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Merry Christmas and a RXMD uplist in the New Year.
Probably coal in your stocking. Lol
agreement with ProHealth Connect LLC ("ProHealth Connect") aiming to extend over-the-counter product ("OTC") benefits provided by health insurance plans to qualifying members nationwide.
NOTICE IT SAYS NATIONWIDE!
MIAMI, Dec. 14, 2023 /PRNewswire/ -- Progressive Care Inc. (OTCQB: RXMD) ("Progressive Care" or the "Company"), a personalized healthcare services and technology provider, today announced that its PharmcoRx ("PharmcoRx") pharmacy subsidiary announced an agreement with ProHealth Connect LLC ("ProHealth Connect") aiming to extend over-the-counter product ("OTC") benefits provided by health insurance plans to qualifying members nationwide.
Through the partnership with ProHealth Connect, the OTC benefits offered by Medicare Advantage ("MA") plans such as United HealthCare, Humana, Devoted, Sharecare, Wellmed, Vitality, Wellcare FL GMS, Ultimate health, Wellcare, and more, enabling their members to purchase over-the-counter healthcare products and medicines using their plan benefits, are now accepted at all PharmcoRx pharmacies. The Centers for Medicare & Medicaid Services (CMS) estimates that in 2024, MA enrollment will rise from 31.6 million individuals in 2023 to 33.8 million, accounting for about 50% of all Medicare eligible. According to Statista, revenue in the OTC pharmaceuticals sector of the market will reach $39.3 billion in 2023 and is expected to grow annually by 3.53% (CAGR 2023-2028). Providing benefits of up to $300 per month, OTC benefit programs were historically only available at large-scale retailers and pharmacy chains. Through Progressive Care's PharmcoRx agreement with ProHealth Connect and its earlier agreement with NationsBenefits, the Company is now able to serve the additional healthcare needs of potentially millions of Medicare Advantage network members in its communities who utilize their OTC benefits. Through its OTC agreements, PharmcoRx locations will be listed as participating pharmacies in the provider directories and will actively market the availability of the program to its existing customer base as well as those in its network of providers, clinics, Management Services Organizations ("MSOs"), Accountable Care Organizations ("ACOs") and Long-Term Care facilities.
Dr. Pamela Roberts, Chief Operating Officer of Progressive Care Inc., said, "We are thrilled to further expand the access to valuable OTC benefits for our pharmacy customers, enabling them to purchase their over-the-counter products and medications from us when they have their prescriptions filled. Through our participation in these valuable OTC benefit programs, we have the potential to expand awareness of PharmcoRx pharmacies and further serve the needs of millions of Medicare Advantage members as part of our ongoing commitment to community-centric services."
Andrew Winakor, President of ProHealth Connect LLC, added, "We welcome the participation of PharmcoRx Pharmacies to the ProHealth network of independent retailers. It furthers our mission of the democratization of the OTC/Grocery benefit, allowing local retailers to share in the millions of members and billions of dollars of benefits available to them. Every dollar spent at a local independent retailer means twice as much money stays in the community. It's a win/win for every stakeholder involved; the member, the retailer, and the community at large."
For more information about Progressive Care Inc., please visit www.progressivecareus.com and connect with us on Facebo
3rd Quarter financials are out!
PharmcoRx Pharmacy Launches Mark Cuban Cost Plus Drug Program Expanding Its In-Pharmacy Offerings
NOVEMBER 27, 2023
The Mark Cuban Cost Plus Drug Company (“MCCPDC”) offers more than 1,000 drugs at their actual acquisition cost plus a transparent 15% markup. MCCPDC recently launched the Team Cuban Card, a free prescription benefit program for consumers providing them with access to low-cost medications throughout the country.
Through its agreement with MCCPDC, PharmcoRx locations will be listed as participating pharmacies in the Team Cuban Card provider directory and will actively market the acceptance of the program to its existing customer base as well as in its network of local clinics and healthcare practices.
Pamela Roberts, Chief Operating Officer of Progressive Care, commented, “Through our inclusion in the Team Cuban Card provider network, we are quickly able to expand our PharmcoRx pharmacy offerings by providing consumers with increased access to medications at a significantly reduced cost. By partnering with organizations such as the Mark Cuban Cost Plus Drug Company and our ongoing initiatives to expand our pharmacy service offerings and reach, we are continuing our mission to make positive contributions to the health of our customers.”
“Team Cuban Card users love the convenience of getting their prescriptions locally, same-day, at the same low prices they’ve come to expect from Cost Plus Drugs,” said Dr. Alex Oshmyansky, co-founder and CEO of Cost Plus Drugs. “We’re excited to add PharmcoRx as an option for consumers.”
About PharmcoRx Pharmacy
Progressive Care Inc. (OTCQB: RXMD) through its subsidiaries, is a Florida health services organization and provider of Third-Party Administration (TPA), data management,COVID-19 related diagnostics and vaccinations, 340B contracted pharmacy services, prescription pharmaceuticals, compounded medications, provider of tele-pharmacy services, the sale of anti-retroviral medications, medication therapy management (MTM), the supply of prescription medications to long-term care facilities, and health practice risk management. Progressive Care, Inc. became a subsidiary of NextPlat Corp. (NASDAQ: NXPL & NXPLW) on July 1,2023.
Forward-Looking Statements
Forward-LookingStatements c
News out!!
A Florida Corporation (855) 998-7337
For the Three and Nine Months Ended September 30, 2023 and 2022
Prepared in accordance with OTC Pink Basic Disclosure Guidelines
TABLE OF CONTENTS
Page
3
Forward Looking Statements
Organizational Structure
3
Business Development
3
Management
3 5 6
7 8
Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022
Consolidated Statement of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022
Consolidated Statements of Cash Flows for the Nine months ended September 30, 2023 and 2022
Notes to the Consolidated Financial Statements
9
OTC Pink Basic Disclosures
13 18
Signatures
Forward Looking Statements
This Annual Report contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Statements made herein that may be considered forward-looking include statements incorporating terms such as "expects," "believes," "intends," "anticipates" and similar terms that relate to future events, performance, or results of Curtis Mathes Corporation, a Florida corporation (the “Company”), including, without limitation, statements made regarding the forecast for various Original Equipment Manufacturer (“OEM”) market contracts and expected future results. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from management's present expectations or projections. These risks and uncertainties include, but are not limited to, customer and supplier relationships; prices; competition; ability to realize anticipated benefits from initiatives taken; market demand; litigation and other liabilities; and economic, political, governmental, and technological factors affecting the Company's operations, tax rate, markets, products, services, and prices, among others.
Organizational Structure
Curtis Mathes Corporation f/k/a Light Engine Design Corp., a Florida corporation (OTC: CMCZ) (the “Company”), has acquired Curtis Mathes, Inc., a Texas corporation. The Company’s current operating subsidiaries are Curtis Mathes Grow Lights, Inc. (formerly Tall Trees LED Company), Curtis Mathes Therapeutics, Inc. (formerly Curtis Mathes, Inc.), and Curtis Mathes International LLC, as wholly- owned subsidiaries. The primary business focus for the Company is the research, development, manufacturing, and sales of what the Company believes to be groundbreaking Solid-State Lighting (“SSL”). The Company expects to apply these technologies to Light Emitting Diodes (“LEDs”), lasers, and other light sources, for use in the general indoor and outdoor lighting, horticultural and other frequency-specific lighting markets.
Business Development
The Company has shifted its’ focus to the horticultural lighting and lighting therapy markets. Management
Robert (Bob) Manes –Chairman/CEO/COO/Director/Founder
• Previous owner, Tall Trees LED Company
• Solid-State lighting designer
• 30-year business veteran
• 19 years in Solid-State Lighting (SSL)
• BS in Computer Management Information Systems, minor in Aviation
• Master of Business Administration (MBA)
Dr. Zacariah (Zac) Hildenbrand, Ph.D. – President and Chief Scientific Officer/Director
• Ph.D. in Biochemistry
• Doctoral research focused on the molecular architecture involved in hormone-dependent cancers.
• Post-doctoral research fellow at the University of Texas Southwestern Medical Center in Dallas
• Contributed to the development of a novel therapy for the treatment of chronic myeloid leukemia; a blood-borne cancer that
afflicts children
• Nominated for the Humanity in Science Award
Michael Martini – Chief Financial Officer/Director
• B.S. Accounting Eastern Kentucky University
• Registered Certified Public Accountant since 2007
• President, Martini Sports Management, Major League Baseball Certified Agent
• Director, Treasurer John Daly Major Ed Foundation
• Director SixtyFeetSix Foundation
3
Derek Enloe – Chief Revenue Officer
• B.S. Entrepreneurship/Marketing Oklahoma State University
• Director, Enloe and Associates Insurance Agency
• Owner, Enloe and Associates UHaul and rentals
• Serial entrepreneur, developed and sold numerous businesses, agencies and properties
• Real estate investor
• Executive team builder
4
CURTIS MATHES CORP. UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
2022
15,087 870,314 750,000
1,641,114
552,446 240,684
793,130
150,000
943,130
-
105,873 2,492,900 30,000
(1,930,789)
697,984
1,641,114
September 30,
2023
December 31,
Current Assets
Cash and cash equivalents
Accounts receivable
Prepaids 5,438
Total current assets 5,713
Customer financing agreements 15,087 Goodwill 870,314
Intangible assets
Total Assets
Current Liabilities
LIABILITIES AND STOCKHOLDERS' EQUITY
$
$
750,000
1,641,114
554,716 240,684
795,400
150,000
945,400
-
105,873 2,492,900 30,000
(1,933,059)
695,714
1,641,114
$
30 245
$
$
$
30 245 5,438
5,713
Accounts payable and accrued liabilities Notes payable - related party
Total current liabilities
Long Term Liabilities
Long term notes payable
Total Liabilities
Commitments and contingencies
Stockholders' Equity
Common stock, $0.001 par value, 150,000,000 shares authorized having a par value of $0.001 per share; 105,872,622 shares issued and oustanding
Additional paid-in capital Subscriptions Payable Accumulated deficit
Total Stockholders' Equity
Ttoal Liabilities and Stockholders' Equity
$
$
The accompanying notes are an integral part of these consolidated financial statements. 5
CURTIS MATHES CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, Nine Months Ended September 30,
2023
2022 2023 2022
-$ -$ -$ 1,100
Revenue
Revenue
Cost of goods sold
Gross Profit
Operating Expenses
General and administrative Marketing and promotion Professional and consulting fees
Total operating expenses
Loss fromOperations
Other Income (Expense)
Interest income Interest expense
Total other income (expense)
Net Loss (Income) Before Income Taxes
Income Tax
Net Loss (Income) Before After Taxes
Weighted Average Number of Common Shares Outstanding - Basic and Diluted Gain (Loss) per Common Share - Basic and Diluted
$
-
-
- - -
-
-
- -
- -
-
-
-
3,945 - 77,575
81,520
(81,520)
- (3,956)
(3,956) (85,476)
-
(85,476)
105,872,622
(0.00)
-
-
2,270 - -
2,270
(2,270)
169
931
18,677 45 206,387
225,109
(224,178)
-- - (10,436)
- (10,436)
$
$
$
$
$
$
$
(2,270)
-
(2,270) $
105,872,622 $
(0.00) $
(234,614)
-
(234,614)
105,872,622
(0.00)
$ 105,872,622
$ -
The accompanying notes are an integral part of these consolidated financial statements.
6
CURTIS MATHES CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
Additional Paid In Subscriptions Accumulated
Common Stock Common Amount Capital Payable Deficit Total
105,872,622 $ 105,873 $ 2,492,900 $ 30,000 $ (1,750,803) $ 877,970
- - - - (85,476) (85,476)
Balance -September 30, 2022 105,872,622 $ 105,873 $ 2,492,900 $ 30,000 $ (1,836,279) $ 792,494
Additional Paid In Subscriptions Accumulated
Common Stock Common Amount Capital Payable Deficit Total
$ 105,673 $ 2,482,800 $ - $ (1,601,665) $ 986,808
Balance - June 30, 2022
Net loss
Balance - December 31, 2021 105,672,622
Proceeds from subscrittions - Stock issued for consulting contract 200,000 Net loss -
- 200
-
105,873
- 10,100 -
2,492,900
30,000 -
-
30,000
-
- (234,614)
(1,836,279)
30,000
10,300 (234,614)
792,494
Balance -September 30, 2022
Additional Paid In Subscriptions Accumulated
Common Stock Common Amount Capital Payable Deficit Total
105,872,622 $ 105,873 $ 2,492,900 $ 30,000 $ (1,933,059) $ 695,714
------
Balance -September 30, 2023 105,872,622 $ 105,873 $ 2,492,900 $ 30,000 $ (1,933,059) $ 695,714
Additional Paid In Subscriptions Accumulated
Common Stock Common Amount Capital Payable Deficit Total
$ 105,873 $ 2,492,900 $ 30,000 $ (1,930,789) $ 697,984
105,872,622
$
$
$
$
$
Balance - June 30, 2023
Net loss
Balance - December 31, 2022 105,872,622
Netloss -
105,872,622
$
-
105,873
$
-
2,492,900
$
-
30,000
$
(2,270)
(1,933,059)
$
(2,270)
695,714
Balance -September 30, 2023
The accompanying notes are an integral part of these consolidated financial statements. 7
CURTIS MATHES CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months EndedSeptember 30,
2023
2022
Cash Flows from Operating Activities
Net loss $ Adjustments to reconcile net loss to net cash used in operating activities:
Stock issued for consulting contract Changes in operating assets and liabilities:
Prepaid expenses
Accounts receivable
Customer financing agreements Inventory
Accounts payable and accrued liabilities
Net Cash Used in Operating Activities
Cash Flows From Investing Activities
Cash Flows From Financing Activities
Proceeds from subscriptions payable Proceeds from issuance of debt
Net Cash Provided by Financing Activities
Net (Decrease) Increase In Cash Cash, Beginning of Period
Cash,EndofPeriod $
Supplemental Disclosures of Cash flowinformation:
Cash paid for interest $
Cash paid for income taxes $
(2,270) -
- - - -
2,270
- -
- -
-
- 30
30
-
-
$
(234,614) 10,300
(4,513) -
350 (18)
187,717
(40,778) -
30,000 10,000
40,000 (778)
6,413
5,635
-
-
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
8
CURTIS MATHES CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2023
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
Curtis Mathes Corp. f/k/a Light Engine Design Corp. (the “Company”) was incorporated under the name Mortgage Acquisition Group, Inc. in the State of Florida on July 7, 1997. On December 2, 2016, the Company changed its name from Tall Trees LED Company, Inc. to Light Engine Design Corp. On November 4, 2016, the Company completed the acquisition of Tall Trees LED Company (“Tall Trees”) through the issuance of 15,292,500 shares of the Company’s common stock. In conjunction with the acquisition, Robert Manes, the majority owner of Tall Trees, exchanged his ownership for 15,000,000 shares of the Company’s common stock and was appointed Chief Executive Officer, Chief Operating Officer and Chairman, and Kevin Stone, the sole owner of DLP, exchanged his ownership for 15,000,000 shares of the Company’s common stock and was appointed President, Chief Technology Officer and Director. Effective May 20, 2019, the Company acquired Curtis Mathes, Inc. and Curtis Mathes International, LLC as wholly-owned subsidiaries. The Company facilitates research and development, and manufacture of products for the solid-state lighting industries. Both acquired companies are wholly-owned subsidiaries and are consolidated in these financial statements using the equity method of accounting.
On March 18, 2020 ,Tall Trees LED Company changed its name to Curtis Mathes Grow Lights, Inc. On June 23, 2020, Curtis Mathes, Inc. changed its name to Curtis Mathes Therapeutics, Inc.
September 25, 2020, The Company changed its name from Light Engine Design Corp to Curtis Mathes Corporation and requested a stock symbol change. On June 3, 2021, the Company received approval from FINRA for its new ticker symbol CMCZ.
The Company’s principal business is to provide Light Emitting Diode (LED) lighting for frequency-specific applications, such as horticulture, phototherapy, and light-delivery and spectrum-sensitive functions, such as wildlife preservation and light pollution reduction.
Effective November 9, 2021, Paul Williams resigned as the Company’s Chief Executive Officer, Chief Financial Officer and Chairman. Effective November 23, 2021, Eric Hill resigned as the Company’s Chief Legal Officer and Secretary.
Effective December 10, 2021, Michael Martini added to Board of Directors. Serves as Chief Financial Officer
Effective December 10, 2021, Derek Enloe added to Board of Directors. Serves as Chief Revenue Officer.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America
(“GAAP”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. Such estimates include, but are not limited to, allowance for doubtful accounts and valuations of intangible assets, among others. Actual results could differ from those estimates.
Concentrations and credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The cash balance may at times may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. Company did not have cash balances in excess of FDIC limits at September 30, 2023 and December 31, 2022.
9
Risk and Uncertainties
The Company operates in an industry that is subject to rapid change and intense competition. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential risk of business failure.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase and money market accounts to be cash equivalents. As of September 30, 2023 and December 31, 2022, the Company had no cash equivalents and all cash amounts consisted of cash on deposit.
Accounts Receivable
Receivables are stated at the amount the Company expects to collect. The Company considers the following factors when evaluating the collectability of specific receivable balances: creditworthiness of the debtor, past transaction history with the debtor, current economic industry trends, and changes in debtor payment terms. If the financial condition of the Company’s debtors were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Changes to the allowance for doubtful accounts made as a result of management’s determination regarding the ultimate collectability of such accounts are recognized as a charge to the Company’s earnings. Specific receivable balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to the receivable.
At September 30, 2023 and December 31, 2022, the Company has determined that all receivable balances are fully collectible and, accordingly, no allowance for doubtful accounts has been recorded.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of various payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses include service contracts and taxes paid in advance, deposits on facilities.
Revenue Recognition
The Company currently generates revenue through the sale of its LED lighting solutions. Revenue is recognized when all of the following criteria are met:
• Persuasive evidence of an arrangement exists. Evidence of an arrangement consists of an order from the Company’s distributors, resellers or customers.
• Delivery has occurred. Delivery is deemed to have occurred when title and risk of loss has transferred, either upon shipment of products to customers or upon delivery.
• The fee is fixed or determinable. The Company assesses whether the fee is fixed or determinable based on the terms associated with the transaction.
• Collection is reasonably assured. The Company assesses collectability based on credit analysis and payment history.
Any revenue received that does not yet meet the above recognition standards is recorded to unearned revenue, and held as a liability
until recognition occurs.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, at least annually, to determine if impairment has occurred and whether the economic benefit of the asset (fair value of assets to be used and fair value less disposal cost for assets to be disposed of) is expected to be less than the carrying value. Triggering events, which signal further analysis, consist of a significant decrease in the asset's market value, a substantial change in the use of an asset, a significant physical change in the asset, a significant change in the legal or business climate that could affect the asset, an accumulation of costs significantly in excess of the amount originally expected to acquire or construct the asset, or a history of losses that imply continued loss associated with assets used to generate revenue.
10
Income Taxes
Income taxes are provided in accordance with ASC 740 Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Provision for income taxes consists of federal and state income taxes in the United States. Due to the uncertainty as to the realization of benefits from our deferred tax assets, including net operating loss carry-forwards and other tax credits, we have a full valuation allowance reserved against such assets. We expect to maintain this full valuation allowance at least in the near term.
The Company records interest and penalties related to unrecognized tax benefits in income tax expense. There were no interest or penalties related to unrecognized tax benefits for the Three and Nine months ended September 30, 2023 or the year ended December 31, 2022.
Fair Value of Financial Instruments
The fair values of the Company’s assets and liabilities that qualify as financial instruments under FASB ASC Topic 825, “Financial Instruments,” approximate their carrying amounts presented in the accompanying financial statements at September 30, 2023 and December 31, 2022.
Loss Contingencies
The Company recognizes contingent losses that are both probable and estimable. In this context, the Company defines probability as circumstances under which events are likely to occur. In regard to legal costs, we record such costs as incurred.
Earnings per Share Policy
The basic computation of loss per share is based on the weighted average number of shares outstanding during the period presented in
accordance with ASC 260, "Earnings Per Share”. The computation of diluted earnings per common share is based on the weighted
average number of shares outstanding during the period plus the common stock equivalents which would arise from the exercise of stock options and warrants outstanding using the treasury stock method and the average market price per share during the period. Common stock equivalents are not included in the diluted earnings per share calculation when their effect is antidilutive.
Recent Accounting Pronouncements
Management believes the impact of recently issued standards and updates, which are not yet effective, will not have a material impact
on the Company’s financial position, results of operations or cash flows upon adoption.
NOTE 3 – LIQUIDITY/GOING CONCERN
The Company has accumulated losses of $1,933,059, including non-cash expenses, and has sustained negative cash flows from operating activities since its acquisition of Tall Trees LED Company and Curtis Mathes, Inc. This factor raises substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. Management plans to (i) raise additional capital to fund continued operations of the Company and (ii) generate profits from operations beginning in first half of 2024.
In the event the Company does not generate sufficient funds from revenues or financing through the issuance of its common stock or from debt financing, the Company will be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.
11
NOTE 4 – STOCKHOLDERS’ DEFICIT
The total number of common shares authorized that may be issued by the Company is 150,000,000 shares with a par value of $0.001
per share. As of September 30, 2023 and December 31, 2022 there were 105, 872,622 shares of Common Stock issued and outstanding.
NOTE 5 – EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.
The Company has the following common stock equivalents as of September 30, 2023 and December 31, 2022:
As of September 30, 2023
Options (exercise price $0.06/share) 100,000
As of December 31, 2022
100,000
NOTE 6 – RELATED PARTY TRANSACTIONS
Notes payable – related party
As of September 30, 2023 and December 31, 2022, the Company has a note payable in the amount of $182,484 to Eric Hill, the Company’s former Chief Executive Officer and Secretary, for moneys advanced to Curtis Mathes prior to its acquisition by the Company. The note is non-interest bearing and payable based upon a fixed percentage of sales.
As of September 30, 2023 and December 31, 2022, the Company has notes payable in the amount of $58,200 to Inform Environmental, LLC
NOTE 7 – SUBSEQUENT EVENTS
We have evaluated all events that occurred after the balance sheet date through the date when our financial statements were issued to determine if they must be reported. Management has determined that there are no events requiring disclosure.
12
Disclosure Statement Pursuant to the Pink Basic Disclosure Guidelines Curtis Mathes Corp.
2770 Main St. #130
Frisco, TX 75033 855.998.7337 http://www.curtismathes.com info@curtismathes.com
SIC Code: 3648 – Lighting Equipment
Quarterly Report
For the Period Ending: September 30, 2023 (the “Reporting Period”)
Outstanding Shares
The number of shares outstanding of our Common Stock was:
105,872,622 As of December 31, 2022, the number of shares outstanding of our Common Stock was: 105,872,622
Shell Status
Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933, Rule 12b-2 of the Exchange Act of 1934 and Rule 15c2-11 of the Exchange Act of 1934):
Yes: ? No:?
Indicate by check mark whether the company’s shell status has changed since the previous reporting period:
Yes: ? No:?
Change in Control
Indicate by check mark whether a Change in Control1 of the company has occurred over this reporting period: Yes: ? No:?
1 “Change in Control” shall mean any events resulting in:
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becoming the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;
(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;
(iii) A change in the composition of the Board occurring within a two (2)-year period, as a result of which fewer than a majority of the directors are directors immediately prior to such change; or
(iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
As of September 30, 2023,
the number of shares outstanding of our Common Stock was:
13
ITEM1: Nameoftheissueranditspredecessors(ifany)
Curtis Mathes Corp. (the “Company”) was incorporated in the State of Florida on July 7, 1997 and is currently active and in good standing in Florida and all other states in which it operates. A listing of all previous names used by the Company is as follows:
Curtis Mathes Corporation
Light Engine Design Corp.
Tall Trees LED Company, Inc.
Business Continuity Solutions, Inc.
Extreme Sports Marketing, Inc.
Exosphere Aircraft Company, Inc.
MMA World Holdings, Inc.
Exosphere Aircraft Company, Inc.
American Lending & Acquisition Group, Inc. Mortgage Acquisition Group, Inc.
There have not been any trading suspension orders issued by the
June 3, 2021 - Present
December 2, 2016 – June 2, 2021 August 16, 2016 - December 2, 2016 June 23, 2013 – August 16, 2016
April 3, 2009 – June 23, 2013
December 15, 2008 – April 3, 2009 September 24, 2008 - December 15, 2008 May 17, 2006 – September 24, 2008 March 16, 1998 – May 17, 2006
July 7, 1997 – March 16, 1998
SEC since inception.
There have not been any stock splits, stock dividends, recapitalizations, mergers, acquisitions, spin-offs, or reorganizations either within the past 12 months, and none are currently anticipated.
The Company’s principal executive office is:
7521 S Olympia Avenue West #1054 Tulsa, OK 74132
Check box if principal executive office and principal place of business are the same address: ?
Has the issuer or any of its predecessors been in bankruptcy, receivership, or any similar proceeding in the past five years? Yes: ? No:?
ITEM 2: Security Information
Transfer Agent
Securities Transfer Corporation 2901 N Dallas Parkway
Plano, TX 75093
Phone: (469) 633-0101
Trading symbol: CMCZ
Exact title and class of securities outstanding: Common Stock CUSIP: 231468109
Par or Stated Value: $0.001
Totalsharesauthorized: 150,000,000asof:November14,2023
Total shares outstanding: 105,872,622 as of November 14, 2023
Total number of shareholders of record: 111* as of: November 14, 2023
*shareholder of record may not include all shares held in “street name”
Security Description:
The Company currently has authorized only one class of common equity shares and no preferred class of equity shares. Each of the Company’s common shares have the right to one vote per share. There are currently no preemption or dividend rights attributable to the Company’s common shares.
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There have not been any material modification to the rights of holders of the Company’s securities that have occurred over the reporting period covered by this report.
ITEM 3: Issuance History
On March 8, 2022, the Company issued 200,000 shares of the Company’s common stock valued at $10,300 for consulting services to be provided under a one year advisory agreement.
ITEM 3A: Changes to the Number of Outstanding Shares
Indicate by check mark whether there were any changes to the number of outstanding shares within the past two completed fiscal years:
No: ? Yes:? (If yes, you must complete the table below)
Shares Outstanding as of Second Most Recent Fiscal Year End:
Opening Balance
Date: December 31, 2020 Common: 105,672,622
Date of Transaction
Transaction type (e.g. new issuance, cancellation, shares returned to treasury)
Number of Shares Issued (or cancelled)
Class of Securities
Value of shares issued ($/per share) at Issuance
Were the shares issued at a discount to market price at the time of issuance? (Yes/No)
Individual/ Entity Shares were issued to (entities must have individual with voting / investment control disclosed).
Reason for share issuance (e.g. for cash or debt conversion) - OR- Nature of Services Provided
Restricted or Unrestricte d as of this filing.
Exemption or Registratio n Type.
3/8/2022 New 200,000 Common 10,300 No Derek Holland Consulting Restricted N/A
ITEM 3B: Promissory and Convertible Notes
Indicate by check mark whether there are any outstanding promissory, convertible notes, convertible debentures, or any other debt instruments that may be converted into a class of the issuer’s equity securities:
No: ? Yes:? (If yes, you must complete the table below)
5/20/2019 182,484 182,484 - N/A N/A Eric Hill(1) Previous advances
(1) See Item 6: Officers, Directors and Control Persons for voting control disclosures
ITEM 4: Issuer’s Business, Products and Services
The purpose of this section is to provide a clear description of the issuer’s current operations. In answering this item, please include the
following:
A. Summarize the issuer’s business operations (If the issuer does not have current operations, state “no operations”)
Shares Outstanding on Date of This Report:
Ending Balance
Date September 30, 2023 Common: 105,872,622
Date of Note Issuance
Outstanding Balance ($)
Principal Amount at Issuance ($)
Interest Accrued ($)
Maturity Date
Conversion Terms (e.g. pricing mechanism for determining conversion of instrument to shares)
Name of Noteholder (entities must have individual with voting / investment control disclosed).
Reason for Issuance (e.g. Loan, Services, etc.)
15
Based in Tulsa, OK, the Company’s and all associated subsidiaries’ principal business is to provide Light Emitting Diode (LED) lighting for frequency-specific applications, such as horticulture, phototherapy, and light-delivery and spectrum-sensitive functions, such as wildlife preservation and light pollution reduction.
B. Describe any subsidiaries, parents, or affiliated companies, if applicable, and a description of such entity’s business, contact information for the business, officers, directors, managers or control persons. Subsidiary information may be included by reference
The Company and its subsidiaries consist of the following entities, which have been consolidated in the accompanying financial statements:
• Curtis Mathes Grow Lights, Inc. formerly Tall Trees LED Company
• Curtis Mathes Therapeutics, Inc. formerly Curtis Mathes, Inc.
• Curtis Mathes International, LLC (Subsidiary of Curtis Mathes Therapeutics, Inc.)
C. Describe the issuers’ principal products or services, and their markets LED lighting solutions for U.S. markets as well as markets abroad
ITEM 6: Company Insiders (Officers, Directors and Control Persons)
ITEM 5: Facilities
The Company currently leases shared office space in Tulsa, OK.
Name of Officer/Director or Control Person
Affiliation with Company (e.g. Officer/Director/Owner of more than 5%)
Residential Address (City / State Only)(1)
Number of shares owned
Share type/class
Ownership Percentage of Class Outstanding(2)
Robert Manes
Zacariah Hildenbrand
Michael Martini
Derek Enloe
Total Directors and Officers
Eric Hill
Rene Gamez
President, Chief Operating Officer, Vice Chairman, Director and significant shareholder
Chief Scientific Officer and Director Chief Financial Officer and Director Chief Revenue Officer and Director
Frisco, TX
Frisco, TX Frisco, TX Frisco, TX
16,250,000
2,550,000 227,839
- 19,027,839
8,001,670
7,722,375
Common
15.3%
Paul Williams
Former Chief Executive Officer, Former Chief Financial Officer, Former Chairman of the Board and Significant Shareholder
Frisco, TX
22,466,667
Common
21.2%
Former Chief Legal Officer, Former Director and significant shareholder
Significant Shareholder
Frisco, TX
Houston, TX
Common 2.4% Common 0.2%
- 0% 18.0%
Common 7.6%
Common 7.3%
(1) The address for each named executive officer and director is the same
(2) Based on 105,872,622 shares of common stock outstanding as of November 14, 2023
address as the Company
16
ITEM 7: Legal/Disciplinary History
None of the persons listed above in Item 6 have, in the last 10 years, been the subject of:
1) a conviction in a criminal proceeding or named as a defendant in a pending criminal proceeding (excluding traffic violations and other minor offenses);
2) the entry of an order, judgment or decree not subsequently reversed. Suspended or vacated, by a court of competent jurisdiction that permanently or temporarily enjoined, barred, suspended or otherwise limited such person’s involvement in any type of business, securities, commodities, or banking activities;
3) a finding or judgment by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission, the Commodity FuturesTradingCommission,orastatesecuritiesorcommodities law,whichfinding,orjudgmenthasnotbeenreversed,suspended or vacated; or
4) the entry of an order by a self-regulatory organization that permanently or temporarily barred suspended or otherwise limited such person’s involvement in any type of business or securities activities.
There are no material pending legal proceedings, to which the issuer is a party or of which any of their property is the subject.
ITEM 8: Third Party Providers
Legal Counsel Michael Littman
PO Box 1839
Arvada, CO 80001 Phone (720) 530-6184
Brian Higley
Business Legal Advisors, LLC 14888 Auburn Sky Drive Draper, UT, 84020
Phone (801) 634-1984
ITEM 9: Financial Statements
A. The following financial statements were prepared in accordance with: ? IFRS
?U.S. GAAP
B. These financial statements for this reporting period were prepared by:
Name: Chris Kohler Consulting, Inc.
Title: Accountant
Relationship to Issuer: Contract Accountant
Describe the qualifications of the person or persons who prepared the financial statements: Financial and Accounting Expert with a Masters Degree in Accountancy
The issuer is providing the following financial statements:
a) Balance Sheets as of September 30, 2023 and December 31, 2022;
b) Statements of Operations for the Three and Nine months ended September 30, 2023 and 2022;
c) Statement of Stockholders’ Equity (Deficit) for the Three and Nine months ended September 30, 2023 and 2022;
d) Statements of Cash Flows for the nine months ended September 30, 2023 and 2022;
e) Notes to the financial statements.
17
ITEM10: Certifications
Chairman and Chief Executive Officer:
I,RobertManes,asChairmanandChiefExecutiveOfficerofCurtisMathesCorporation (“theCompany”)certifythat:
1. I have reviewed the Disclosure Statements for the Three and Nine months ended September 30, 2023 and 2022of Curtis Mathis Corp.;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this
disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
November 14, 2023
/s/ Robert Manes Robert Manes
Chairman and Chief Executive Officer
Chief Financial Officer:
I,MichaelMartini,asChiefFinancialOfficerofCurtisMathesCorporation (“theCompany”)certifythat:
1. I have reviewed the Disclosure Statements for the Three and Nine months ended September 30, 2023 and 2022 of Curtis Mathis Corp.;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this
disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
November 14, 2023
/s/ Michael Martini Michael Martini
Chief Financial Officer
18
Get ready for a REVERSE SPLIIT !
Investor Relations told me last month that Humi-Soil will be sold at retail outlets nationally. Revenues should start accelerating from this quarter and in the future quarters.
SGTM mission is to replenish 1/4 of Earth’s farmland using Humi-Soil.
Sounds to me like talk is cheap. Wishful thinking.
Have you seen any indication, on NexPlat platform, as to whether RXMD is selling any of their products?
I use the Schwab mobile app also. It’s very convenient for me. When you link on to a particular stock click on the “alert” tab. I set multiple alerts first thing at opening bell and when the stock price is triggered it notify you. Enjoy the weekend.
The Sustainable Green Team's Wholly Owned Subsidiary, SGTM-VRM, LLC. Announces Round Table Meeting Held in Jordan with His Excellency Raed Abu Soud, the Jordanian Minister of Water
The United States Agency for International Development (USAID) Invited SGTM-VRM, LLC. to The Meeting
ORLANDO, Fla., Oct. 18, 2023 (GLOBE NEWSWIRE) -- SGTM-VRM, LLC. ("SGTM-VRM"), a leading innovator in waste management solutions and a wholly owned subsidiary, The Sustainable Green Team, Ltd. (OTCQX: SGTM) ($SGTM), recently participated in a round table meeting held in Jordan. The United States Agency for International Development (USAID) organized the meeting with an agenda to seek and devise effective strategies for Jordan to recycle human biosolids and other challenging waste byproducts safely.??
His Excellency Raed Abu Soud, the Jordanian Minister of Water, requested the meeting to find solutions in waste materials, reusing them to enhance soil and water management. In response, SGTM-VRM's representatives, Tony Raynor and Ken Bellamy, and key VRM Biologik's global team members shared their expertise and successful solutions implemented worldwide. The collaborative efforts proved fruitful, leading to plans for a follow-up meeting scheduled for later in October.
Tony Reynor, CEO of SGTM-VRM, states, "The forthcoming meeting will focus on conducting comprehensive surveys to evaluate available resources and identify necessary measures to facilitate large-scale pilots of the technology and inputs provided by SGTM-VRM, based in Florida. We have an immediate goal to provide solutions to Jordan."
SGTM-VRM remains committed to supporting Jordan in its pursuit of sustainable waste management practices. By leveraging advanced technologies and innovative approaches, SGTM-VRM aims to improve soil and water quality while safely recycling challenging waste materials.
For media inquiries or further information, please contact Tony Raynor, at 1-407-886-8733 and traynor@sgtmltd.com.
About VRM Biologik:
VRM Biologik is a renowned biotech intellectual property development leader committed to revolutionizing various industries through innovative solutions. With a strong background in research and development, VRM Biologik aims to create sustainable and transformative products that address pressing global challenges. Their sustainable technologies are designed to address environmental challenges and promote a more sustainable future – https://vrmbiologik.com.
About The Sustainable Green Team, Ltd.:
The Sustainable Green Team (OTCQX: SGTM) ($SGTM) is a leading provider of sustainable solutions to improve environmental health and promote sustainable practices, delivering eco-friendly products and services. With a focus on innovative products and strategic partnerships, SGTM focuses on creating and providing innovative solutions for a greener and more sustainable future for generations; learn more by visiting the Company website, https://www.thesustainablegreenteam.com/, SGTM's YouTube Channel and corporate videos -
The Sustainable Green Team and VRM Biologik Announce US Manufacture Alliance and Expanded Strategic Partnership
Together They Seek a Long-term Vision of Becoming a Global Conglomerate
ORLANDO, Fla., Oct. 17, 2023 (GLOBE NEWSWIRE) -- The Sustainable Green Team (OTCQX: SGTM), a leading sustainable solutions company, and VRM Biologik (VRM), a global innovator in biotechnology, are thrilled to announce a strategic partnership aimed at expanding VRM Biologik's technology and products into North, Central and South America and the Caribbean Islands.??
The expanded relationship will see VRM increase its equity in SGTM, solidifying its commitment to mutual success and growth. SGTM has been granted exclusive rights for deploying VRM Biologik programs throughout the Americas and will act as the implementer of an expanded Licensing and manufacturing program delivering access to VRM's products in the region.
SGTM will collaborate with VRM to enhance its global supply chain by using resources and capacity from the United States to grow its export markets positively.
Further, SGTM and VRM Biologik will actively pursue growth in their global operations while contributing and scaling their national food and water security programs.
"We are excited to partner with VRM Biologik to expand their innovative biotechnology solutions into the Americas and the Caribbean," said Tony Raynor, CEO of SGTM. "This partnership will not only enhance our product offerings but also contribute to the growth and development of both companies."
SGTM’s long-term vision is to expand the partnership, creating an international conglomerate with a future up-list of its shares on a national stock exchange.
"SGTM's strong US manufacturing capacity and market reach makes them an ideal partner for us," said Ken Bellamy, VRM Biologik Founder. "Together, we will drive delivery of sustainable solutions for organic waste and sustainable agriculture to make a significant impact globally."
For media inquiries or further information, please contact Tony Raynor, at 1-407-886-8733 and traynor@sgtmltd.com.
About VRM Biologik:??
VRM Biologik is a renowned biotech intellectual property development leader committed to revolutionizing various industries through innovative solutions. With a strong background in research and development, VRM Biologik aims to create sustainable and transformative products that address pressing global challenges. Their sustainable technologies are designed to address environmental challenges and promote a more sustainable future - https://vrmbiologik.com.
About The Sustainable Green Team, Ltd.:
The Sustainable Green Team (OTCQX: SGTM) ($SGTM) is a leading provider of sustainable solutions to improve environmental health and promote sustainable practices, delivering eco-friendly products and services. With a focus on innovative products and strategic partnerships, SGTM focuses on creating and providing innovative solutions for a greener and more sustainable future for generations; learn more by visiting the Company website, https://www.thesustainablegreenteam.com/ and SGTM's YouTube Channel.
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements included within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding our expected future financial position, results of operations, cash flows, financing plans, business strategy, products, and services, competitive positions, growth opportunities, plans and objectives of Management for future operations, including words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will," and other similar expressions are forward-looking statements and involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. The Company cautions readers not to rely on any such forward-looking statements, which speak only as of the date made. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
Company Contact ?Tony Raynor, CEO ?SGTM-VRM, LLC ?Traynor @kikr-8733
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/d137921d-ce78-4e54-9f11-65c8dc5d1d57
Videos accompanying this announcement are available at?https://www.globenewswire.com/NewsRoom/AttachmentNg/991c3f0f-8a72-4fdd-a7f9-10dd6af826cb?https://www.globenewswire.com/NewsRoom/AttachmentNg/9156f781-c201-4581-b149-f1970e2015c7
?
Clean Technology
Sustainable Green Team Secures Groundbreaking $20M Middle East Deal
Agreement showcases company's ongoing strategic transformation
ORLANDO, FL / ACCESSWIRE / October 6, 2023 / Sustainable Green Team (OTCQX:SGTM) ("Company"), a leader in environmentally conscious solutions in the arbor care, disposal, and recycling industry, proudly announces the successful sale of $12 million worth of state-of-the-art equipment as part of a groundbreaking Middle East deal. In addition to the equipment sale, the transaction also includes an allocation of $8 million for transportation and reinstallation, bringing the total deal value to an impressive $20 million.
Earlier this month, Sustainable Green Team invoiced approximately $7.5 million from its innovative new product lines, HumiSoil® and Core Catalyst, to the Middle East. These achievements demonstrate the growing demand for environmentally-friendly and sustainable products in the region.
Tony Raynor, CEO of Sustainable Green Team, said: "We are delighted to be entering into this partnership, which represents a significant milestone for Sustainable Green Team as we continue our strategic transformation.
"Our commitment to sustainability drives us to convert underutilized assets into groundbreaking solutions. With our expertise in recycling, we will provide essential knowledge, cutting-edge equipment, and sustainable fiber solutions to the Middle East, a region with a tremendous need for soil enhancement."
CLICK HERE TO WATCH THE VIDEO
Leveraging its recycling prowess, Sustainable Green Team has developed a comprehensive equipment solution that not only addresses the urgent need for sustainable practices but also tackles the scarcity of high-quality soil. The company's cutting-edge equipment is set to revolutionize the approach to soil enhancement in the Middle East, paving the way for a more sustainable and fruitful future.
Sustainable Green Team extends a warm invitation to industry stakeholders, partners, and enthusiasts to join in celebrating this momentous achievement. Together, we can make a tangible difference in the world, one step at a time.
CLICK HERE TO WATCH THE VIDEO
About Sustainable Green Team
Sustainable Green Team (OTCQX: SGTM) is at the forefront of promoting environmental sustainability through innovative recycling solutions. Committed to preserving and protecting our planet, we specialize in transforming underutilized assets into valuable resources that benefit both the environment and society. With our expertise and cutting-edge equipment, we strive to create a greener future for generations to come. For more information, please visit www.sustainablegreenteam.com.
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements included within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding our expected future financial position, results of operations, cash flows, financing plans, business strategy, products, and services, competitive positions, growth opportunities, plans and objectives of Management for future operations, including words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will," and other similar expressions are forward-looking statements and involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. The Company cautions readers not to rely on any such forward-looking statements, which speak only as of the date made. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
For more information
Tony Raynor??CEO & Chairman of the Board??Traynor @kikr-8733
SOURCE: SUSTAINABLE GREEN TEAM LTD.??via PRISM Mediawire, LLC
View source version on accesswire.com:
https://www.accesswire.com/790610/sustainable-green-team-secures-groundbreaking-20m-middle-east-deal
More great news!!
Sustainable Green Team Announces Newly Formed Wholly Owned Subsidiary, SGTM-VRM, LLC., Establishes Advisory Panel
ORLANDO, Fla., Oct. 05, 2023 (GLOBE NEWSWIRE) -- The Sustainable Green Team (OTCQX: SGTM) announces the establishment of its wholly owned subsidiary, SGTM-VRM, LLC ("SGTM-VRM"). The new entity aims to significantly expand the deployment of VRM Biologik's Intellectual Property in the Americas and offer sales to programs and projects globally.??
The Sustainable Green Team, Ltd. and VRM Biologik entered into a distribution agreement in October 2022 to further develop markets of VRM Biologik's HumiSoil® and Core Catalyst products. SGTM-VRM, LLC's expanded business model, focuses on developing catalyst manufacturing strategies that enable the cost-effective delivery of VRM Biologik products and programs throughout the Americas. Furthermore, it will facilitate the supply of catalysts from the USA to programs conducted by the VRM Biologik Group worldwide. SGTM-VRM assumed the role of "Master Licensee" for the region to serve licensed manufacturers, distributors, and end users of the technology.
SGTM-VRM has global distribution plans, and it is currently seeking funding to rapidly expand equipment manufacturing and delivery capacity, enabling the deployment of VRM Biologik technology programs on a business-to-government scale. These programs will contribute to the realization of a circular economy, ensuring sustained food and water security benefits.
SGTM has also formed an Advisory Panel that will seat key staff from VRM Biologik Group and SGTM, who will guide the deployment of large-scale programs globally. The Advisory Panel's primary focus will be to develop strategies and preparedness for SGTM's inclusion in food and water security programs, both on a business-to-government and business-to-business basis. This collaborative effort reinforces SGTM's commitment to making a significant impact on a global scale.
SGTM's CEO, Tony Raynor, states, "The newly formed wholly owned subsidiary, SGTM-VRM, which now holds the 'Master Licensee' for deployment of VRM Biologik's Intellectual Property is a testament to the strong relationship between SGTM and VRM Biologik. Over the past two years, Ken Bellamy, VRM Biologik's founder, has worked tirelessly with us to allow HumiSoil® and Core Catalyst products to be readily available in and from the USA. I'm excited for the future together with SGTM-VRM."
VRM Biologik and SGTM through SGTM-VRM, LLC remain dedicated to creating a brighter and greener future for all and to revolutionizing the wood fiber industry, offering innovative solutions for sustainable development and circular economy.
For media inquiries or further information, please contact Tony Raynor, CEO/Chairman, at Traynor@sgtmltd.com.
About The Sustainable Green Team, Ltd.:
The Sustainable Green Team (OTCQX: SGTM) is a leading provider of sustainable solutions to improve environmental health and promote sustainable practices. With a focus on innovative products and strategic partnerships, SGTM focuses on creating a greener and more sustainable future for generations; learn more by visiting the Company website, https://www.thesustainablegreenteam.com/ and SGTM's YouTube Channel.
About VRM Biologik:
VRM Biologik is a renowned biotech intellectual property development leader committed to revolutionizing various industries through innovative solutions. With a strong background in research and development, VRM Biologik aims to create sustainable and transformative products that address pressing global challenges – https://www.vrmbiologik.com
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements included within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding our expected future financial position, results of operations, cash flows, financing plans, business strategy, products, and services, competitive positions, growth opportunities, plans and objectives of Management for future operations, including words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will," and other similar expressions are forward-looking statements and involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. The Company cautions readers not to rely on any such forward-looking statements, which speak only as of the date made. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
Company Contact ?Tony Raynor ?CEO & Chairman of the Board ?Traynor @kikr-8733
A photo accompanying this announcement is available at: https://www.globenewswire.com/NewsRoom/AttachmentNg/3d970b1c-d8b3-4cce-8b29-d30b48cbfa1d
A video accompanying this announcement is available at: https://www.globenewswire.com/NewsRoom/AttachmentNg/4c0704bf-e6c2-45be-8d09-52c3a8695620
?
NextPlat Corp's (NASDAQ:NXPL) Share Price Is Still Matching Investor Opinion Despite 26% Slump
The NextPlat Corp (NASDAQ:NXPL) share price has fared very poorly over the last month, falling by a substantial 26%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 22% in that time.
Even after such a large drop in price, you could still be forgiven for thinking NextPlat is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.2x, considering almost half the companies in the United States' Telecom industry have P/S ratios below 1x. However, the P/S might be quite high for a reason and it requires further investigation to determine if it's justified.
See our latest analysis for NextPlat
What Does NextPlat's Recent Performance Look Like?
The recent revenue growth at NextPlat would have to be considered satisfactory if not spectacular. Perhaps the market believes the recent revenue performance is strong enough to outperform the industry, which has inflated the P/S ratio. However, if this isn't the case, investors might get caught out paying too much for the stock.
We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our
free report on NextPlat's
earnings, revenue and cash flow.
Is There Enough Revenue Growth Forecasted For NextPlat?
The only time you'd be truly comfortable seeing a P/S as steep as NextPlat's is when the company's growth is on track to outshine the industry decidedly.
Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. The latest three year period has also seen an excellent 90% overall rise in revenue, aided somewhat by its short-term performance. Therefore, it's fair to say the revenue growth recently has been superb for the company.
When compared to the industry's one-year growth forecast of 6.0%, the most recent medium-term revenue trajectory is noticeably more alluring
With this information, we can see why NextPlat is trading at such a high P/S compared to the industry. It seems most investors are expecting this strong growth to continue and are willing to pay more for the stock.
The Key Takeaway
A significant share price dive has done very little to deflate NextPlat's very lofty P/S. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
It's no surprise that NextPlat can support its high P/S given the strong revenue growth its experienced over the last three-year is superior to the current industry outlook. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.
Before you take the next step, you should know about the 3 warning signs for NextPlat (2 can't be ignored!) that we have uncovered.
If these risks are making you reconsider your opinion on NextPlat, explore our interactive list of high quality stocks to get an idea of what else is out there.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.??This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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NEVADA
(State or Other Jurisdiction
of Incorporation or Organization)
65-0783722
(I.R.S. Employer Identification No.)
Title of each class
Common Stock, par value $0.0001 Warrants
Trading Symbol (s)
NXPL NXPLW
Name of each exchange on which registered
The Nasdaq Stock Market, Inc. The Nasdaq Stock Market, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 8-K CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 1, 2023
NEXTPLAT CORP
(Exact Name of Registrant as Specified in its Charter)
001-40447
(Commission File No.)
3250 Mary St., Suite 410
Coconut Grove, FL 33133
(Address of principal executive offices and zip code)
(305) 560-5355
(Registrant’s telephone number, including area code)
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
? Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
? Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
? Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
? Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-14(c)).
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2
of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ? If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ? Securities registered pursuant to Section 12(b) of the Act:
Item 2.01. Completion of Acquisition or Disposition of Assets
As previously disclosed, NextPlat Corp (the "Company") has made a series of investments in Progressive Care Inc. (OTCQB: RXMD) ("Progressive Care") beginning with an initial investment that closed on September 2, 2022.
On July 1, 2023, each of the Company, Charles M. Fernandez, and Rodney Barreto exercised common stock purchase warrants and were issued common stock shares from Progressive Care. The Company exercised common stock warrants on a cashless basis and received 402,269 shares of Progressive Care common stock. The Company also exercised common stock warrants on a cash basis and paid consideration in the amount of $506,000 in return for 230,000 shares of Progressive Care common stock. Mr. Fernandez exercised common stock warrants on a cashless basis and received 211,470 shares of Progressive care common stock. Mr. Barreto exercised common stock warrants on a cashless basis and received 130,571 shares of Progressive Care common stock. After these warrant exercises, the aggregate number of shares of Progressive Care common stock owned by the Company, Mr. Fernandez, and Mr. Barreto represent 53% of Progressive Care’s issued and outstanding common stock.
On June 30, 2023, the Company entered into a voting agreement with Messrs. Fernandez and Barreto pursuant to which Messrs. Fernandez and Barreto agreed to vote all of their shares of Progressive Care common stock (whether owned directly or indirectly) in the same manner that the Company votes its shares of Progressive Care common stock at any annual or special shareholders meeting of the stockholders of Progressive Care, and whenever the holders of Progressive Care’s common stock act by written consent. The voting agreement has a perpetual term.
As a result of the common stock warrant purchases and the entry into the voting agreement, the Company concluded that there was a change in control of Progressive Care with the Company having the right to control more than 50 percent of the voting interests in Progressive Care as of July 1, 2023 through the concurrent warrant exercises and voting agreement noted above.
As a result of the change in control of Progressive Care, the Company is filing this report to provide the financial statements and pro forma financial information required by Items 9.01(a) and 9.01(b) of Form 8-K, respectively.
Item 9.01. Financial Statements and Exhibits.
a. Financial Statements of Business Acquired.
The audited consolidated financial statements of Progressive Care Inc., for the years ended December 31, 2022 and 2021, the accompanying notes thereto and the related Independent Registered Public Accounting Firm's Report, are attached hereto as Exhibit 99.1.
The unaudited consolidated financial statements of Progressive Care Inc., for the three and six month ended June 30, 2023 and 2022, and the accompanying notes thereto, are attached hereto as Exhibit 99.2.
b. Pro Forma Financial Information.
The unaudited pro forma condensed combined balance sheet of NextPlat Corp and Progressive Care, Inc. as of June 30, 2023 and the unaudited pro forma condensed combined statement of operations of NextPlat Corp and Progressive Care, Inc. for the year ended December 31, 2022, and the six months ended June 30, 2023, are attached hereto as Exhibit 99.3.
Exhibits.
Exhibit No.
23.1 99.1
99.2 99.3
104
Description
Consent of Daszkal Bolton LLP
Audited Consolidated Financial Statements of Progressive Care Inc. as of and for the years ended December 31, 2022 and 2021, the accompanying notes thereto and the related Independent Registered Public Accounting Firm's Report
Unaudited Consolidated Financial Statements of Progressive Care, Inc. as of and for the three and six months ended June 30, 2023 and for the year ended December 31, 2022
Unaudited pro forma condensed combined Balance Sheet of NextPlat Corp and Progressive Care Inc. as of June 30, 2023 and the unaudited pro forma condensed combined Statement of Operations of NextPlat Corp and Progressive Care Inc. for the year ended December 31, 2022, and the six months ended June 30, 2023
Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NEXTPLAT CORP
By: Name: Title:
/s/ Charles M. Fernandez
Charles M. Fernandez
Chairman and Chief Executive Officer
Dated: September 11, 2023
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
NextPlat Corp. Coconut Grove, Florida
We consent to the incorporation by reference in the Registration Statements (Forms S-3 No. 333-272809, S-3 No. 333-269422, S-3 No. 333-268488 and S-3 No. 333- 262748) and related Prospectus of NextPlat Corp. of our audit report dated March 30, 2023 with respect to the consolidated financial statements of Progressive Care, Inc as of and for the years ended December 31, 2022 and 2021, which appear in this Form 8-K of NextPlat Corp..
/s/ Daszkal Bolton LLP
Boca Raton, Florida September 11, 2023
Exhibit 23.1
PROGRESSIVE CARE INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Exhibit 99.1
Report of Independent Registered Public Accounting Firm Daszkal Bolton LLP (PCAOB ID 229) F-1
Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021 F-3
Consolidated Statements of Operations for the years ended December 31, 2022 and December 31, 2021 F-4
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and December 31, 2021 F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and December 31, 2021 F-6
Notes to Consolidated Financial Statements F-7
Report of Independent Registered Public Accounting Firm
To the Board of Directors Stockholders of Progressive Care, Inc. Hallandale Beach, FL
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Progressive Care, Inc. (the “Company”) at December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Goodwill Impairment Assessments
As described in Note 3 to the consolidated financial statements, the Company’s goodwill balance was approximately $1.4 million at December 31, 2022. Management tests goodwill for impairment by performing an initial qualitative assessment (and quantitative assessment, if necessary), at least annually, or more frequently if an indication of impairment exists. Management’s goodwill impairment assessment and testing is performed during the fourth quarter of each year by comparing the estimated fair value of an associated reporting unit at December 31, 2022 to its carrying value.
F-1
The principal considerations for our determination that performing procedures relating to qualitative goodwill impairment testing is a critical audit matter are there was significant judgment by management when developing the fair value measurement of any reporting units where qualitative test was performed and there was a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating audit evidence relating to management’s analysis.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s qualitative goodwill impairment test, including controls over the valuation of any reporting units for which a qualitative test was performed. Evaluating whether the assumptions used by management was reasonable considering (i) the current and past performing of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit.
Valuation of Derivative Liabilities
As described Note 3 and 10 to the consolidated financial statements, the Company determined that the conversion features of its convertible notes in conjunction with financing arrangements required to be accounted for as derivative liabilities. The derivative liabilities are recorded at fair value when issued and subsequently re-measured to fair value each reporting period. The Company utilized the Monte Carlo Simulation Model (“model”) to determine the fair value of the derivative liabilities, which uses certain assumptions related to exercise price, term, expected volatility, and risk-free interest rate.
We determined the assessment of the fair values of the derivative liabilities as a critical audit matter due to the significant judgements used by the Company in determining the fair value of the derivative liabilities. Auditing the valuation of the derivative liabilities involved a high degree of auditor judgement and specialized skills and knowledge were needed.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing management’s process for developing the fair value measurement, evaluating the appropriateness of the model used by the Company to value the derivative liabilities, testing the reasonableness of the assumptions used by the Company in the model including exercise price, term, expected volatility, and risk-free interest rate and testing the accuracy and completeness of data used by the Company in developing the assumptions use in the model.
/s/ Daszkal Bolton LLP Daszkal Bolton LLP
We have served as the Company’s auditor since 2020 Boca Raton, Florida
March 30, 2023
F-2
PROGRESSIVE CARE INC. AND SUBSIDIARIES Consolidated Balance Sheets
December 31, 2022 December 31, 2021
6,742,876
3,671,786
2,004,805
713,284
245,983
13,378,734
2,582,753
1,387,860
126,696
446,180
53,814
38,637
2,053,187
18,014,674
7,384,336
226,931
200,314
33,616
7,845,197
2,248,626
—
278,602
24,198
10,396,623
—
—
3
66,947
22,525,214
(14,974,113
7,618,051
18,014,674
1,412,108
2,187,848
382,324
1,150,390
813,310
5,945,980
2,423,497
1,387,860
152,791
595,790
87,156
38,637
2,262,234
10,631,711
6,000,034
202,184
149,744
33,976
6,385,938
3,108,794
221,900
469,665
57,814
10,244,111
—
—
—
—
54,487
8,862,050
(8,528,937
387,600
10,631,711
Assets
Current Assets
Cash
Accounts receivable – trade, net
Receivables - other
Inventory, net
Prepaid expenses
Total Current Assets
Property and equipment, net
Other Assets
Goodwill
Intangible assets, net
Operating right-of-use assets, net
Finance right-of-use assets, net
Deposits
Total Other Assets
Total Assets
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities
Notes payable and accrued interest, net of unamortized debt discount and debt issuance costs
Operating lease liabilities - current portion
Finance lease liabilities – current portion
Total Current Liabilities
Long-term Liabilities
Notes payable, net of current portion
Derivative liabilities
Operating lease liabilities - net of current portion
Finance lease liabilities – net of current portion
Total Liabilities
Commitments and Contingencies
Stockholders’ Equity
Preferred Stock, Series A ($0.001 par value, 10,000,000 shares authorized; 0 and 51 shares issued and outstanding at December 31, 2022 and 2021, respectively)
Preferred Stock, Series B ($0.001 par value, 100,000 shares authorized; 3,000 and 0 issued and outstanding at December 31, 2022 and 2021, respectively)
Common stock ($0.0001 par value, 100,000,000 shares authorized; 3,347,440 and 2,724,422 issued and outstanding at December 31, 2022 and 2021, respectively)
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See accompanying notes to consolidated financial statements.
F-3
$$
$$
$$
))
$$
PROGRESSIVE CARE INC. AND SUBSIDIARIES Consolidated Statements of Operations
Years Ended December 31, 2022 2021
$$
) )) )
) ) ) )
)
)) )
)
)
$)$ )
$)$
$)$ $)$
40,601,859
30,898,783
9,703,076
12,285,174
(3,300
12,281,874
(2,578,798
(3,322,500
953,228
2,079,297
(147,622
(635,545
(1,026,155
(523,526
11,562
84,742
(797,715
(3,324,234
(5,903,032
(866
(5,903,898
(541,278
(6,445,176
(2.21
(2.21
2,911,684
2,911,684
38,852,580
28,678,742
10,173,838
11,209,715
208,953
11,418,668
(1,244,830
1,821,100
1,054,951
—
—
—
—
—
(17,621
10
(1,395,617
1,462,823
217,993
—
217,993
—
217,993
0.08
0.07
2,603,203
3,090,451
Revenues, net
Cost of revenue
Gross profit
Operating expenses
Selling, general and administrative expenses
Bad debt (recovery) expense
Total operating expenses
Loss from operations
Other (loss) income
Change in fair value of derivative liabilities
Gain on debt extinguishment
Grant revenue
Other finance costs
Abandoned offering costs
Day one loss on issuance of units
Day one loss on debt modification
Gain (loss) on disposal of fixed assets
Interest income
Interest expense
Total other (loss) income
(Loss) income before income taxes
Income taxes
Net (loss) income
Series A Preferred Stock dividend associated with induced conversion
Net (loss) income attributable to Common Shareholders
Basic weighted average (loss) earnings per common share
Diluted weighted average (loss) earnings per common share
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
See accompanying notes to consolidated financial statements.
F-4
Preferred Series A $0.001 Par Value
Preferred Series B $0.001 Par Value Shares Amount
Common Stock $0.0001 Par Value Shares Amount
Additional Paid in Capital
Accumulated Deficit
Total Stockholders’ (Deficit) Equity
PROGRESSIVE CARE INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity
Shares
Amount
51
—
—
—
51
—
—
—
(51
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,000
—
—
—
—
3,000
—
—
—
—
—
—
—
—
—
—
3
—
—
—
—
3
2,428,930
268,245
27,247
—
2,724,422
141,472
248,982
105,000
127,564
—
—
—
—
—
—
3,347,440
48,577
5,365
545
—
54,487
2,830
4,979
2,100
2,551
—
—
—
—
—
—
66,947
6,978,301
1,636,615
247,134
—
8,862,050
676,852
1,180,019
459,900
538,727
—
—
10,108,997
698,669
—
—
22,525,214
(8,746,930
—
—
217,993
(8,528,937
—
—
—
—
(541,278
—
—
—
(5,903,898
(14,974,113
(1,720,052
1,641,980
247,679
217,993
387,600
679,682
1,184,998
462,000
541,278
(541,278
3
10,108,997
698,669
(5,903,898
7,618,051
Balance at December 31, 2020
Issuance of common stock for settlement of debt principle and interest
Issuance of common stock for services
Net income
Balance at December 31, 2021
Issuance of common stock for services
Stock-based compensation
Issuance of common stock for debt modification agreement
Issuance of common stock in exchange for redemption and cancellation of Series A Preferred Stock
Series A Preferred Stock dividend associated with induced conversion
Issuance of Series B Preferred Stock from securities purchase agreement
Reclassification of debt and equity contracts
Stock options granted during the period
Net loss
Balance at December 31, 2022
$—$$$$)$)
—
— —
—) —
— —
—
)— —))
—
—
— —)) —
$—$$$$)$ See accompanying notes to the consolidated financial statements.
F-5
PROGRESSIVE CARE INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows
Years Ended December 31,
Cash flows from operating activities:
Net (loss) income attributable to Common Shareholders
$
2022
(6,445,176)
141,737 (3,300)
1,904,668 417,286
(953,228) 147,622 541,278
1,026,155 523,526 31,655 151,297 3,322,500 320,639 25,606 36,095
(11,562)
(1,466,258) (1,636,861)
437,106 695,764 — 1,622,462
(159,609) 669,402
(185,882) 11,562 (10,000)
(184,320)
— 6,000,000
(579,036) (221,964) (312,849)
(40,465) 4,845,686
5,330,768
1,412,108 6,742,876
104,212 886
— 484,377 679,681 128,437 115,111
$
2021
165,308 101,700 247,679
1,058,615 (1,054,951)
— — — —
33,344 192,879
(1,821,100) 258,635 — 175,865 —
269,716 —
(205,116) (220,506) (2,236)
23,316 (199,070) (757,929)
(123,317) —
— (123,317)
421,400 — — —
(167,934) (60,807)
192,659 (688,587)
2,100,695 1,412,108
78,367 —
1,641,980 — 247,679 126,313 —
217,993
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation
Change in provision for doubtful accounts
Stock-based compensation
Amortization of debt issuance costs and debt discounts
Gain on debt extinguishment
Other financing costs
Series A Preferred Stock dividend associated with induced conversion Day one loss on issuance of units
Day one loss on debt modification
Amortization of right of use assets-Finance leases Amortization of right of use assets-Operating leases Change in fair value of derivative liability
Change in accrued interest on notes payable Change in accrued interest on lease liabilities Amortization of intangible assets
Gain on disposal of fixed assets
Changes in operating assets and liabilities:
Accounts receivable Grant receivable Inventory
Prepaid expenses Deposits
Accounts payable and accrued liabilities
Operating lease liabilities
Net cash provided by (used in) operating activities Cash flows from investing activities:
Purchase of property and equipment
Proceeds from disposal of fixed assets
Purchase of intangible assets
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of notes payable
Gross proceeds from issuance of preferred stock Payment of stock issuance costs
Payment of debt discount and debt issuance costs Payments of notes payable
Payments on lease liabilities
Net cash provided by financing activities
Increase (decrease) in cash
Cash at beginning of year Cash at end of year
Supplemental disclosures of cash flow information: Cash paid for interest
Cash paid for income taxes
Supplemental schedule of non-cash investing and financing activities:
Debt principal and interest repaid through conversion into common stock shares Debt extension fees and other financing costs added to note principal
Issuance of common stock for services rendered
Insurance premiums financed through issuance of note payable
$
$ $
$ $ $ $ $
$
$ $
$ $ $ $ $
Equipment purchase financed through issuance of note payable See accompanying notes to the consolidated financial statements.
F-6
PROGRESSIVE CARE INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements
Unless the context requires otherwise, references to the “Company”, “we”, “us”, or “our” in these consolidated financial statements on Form 10-K refer to Progressive Care Inc. and its subsidiaries.
Progressive Care Inc. (“Progressive”) was incorporated under the laws of the state of Delaware on October 31, 2006.
Progressive, through its wholly-owned subsidiaries, Pharmco, LLC (“Pharmco 901”), Touchpoint RX, LLC doing business as Pharmco Rx 1002, LLC (“Pharmco 1002”), Family Physicians RX, Inc. doing business as PharmcoRx 1103 and PharmcoRx 1204 (“FPRX” or “Pharmco 1103” and “Pharmco 1204”) (pharmacy subsidiaries collectively referred to as “Pharmco”), and ClearMetrX Inc. (“ClearMetrX”) is a personalized healthcare services and technology company that provides prescription pharmaceuticals and risk and data management services to healthcare organizations and providers.
Pharmco 901 was formed on November 29, 2005 as a Florida Limited Liability Company and is a 100% owned subsidiary of Progressive. Pharmco 901 was acquired by Progressive on October 21, 2010. We currently deliver prescriptions to Florida’s diverse population and ship medications to patients in states where we hold non-resident pharmacy licenses as well. We currently hold Florida Community Pharmacy Permits at all Florida pharmacy locations and our Pharmco 901 location is licensed as a non-resident pharmacy in the following states: Arizona, Colorado, Connecticut, Georgia, Illinois, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Texas, and Utah. We are able to dispense to patients in the state of Massachusetts without a non-resident pharmacy license because Massachusetts does not require such a license for these activities.
Pharmco 1103 is a pharmacy with locations in North Miami Beach and Orlando, Florida that provides Pharmco’s pharmacy services to Broward County, the Orlando/Tampa corridor, and the Treasure Coast of Florida. Progressive acquired all the ownership interests in Pharmco 1103 in a purchase agreement entered into on June 1, 2019.
Pharmco 1002 is a pharmacy located in Palm Springs, Florida that provides Pharmco’s pharmacy services to Palm Beach, St. Lucie and Martin Counties, Florida. Progressive acquired all the ownership interests in Pharmco 1002 in a purchase agreement entered into on July 1, 2018.
ClearMetrX was formed on June 10, 2020 and provides third-party administration (“TPA”) services to 340B covered entities. ClearMetrX also provides data analytics and reporting services to support and improve care management for health care organizations.
RXMD Therapeutics was formed on October 1, 2019. RXMD Therapeutics had no operating activity to date.
Note 2. Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements for the years ended December 31, 2022 and 2021 have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for annual financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.
F-7
Note 1. Organization & Nature of Operations
Note 3. Summary of Significant Accounting Policies Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected to opt out of such extended transition period.
Use of Estimates
The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to residual values, estimated asset lives, impairments and bad debts. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Common Stock Reverse Stock Split
On December 29, 2022, we effected a 1-for-200 reverse stock split of our common stock and the number of shares of common stock that we are authorized to issue was reduced to 100 million. All share information throughout this Annual Report on Form 10-K has been retrospectively adjusted to reflect the reverse stock split. The shares of common stock retain a par value of $0.001 per share.
Reclassifications
Certain reclassifications have been made to the 2021 financial statement presentation to conform to that of the current period. Total equity and net (loss) income are unchanged due to these reclassifications.
Cash
The Company maintains its cash in bank deposit accounts at several financial institutions, which are insured by the Federal Deposit Insurance Corporation (“FDIC”) and at times may exceed federally insured limits. The Company had approximately $5.6 million that was uninsured at December 31, 2022. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk associated with its cash balances, since our deposits are held with high quality financial institutions that are well capitalized.
F-8
Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at December 31, 2022 and 2021.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are stated at the invoiced amount. Trade accounts receivable primarily include amounts from third-party pharmacy benefit managers (“PBMs”) and insurance providers and are based on contracted prices. Trade accounts receivable are unsecured and require no collateral. The Company records an allowance for doubtful accounts for estimated differences between the expected and actual payment of accounts receivable. These reductions were made based upon reasonable and reliable estimates that were determined by reference to historical experience, contractual terms, and current conditions. Each quarter, the Company reevaluates its estimates to assess the adequacy of its allowance and adjusts the amounts as necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Risks and Uncertainties
The Company’s operations are subject to intense competition, risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure.
Billing Concentrations
The Company’s trade receivables are primarily from prescription medications billed to various insurance providers. Ultimately, the insured is responsible for payment should the insurance company not reimburse the Company.
The Company generated reimbursements from three significant PBMs:
Inventory
Years Ended December 31, 2022 2021
%% %% %%
56
36
5
59
31
5
A
B
C
Inventory is valued on a lower of first-in, first-out (FIFO) cost or net realizable value basis. Inventory primarily consists of prescription medications, pharmacy and testing supplies, and retail items. The Company provides a valuation allowance for obsolescence and slow-moving items. The Company recorded an allowance for obsolescence of $40,000 at December 31, 2022 and 2021, respectively.
Property and Equipment
Property and equipment are recorded at cost or fair value if acquired as part of a business combination. Property and equipment are depreciated or amortized using the straight-line method over their estimated useful lives. Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is recorded, when appropriate. Expenditures for maintenance and repairs are charged to expense as incurred. Estimated useful lives of property and equipment are as follows:
Description Estimated Useful Life (in years)
Lesser of estimated useful life or life of lease
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. There were no impairment charges during the years ended December 31, 2022 and 2021, respectively.
F-9
Building
Building improvements
Leasehold improvements and fixtures
Furniture and equipment
Computer equipment and software
Vehicles
40
Remaining life of the building
5
3
3-5
Business acquisitions
The Company records business acquisitions using the acquisition method of accounting. All of the assets acquired, liabilities assumed, and contractual contingencies are recognized at their fair value on the acquisition date. The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized and goodwill. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred.
Goodwill
Goodwill represents the excess of the purchase price of FPRX and Pharmco 1002 over the value assigned to their net tangible and identifiable intangible assets. FPRX and Pharmco 1002 are considered to be the reporting units for goodwill. Acquired intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. Valuation techniques consistent with the market approach, income approach, and/or cost approach are used to measure fair value. Goodwill and other indefinite-lived intangible assets are assessed annually for impairment in the fourth fiscal quarter and in interim periods if events or changes in circumstances indicate that the assets may be impaired.
Intangible Assets
Identifiable intangible assets subject to amortization generally represent the cost of client relationships and tradenames acquired, as well as non-compete agreements to which the Company is a party. In valuing these assets, the Company makes assumptions regarding useful lives and projected growth rates, and significant judgment is required. The Company periodically reviews its identifiable intangible assets for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of those assets exceed their respective fair values, additional impairment tests are performed to measure the amount of the impairment losses, if any.
Fair Value Measurements
Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
F-10
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
? Cash, accounts receivable, and accounts payable and accrued liabilities:The amounts reported in the accompanying Consolidated Balance Sheets approximate fair value due to their short-term nature.
? Notes payable and lease liabilities: The carrying amount of notes payable approximated fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing. The carrying value of lease liabilities approximate fair value due to the implicit rate in the lease in relation to the Company’s borrowing rate and the duration of the leases (Level 2 inputs).
Assets Measured and Recorded at Fair Value on a Recurring Basis
The following tables presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of:
Description
Derivative Liabilities $ Description
Derivative Liabilities
Level 1
Level 1
Level 2
Level 2
Level 3
Balance at December 31, 2022
$ —
Balance at December 31, 2021 221,900 $ 221,900
—
$
—
$
—
Level 3
$
—
$
—
$
The following table is a roll forward from December 31, 2021 to December 31, 2022 of the opening and closing balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
Derivative
Liabilities
221,900
3,322,500
8,042,000
(11,586,400
-
Balance December 31, 2021
Total losses for the period:
Changes in fair value
New derivatives
Transfers out
Balance December 31, 2022
Changes in fair value of derivative liabilities for the year ended December 31, 2022 were included in net (loss) income for the year.
Derivative Liabilities
The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 810-10-05-4 and paragraph 815-40-25 of the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”). The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the Consolidated Statements of Operations as other income or expense. Upon registration, conversion or exercise, as applicable, of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the Consolidated Balance Sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months after the balance sheet date.
The fair value of these derivative instruments is determined using the Monte Carlo Simulation Model. F-11
$
$
)
Revenue Recognition
The Company recognizes pharmacy revenue from dispensing prescription drugs at the time the drugs are physically delivered to a customer or when a customer picks up their prescription or purchases merchandise at the store, which is the point in time when control transfers to the customer. Each prescription claim is considered an arrangement with the customer and is a separate performance obligation. Payments are received directly from the customer at the point of sale, or the customers’ insurance provider is billed electronically. For third-party medical insurance and other claims, authorization is obtained to ensure payment from the customer’s insurance provider before the medication is dispensed to the customer. Authorization is obtained for these sales electronically and a corresponding authorization number is issued by the customers’ insurance provider.
The Company recognizes testing revenue when the tests are performed and results are delivered to the customer. Each test is considered an arrangement with the customer and is a separate performance obligation. Payment is generally received in advance from the customer.
Billings for most prescription orders are with third-party payers, including Medicare, Medicaid, and insurance carriers. Customer returns are nominal. Prescription revenues were 89% and 87% of total revenue for the years ended December 31, 2022 and 2021, respectively.
The Company accrues an estimate of fees, including direct and indirect remuneration (“DIR”) fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of revenue at the time revenue is recognized. Changes in the estimate of such fees are recorded as an adjustment to revenue when the change becomes known.
The following table disaggregates net revenue by categories:
Grant Revenue
For the Years Ended December 31, 2022 2021
$$
)) )
$$
36,288,366
3,789,781
1,915,471
2,560
41,996,178
(1,394,319
—
40,601,859
33,828,219
2,803,859
4,320,657
1,555
40,954,290
(2,098,508
(3,202
38,852,580
Prescription revenue
340B contract revenue
Testing revenue
Rent and other revenue
Subtotal
PBM fees
Sales returns
Revenues, net
Under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company is eligible for refundable employee retention credits (“ERCs”) subject to certain conditions which were met during the year ended December 31, 2022. In connection with the ERCs, the Company adopted a policy to recognize the ERCs when earned and report the amounts as grant revenue in accordance with FASB ASC 958-605. Accordingly, the Company recorded approximately $2.1 million of grant revenue and grant revenue receivable during the year ended December 31, 2022. The Company received approximately $1.6 million of ERC proceeds during the year ended December 31, 2022, which were credited against grant revenue receivable. Grant revenue receivable balance at December 31, 2022 was approximately $0.3 million and recorded in Receivables – other on the Consolidated Balance Sheets.
Cost of Revenue
Cost of pharmacy revenue is derived based upon vendor purchases relating to prescriptions sold, cost of testing supplies for tests administered to patients, and point- of-sale scanning information for non-prescription sales and is adjusted based on periodic inventories. All other costs related to revenues are expensed as incurred.
DIR Fees
The Company reports DIR fees as a reduction of revenue on the accompanying Consolidated Statements of Operations. DIR fees are fees charged by PBMs to pharmacies for network participation as well as periodic reimbursement reconciliations. For some PBMs, DIR fees are charged at the time of the settlement of a pharmacy claim. Other PBMs do not determine DIR fees at the claim settlement date, and therefore DIR fees are collected from pharmacies after claim settlement, often as clawbacks of reimbursements based on factors that vary from plan to plan. For example, two PBMs calculate DIR fees on a trimester basis and charge the Company for these fees as reductions of reimbursements paid to the Company two to three months after the end of the trimester (e.g., DIR fees for January – April 2022 claims were charged by these PBMs in July – August 2022). For DIR fees that are not collected at the time of claim settlement, the Company records an accrued liability at each reporting date for estimated DIR fees that are expected to be collected by the PBMs in a future period. The estimated liability for these fees is highly subjective and the actual amount collected may differ from the accrued liability. The uncertainty of management’s estimates is due to inadequate disclosure to the Company by the PBMs as to exactly how these fees are calculated either at the time the DIR fees are actually assessed and reported to the Company. The detail level of the disclosure of assessed DIR fees varies based on the information provided by the PBM.
F-12
Vendor Concentrations
The Company had significant concentrations with one vendor. The purchases from this significant vendor were 95% and 96% of total vendor purchases for the years ended December 31, 2022 and 2021, respectively.
Selling, General and Administrative Expenses
Selling expenses primarily consist of salaries, contract labor, occupancy costs, and expenses directly related to operations. General and administrative costs include advertising, insurance, professional fees, and depreciation and amortization.
Advertising
Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred. Advertising expense was approximately $0.3 million for the years ended December 31, 2022 and 2021, respectively.
Stock-Based Compensation
Stock-based compensation expense is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. The Company uses the Black-Scholes and Monte Carlo Simulation models to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards.
Stock-based compensation expense is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation expense is recognized on a straight-line basis over the requisite service period for the entire award. The Company’s policy is to recognize forfeitures as they occur.
Stock Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the Consolidated Statements of Operations. The fair value of the warrants issued in the Private Placement transaction was estimated using a Monte Carlo simulation approach (see Note 14).
Offering Costs Associated with the Public Offering
The Company complies with the requirements of ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Company’s planned underwritten public offering. Offering costs generally are deferred and reclassified as a charge to additional paid-in capital upon the sale of securities. Deferred costs for an abandoned offering are expensed.
F-13
Income Taxes
Income taxes are accounted for under the asset and liability method. 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 and operating loss and tax credit carry forwards. 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 that includes the enactment date.
Progressive Care Inc., RXMD Therapeutics and PharmcoRx 1103 are taxed as C corporations. Pharmco 901 and Pharmco 1002 are taxed as partnerships, wherein each member is responsible for the tax liability, if any, related to its proportionate share of Pharmco 901 and Pharmco 1002’s taxable income. Progressive Care Inc. has a 100% ownership interest in Pharmco 901 and Pharmco 1002; therefore, all of Pharmco 901 and Pharmco 1002’s taxable income attributable to the period of ownership is included in Progressive Care Inc.’s taxable income.
There was no current tax provision for the years ended December 31, 2022 and 2021 because the Company did not have taxable income during those periods. Total available net operating losses to be carried forward to future taxable years was approximately $16.5 million as of December 31, 2022, $12.5 million of which will expire in various years through 2038. The temporary differences giving rise to deferred income taxes principally relate to accelerated depreciation on property and equipment and amortization of goodwill recorded for tax purposes, reserves for estimated doubtful accounts and inventory obsolescence and net operating losses recorded for financial reporting purposes. The Company’s net deferred tax asset at December 31, 2022 and 2021 was fully offset by a 100% valuation allowance as it was not more likely than not that the tax benefits of the net deferred tax asset would be realized. The change in the valuation allowance increased by approximately $1.6 million for the year ended December 31, 2022.
The Company accounts for uncertainty in income taxes by recognizing a tax position in the consolidated financial statements only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company records interest and penalties related to tax uncertainties, if any, as income tax expense. Based on management’s evaluation, the Company does not believe it has any uncertain tax positions for the years ended December 31, 2022 and 2021.
(Loss) Earnings per Share
Basic (loss) earnings per share (“EPS”) is computed by dividing net (loss) income available to common shareholders by the weighted average number of common shares outstanding during the year, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the year including stock warrants, using the treasury stock method (by using the average stock price for the year to determine the number of shares assumed to be purchased from the exercise of stock warrants), and convertible debt, using the if converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.
The following are dilutive common stock equivalents during the years ended:
The following table presents the calculation of basic and diluted EPS:
December 31, 2022 December 31, 2021
Years Ended December 31, 2022 2021
$)$
$)$ $)$
709,478
576,923
1,286,401
487,248
—
487,248
Convertible debt
Stock warrants
Total
(6,445,176
2,911,684
—
2,911,684
(2.21
(2.21
217,993
2,603,203
487,248
3,090,451
0.08
0.07
Net (loss) income attributable to Common Shareholders
Basic weighted average common shares outstanding
Potentially dilutive common shares
Diluted weighted average common shares outstanding
Basic weighted average (loss) earnings per common share
Diluted weighted average (loss) earnings per common share
Paycheck Protection Program Loan
The Company records Paycheck Protection Program (“PPP”) loan proceeds in accordance with ASC 470, Debt. The Company treated the PPP loan as indebtedness, which was extinguished and recorded as a gain on debt extinguishment when legally released by the primary obligor.
F-14
Recently Adopted Accounting Standards
Debt
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which among other things, simplifies the accounting models for the allocation of proceeds attributable to the issuance of a convertible debt instrument. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (i) a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or (ii) a convertible debt instrument was issued at a substantial premium. The standard became effective for the Company in the first quarter of 2022 and did not have a material effect on the Company’s consolidated financial statements.
Accounting Pronouncements Issued but not yet Adopted
Income Taxes
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 is required to be adopted for annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 with early adoption permitted. The Company will adopt this accounting standard update effective January 1, 2023. We expect that the adoption of the standard will not have a material impact on our consolidated financial statements.
Credit Losses
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which introduces an impairment model based on expected, rather than incurred, losses. Additionally, it requires expanded disclosures regarding (a) credit risk inherent in a portfolio and how management monitors the portfolio’s credit quality; (b) management’s estimate of expected credit losses; and (c) changes in estimates of expected credit losses that have taken place during the period. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016-13. In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments.” This ASU improves the Codification and amends the interaction of Topic 842 and Topic 326. ASU 2016-13 and related amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company expects to adopt this accounting standards update effective January 1, 2023. The Company has not yet quantified the impact of ASU 2016-13 on its consolidated financial statements. However, it is not expected to have a material effect on the Company’s consolidated financial statements.
Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the Company’s consolidated financial statements.
Subsequent Events
Management has evaluated subsequent events and transactions for potential recognition or disclosure in the consolidated financial statements through March 30, 2023, the date the consolidated financial statements were available to be issued.
Note 4. Liquidity and Going Concern Consideration
The Company has sustained recurring operating losses and negative cash flows from operations. At December 31, 2022, the Company had an accumulated deficit of approximately $15.0 million. For the year ended December 31, 2022, the Company had a net loss of $5.9 million. The Company expects to continue to incur significant losses for at least the next 12 months.
F-15
The Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and other commitments in the normal course of business.
On August 30, 2022, the Company entered into a Debt Modification Agreement (“the Modification Agreement”) with a group of investors led by NextPlat Corporation (the “NextPlat investors”) wherein the terms were modified for the existing Secured Convertible Promissory Note previously held by Iliad Research and Trading, L.P. (“the Iliad Note”) and sold to the NextPlat investors. The NextPlat investors purchased the Iliad Note as part of a Confidential Note Purchase and Release Agreement (“the NPA”) between Iliad Research and Trading L.P. and the NextPlat investors. As of the date of the Securities Purchase Agreement (“SPA”), the aggregate amount of principal and interest outstanding was approximately $2.8 million (see Note 5). As part of the Modification Agreement, the NextPlat investors agreed to modify the following terms of the Iliad Note as follows:
1. The Maturity Date was extended to August 31, 2027.
2. The Outstanding Balance shall bear interest at the simple annual rate of five percent (5%) per annum.
3. The Company is prohibited from prepaying the Note.
4. The Conversion Price for the Note was modified to a fixed price of $4.00 per share of common stock.
5. The Note shall provide for mandatory conversion upon the later to occur of (a) the completion of the Company’s reverse stock split, and (b) the listing of the Company’s common stock on a national exchange, including the Nasdaq Capital Market, the Nasdaq Global Market, or the New York Stock Exchange.
The Company also entered into a Private Placement Transaction wherein the Company raised approximately $6.0 million in gross proceeds from the sale of Series
B Convertible Preferred Stock (see Note 5), which approximately $0.6 million were withheld from the gross proceeds as it relates to offering costs and approximately $0.4 million in stock issued for services rendered and derivative liabilities associated with the offering.
Management believes that the above transactions mitigate the previously reported conditions related to the Company’s ability to continue as a going concern over the next 12 months.
Note 5. Private Placement Transaction
On August 30, 2022, the Company entered into a SPA with NextPlat Corporation (“NextPlat”) wherein the Company received gross proceeds of $6.0 million through the sale of 3,000 units. Each unit is made up of one share of Series B Convertible Preferred Stock, $0.001 par value, and one redeemable warrant (“the Investor Warrants”). Each warrant entitles the holder to purchase one share of Series B Convertible Preferred Stock at an exercise price of $2,000. The Investor Warrants may also be exercised, in whole or in part, by means of a cashless exercise. The Series B Convertible Preferred Stock has a stated value of $2,000 per share. Each share of Series B Convertible Preferred Stock is convertible at any time at the option of the holder into shares of the Company’s common stock determined by dividing the stated value by the conversion price of $4.00. The Company incurred total offering costs associated with the transaction of approximately $1.0 million, which approximately $0.6 million in offering costs were withheld from the gross proceeds and approximately $0.4 million in stock issued for service rendered and derivative liabilities associated with the offering.
In conjunction with the Private Placement Transaction, the Company also entered into a Debt Modification Agreement with NextPlat (see Note 4). The Company also issued placement agent warrants with substantively similar terms as the Investor Warrants.
In connection with the Private Placement Transaction, the Company entered into a registration rights agreement with NextPlat pursuant to which, among other things, the Company agreed to prepare and file with the SEC a resale registration statement to register the shares of the Company’s common stock to be issued upon conversion of the Series B Convertible Preferred Stock, the NextPlat Convertible Note, and Warrants.
Subsequent to December 31, 2022, the Company filed with the SEC a Request for Withdrawal of Registration Statement on Form S-1. F-16
Note 6. Accounts Receivable – Trade, net
Accounts receivable consisted of the following at:
December 31, 2022 December 31, 2021
$$ ))
$$
3,875,686
(203,900
3,671,786
2,395,048
(207,200
2,187,848
Gross accounts receivable – trade
Less: Allowance for doubtful accounts
Accounts receivable – trade, net
For the years ended December 31, 2022 and 2021, the Company recognized bad debt (recovery) expense in the amount of approximately ($3,300) and $209,000, respectively.
Note 7. Property and Equipment, net
Property and equipment, net consisted of the following at:
December 31, 2022 December 31, 2021
$$
)) $$
1,651,069
513,075
423,829
276,614
251,715
184,000
101,230
3,401,532
(818,779
2,582,753
1,651,069
507,238
330,291
276,614
81,633
184,000
101,230
3,132,075
(708,578
2,423,497
Building
Building improvements
Furniture and equipment
Leasehold improvements and fixtures
Vehicles
Land
Computer equipment and software
Total
Less: accumulated depreciation
Property and equipment, net
Depreciation expense for the year ended December 31, 2022 and 2021 was approximately $142,000 and $165,000, respectively.
Note 8. Intangible Assets
Intangible assets consisted of the following at:
December 31, 2022 December 31, 2021
$$
)) $$
$$
362,000
263,000
166,000
86,424
67,933
945,357
(818,661
126,696
—
126,696
362,000
263,000
166,000
—
67,933
858,933
(782,566
76,367
76,424
152,791
Trade names
Pharmacy records
Non-compete agreements
Software
Website
Subtotal
Less accumulated amortization
Net intangible assets
Software not yet placed in service
Total intangible assets, net
Amortization of intangible assets amounted to approximately $36,000 and $176,000 for the years ended December 31, 2022 and 2021, respectively. The following table represents the total estimated future amortization of intangible assets for the five succeeding years:
Year
Note 9. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at:
F-17
Amount
2023
2024
2025
2026
2027
Total
48,772
30,390
17,285
17,285
12,964
126,696
December 31, 2022
December 31, 2021
$
6,517,496
228,957
500,589
—
137,294
7,384,336
4,677,555
143,074
712,002
306,588
160,815
6,000,034
Accounts payable – trade
Accrued payroll and payroll taxes
Accrued DIR fees
Accrued legal fees
Other accrued liabilities
Total
$$
$$
10. Notes Payable
Notes payable consisted of the following at:
December 31, 2022 December 31, 2021
$$
)) ) )
)) $$
A. Convertible notes payable and accrued interest - collateralized
B. Mortgage note payable - commercial bank - collateralized
C. Note payable - uncollateralized
D. Notes payable - collateralized
Insurance premiums financing
Subtotal
Less: unamortized debt discount
Less: unamortized debt issuance costs
Less: unamortized investment length premium
Total
Less: current portion of notes payable
Long-term portion of notes payable
2,837,910
1,225,913
25,000
137,017
70,302
4,296,142
(1,820,585
—
—
2,475,557
(226,931
2,248,626
2,143,891
1,307,562
25,000
52,231
68,164
3,596,848
(198,677
(575
(86,618
3,310,978
(202,184
3,108,794
The corresponding notes payable above are more fully discussed below: (A) Convertible Notes Payable – collateralized
Iliad Research and Trading, L.P.
On March 6, 2019, Progressive entered a Securities Purchase Agreement (the “Purchase Agreement”) with Iliad Research and Trading, L.P. (“Iliad Research”) in the amount of $3,310,000 (“the Iliad Research note”). The Iliad Research note accrued interest at the rate of 10% per annum and was convertible into shares of common stock ($0.0001 par value per share) based on the average of the two lowest closing trading prices during the twenty trading days immediately preceding the applicable conversion. Through a series of extensions entered into, the maturity date was extended to May 15, 2023, at which time all unpaid principal and accrued and unpaid interest were due. The Iliad Research note was acquired as part of the Confidential Note Purchase and Release Agreement entered into between Iliad Research and the NextPlat investors, and the terms of the Iliad Research note were modified as part of the Debt Modification Agreement between the Company and the NextPlat investors (see Note 4).
The provisions of the Iliad Research note contained a weekly volume limitation on the number of shares common stock received from note conversions that can be sold (“Volume Limitation”). In the event of Volume Limitation breach, the Outstanding Balance of the Iliad Research note was reduced by an amount equal to such Excess Sales (the “Outstanding Balance Reduction”). During the year ended December 31, 2021, the volume of sales of Conversion Shares exceeded the Volume Limitation, which resulted in an Outstanding Balance Reduction in the amount of $180,000, which was recorded as a gain on debt extinguishment during the period.
On December 14, 2021, Progressive Care filed a demand (“the Company Demand”) with Iliad Research that alleged breaches of the Volume Limitation provisions of the Iliad Research note, as well as a previous note agreement with an affiliate of Iliad Research, Chicago Venture Partners, LP (“CVP”), (“the CVP note”). The CVP Note previously had been paid off in 2020. On January 7, 2022, in response to the Company Demand, Iliad Research and CVP filed a complaint with the Third Judicial District Court of Salt Lake County, State of Utah, as well as an Arbitration Notice pursuant to the CVP and Iliad Research Purchase Agreements.
On January 20, 2022, Progressive Care entered into an agreement with Iliad Research and CVP (“the Settlement Agreement”), in which (1) the maturity date of the Iliad Research note was extended to May 15, 2022, for which the Company paid an extension fee in the amount of approximately $46,000, (2) the outstanding balance of the Iliad Research note was increased by $100,000 because the Iliad Research note was not repaid by February 16, 2022, (3) the balance of the Iliad Research note was reduced by $180,000 (recorded in 2021) as settlement of the alleged breaches of the Volume Limitation provisions of the Iliad Research note, (4) CVP paid $175,000 to Progressive Care as settlement of the alleged breaches of the Volume Limitation provisions of the CVP note, and (5) Iliad Research and its affiliated entities agreed not to sell any shares of Progressive Care or submit any Redemption Notices for a stated time period (“Standstill Period”). The $180,000 debt reduction and $175,000 received were accounted for as gains on debt extinguishment, the $100,000 was accounted for as interest expense and the $46,000 extension fee was recorded as other finance costs.
During the second quarter of 2022, the Company and Iliad Research entered into a series of agreements to (i) extend the Standstill Period to July 15, 2022, and (ii) extend the maturity date of the Iliad Research note to May 15, 2023. The fees paid to extend the Standstill Period of approximately $101,000 were recorded as other finance costs. The fees to modify the terms to extend the maturity date in the amount of approximately $237,000 were added to the outstanding note balance, resulting in the recognition of a loss on debt extinguishment.
The outstanding balance on the Iliad Research note was approximately $2,144,000 at December 31, 2021, inclusive of accrued interest in the amount of approximately $833,000. On August 30, 2022, the Iliad Research note was purchased by the NextPlat investors.
The conversion features embedded within the Iliad Research note represented an embedded derivative. Accordingly, the embedded conversion right was bifurcated from the debt host and accounted for as a derivative liability and remeasured to fair value each reporting period. Fair value was determined using a Monte Carlo simulation model. For the years ended December 31, 2022 and 2021, the Company recorded in earnings a change in fair value of the derivative liability in the amounts of approximately ($1,256,000) and $914,000, respectively. Upon the entrance into the Debt Modification Agreement with the NextPlat investors on August 30, 2022, the outstanding fair value of the derivative liability of $1,477,400 million was written off and included in gain on debt extinguishment for the year ended December 31, 2022. The derivative liability balance at December 31, 2021 was approximately $222,000.
F-18
Debt Issuance Costs, Debt Discount, and Investment Length Premium Associated with the Iliad Research Note
Debt issuance costs consist of fees incurred through securing financing from Iliad Research on March 6, 2019. Debt discount consists of the discount recorded upon recognition of the derivative liability upon issuance of the first and second tranches. Investment length premium is calculated at a 5% premium on the outstanding balance when the note is still outstanding at (a) 18 months from the effective date, (b) 24 months from the effective date, and (c) 30 months from the effective date.
Debt issuance costs, debt discount and investment length premium were amortized to interest expense over the term of the related debt using the straight-line method. Total amortization expense for the years ended December 31, 2022 and 2021 was approximately $286,000 and $1,058,615, respectively.
NextPlat Investors
On August 30, 2022, the Company entered into the Modification Agreement with the NextPlat investors wherein the terms were modified for the existing Secured Convertible Promissory Note originally held by Iliad Research (“the Note”) and sold to the NextPlat investors (“the NextPlat Investors Note”). The NextPlat investors purchased the Note as part of a Confidential Note Purchase and Release Agreement between Iliad Research and the NextPlat investors. As of the date of the SPA, the aggregate amount of principal and interest outstanding on the NextPlat Investors Note was approximately $2.8 million. As part of the Modification Agreement, the NextPlat investors agreed to modify the following terms of the NextPlat Investors Note:
1. The Maturity Date was extended to August 31, 2027.
2. The Outstanding Balance shall bear interest at the simple annual rate of five percent (5%) per annum.
3. The Company is prohibited from prepaying the Note.
4. The Conversion Price for the Note was modified to a fixed price of $4.00 per share of common Stock.
5. The Note shall provide for mandatory conversion upon the later to occur of (a) the completion of the Company’s reverse stock split, and (b) the listing of the Company’s common stock on a national exchange, including the Nasdaq Capital Market, the Nasdaq Global Market, or the New York Stock Exchange.
The outstanding balance on the NextPlat Investors Note was approximately $2.8 million at December 31, 2022, inclusive of accrued interest in the amount of
approximately $47,000 at December 31, 2022. The Note is reported net of a debt discount of approximately $1.8 million on the Consolidated Balance Sheets at December 31, 2022.
Embedded Derivative Liability
The Company identified an embedded derivative feature in the NextPlat Investors Note and concluded that it required bifurcation and liability classification as a derivative liability. The fair value of the embedded derivative at the issuance date of the Note (August 30, 2022) was approximately $2.0 million. The Company recorded a gain of approximately $284,000 million from the change in the fair value of the derivative liability in its Consolidated Statements of Operations for the year ended December 31, 2022. As a result of the common stock reverse stock split on December 29, 2022, the derivative liability was reclassified to equity.
Debt Issuance Costs and Debt Discount Associated with the NextPlat Investors Note
Debt Issuance Costs consist of fees incurred from the Placement Agent and Investment Advisor associated with the NextPlat Investors Debt Modification Agreement. Debt Discount consists of the discount recorded from the issuance of approximately 105,000 shares of common stock to the NextPlat Investors as consideration for the Debt Modification Agreement.
Debt issuance costs and debt discount were amortized to interest expense over the term of the related debt using the straight-line method. Total amortization expense for the year ended December 31, 2022 was approximately $131,000.
F-19
Year
Amount
(B) Mortgage Note Payable – collateralized
In 2018, Pharmco 901 closed on the purchase of land and building located at 400 Ansin Boulevard, Hallandale Beach, Florida. The purchase price was financed in part through a mortgage note and security agreement entered into with a commercial lender in the amount of $1,530,000. The promissory note is collateralized by the land and building, bears interest at a fixed rate of 4.75% per annum, matures on December 14, 2028 and is subject to a prepayment penalty. Principal and interest will be repaid through 119 regular payments of $11,901 that began in January 2019, with the final payment of all principal and accrued interest not yet paid on December 14, 2028. Note repayment is guaranteed by Progressive Care Inc.
(C) Note Payable – Uncollateralized
As of December 31, 2022 and 2021, the uncollateralized note payable represents a non-interest-bearing loan that is due on demand from an investor. (D) Notes Payable – Collateralized
In September 2019, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to pay off a capital lease obligation on pharmacy equipment in the amount of $85,429. The terms of the promissory note payable require 48 monthly payments of $2,015, including interest at 6.5%. The balance outstanding on the note payable was approximately $16,000 and $40,000 at December 31, 2022 and 2021, respectively. The promissory note is secured by equipment with a net book value of approximately $16,000 and $36,000 at December 31, 2022 and 2021, respectively.
In April 2021, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of $29,657. During September 2021, pharmacy equipment was returned since the installation was cancelled and the note was amended. The amended promissory note payable requires 46 monthly payments of $331, including interest at 6.9%. The balance outstanding at December 31, 2022 and 2021 on the note payable was approximately $9,000 and $12,000, respectively. The remaining equipment was written off during September 2021.
In July 2022, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount approximately of $90,000. The terms of the promissory note payable require 6 monthly payments of $0 starting July 2022, and 60 monthly payments of $1,859, including interest at 8.78% starting January 2023. The balance outstanding on the note payable was approximately $90,000 on December 31, 2022. The promissory note is secured by equipment with a net book value of approximately $84,000 on December 31, 2022.
In September 2022, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase a vehicle in the amount approximately of $25,000. The terms of the promissory note payable require 24 monthly payments of $1,143, including interest at 8.29% starting October 2022. The balance outstanding on the note payable was approximately $22,000 on December 31, 2022. The promissory note is secured by the vehicle with a net book value of approximately $23,000 on December 31, 2022.
Principal outstanding at December 31, 2022, is expected to be repayable as follows:
2023
2024
2025
2026
2027
Thereafter
Total
226,931
121,119
114,412
118,623
123,590
3,591,467
4,296,142
Interest expense on these notes payable, exclusive of debt discount and debt issue cost amortization, was approximately $340,900 and $330,500 for the years ended December 31, 2022 and 2021, respectively.
F-20
$
$
Note 11. Lease Obligations
The Company has entered into a number of lease arrangements under which the Company is the lessee. Three of the leases are classified as finance leases and three of the leases are classified as operating leases. In addition, the Company has elected the short-term lease practical expedient in ASC Topic 842 related to real estate leases with terms of one year or less and short-term leases of equipment used in our pharmacy locations. The following is a summary of the Company’s lease arrangements.
Finance Leases
In May 2018, the Company entered into a finance lease obligation to purchase pharmacy equipment with a cost of approximately $115,000. The terms of the lease agreement require monthly payments of $1,678 plus applicable tax over 84 months ending March 2025 including interest at the rate of 6%. The finance lease obligation is secured by equipment with a net book value of approximately $38,000 and $55,000 at December 31, 2022 and 2021, respectively.
The Company assumed an equipment finance lease obligation for medication dispensing equipment from the acquisition of Pharmco 1002 in July 2018. The lease expired in March 2022. The finance lease obligation was secured by equipment with a net book value of $0 at December 31, 2022 and 2021, respectively.
In December 2020, the Company entered into an interest-free finance lease obligation to purchase computer servers with a cost of approximately $51,000. The terms of the lease agreement require monthly payments of $1,411 plus applicable tax over 36 months ending November 2023. The finance lease obligation is secured by equipment with a net book value of approximately $16,000 and $32,000 at December 31, 2022 and 2021, respectively.
Operating Leases
The Company entered into a lease agreement for its Orlando pharmacy in August 2020. The term of the lease is 66 months with a termination date of February 2026. The lease agreement calls for monthly payments that began in February 2021, of $4,310, with an escalating payment schedule each year thereafter.
The Company leases its North Miami Beach pharmacy location under an operating lease agreement with a lease commencement date in September 2021. The term of the lease is 60 months with a termination date in August 2026. The lease calls for monthly payments of $5,237, with an escalating payment schedule each year thereafter.
The Company also leases its Palm Beach County pharmacy locations under operating lease agreements expiring in February 2024. The Company recognized lease costs associated with all leases as follows:
191,573
31,655
3,097
226,325
380,972
33,344
6,482
420,798
Operating lease cost:
Fixed rent expense
Finance lease cost:
Amortization of right-of-use assets
Interest expense
Total lease costs
Supplemental cash flow information related to leases was as follows:
F-21
For the Years Ended December 31, 2022 2021
$$
$$
For the Years Ended December 31, 2022 2021
$$
$$
159,609
40,465
200,074
199,070
60,807
259,877
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Financing cash flows from finance leases
Total cash paid for lease liabilities
Supplemental balance sheet information related to leases was as follows:
December 31, 2022 December 31, 2021
446,180
200,314
278,602
3.11
4.8
53,814
33,616
24,198
1.89
4.4
595,790
149,744
469,665
4.01
4.8
87,156
33,976
57,814
2.78
4.0
Operating leases:
Operating lease right-of-use assets, net
Operating lease liabilities:
Current portion
Long-term portion
Weighted average remaining lease term (years)
Weighted average discount rate
Finance leases:
Finance lease right-of-use assets, net
Finance lease liabilities:
Current portion
Long-term portion
Weighted average remaining lease term (years)
Weighted average discount rate
Year
Finance Lease
Maturities of lease liabilities were as follows:
$$
%%
%%
Operating Lease Total Future Lease Commitments
2023
2024
2025
2026
Total lease payments to be paid
Less: future interest expense
Lease liabilities
Less: current maturities
Long-term portion of lease liabilities
35,662
20,142
5,035
—
60,839
(3,025
57,814
(33,616
24,198
181,787
144,583
134,933
53,459
514,762
(35,846
478,916
(200,314
278,602
217,449
164,725
139,968
53,459
575,601
(38,871
536,730
(233,930
302,800
$$$
)))
))) $$$
F-22
Note 12. Stockholders’ Equity
On December 29, 2022, we effected a 1-for-200 reverse stock split of our common stock and the number of shares of common stock that we are authorized to issue
was reduced to 100 million. All common stock share information has been retrospectively adjusted to reflect the reverse stock split.
Preferred Stock
The Series A preferred stock is a non-dividend producing instrument that ranks superior to the Company’s common stock. Each one (1) share of the Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding common stock and Preferred Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator.
With respect to all matters upon which stockholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding shares of Series A Preferred Stock shall vote together with the holders of common stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Certificate of Incorporation or By-laws.
In July 2014, the board of directors approved the issuance of 51 shares of the Company’s Series A Preferred Stock to a certain employee of the Company, which is equal to 50.99% of the total voting power of all issued and outstanding voting capital of the Company in satisfaction of $20,000 in past due debt. In October 2020, the preferred shares were transferred to a trust whose beneficiary is related to the employee. In August 2022, the Company entered into a Share Exchange Agreement with the trust in which the 51 shares of the Company’s Series A Preferred Stock were acquired from the trust and cancelled in exchange for the issuance of 127,564 shares of the Company’s common stock. As a result of the exchange the Company recorded a preferred stock dividend of approximately $541,000 associated with the transaction.
On August 30, 2022, the Company entered into a SPA with NextPlat wherein the Company sold 3,000 units, generating gross proceeds of $6.0 million. Each unit is made up of one share of Series B Convertible Preferred Stock, $0.001 par value, and Investor Warrants. Each warrant entitles the holder to purchase one share of Series B Convertible Preferred Stock at an exercise price of $2,000. The Investor Warrants may also be exercised, in whole or in part, by means of a cashless exercise. The Series B Convertible Preferred Stock has a stated value of $2,000 per share and each Preferred Stock share has the equivalent voting rights of 500 common stock shares. Each share of Series B Convertible Preferred Stock is convertible at any time at the option of the holder into shares of the Company’s common stock determined by dividing the stated value by the conversion price which is $4.00. The Company incurred offering costs associated with the transaction of approximately $1.0 million.
Note 13. Stock-Based Compensation
For the years ended December 31, 2022 and 2021, the Company recorded total stock-based compensation expense of $1.9 million and $0.2 million, respectively. There were no income tax benefits recognized from stock-based compensation during the years ended December 31, 2022 and 2021 due to cumulative losses and valuation allowances.
The 2020 Incentive Plan (the “2020 Plan”) was adopted in November 2020. Under this 2020 Plan, a total of 375,000 shares were authorized for stock-based compensation available in the form of either restricted stock units (“RSUs”) or stock options. As of December 31, 2022, under the 2020 Plan, the Company has granted 3,650 RSUs and 40,000 stock options and has 331,350 shares available for future issuance. The fair value of the RSUs equaled the stock price at the grant date and the RSUs vested upon issuance.
F-23
The following table summarizes fully vested stock options granted under the 2020 Plan for the year ended December 31, 2022:
During the years ended December 31, 2022 and 2021, the Company granted 249,907 and 294,008, respectively, RSUs as stock-based compensation. The fair value of the RSUs equaled the stock price at the grant date and the RSUs vested upon issuance.
Stock Options
During 2022, the Company granted 282,965 stock options at a weighted average exercise price of $4.40, and no options were exercised, forfeited, or expired. As of December 31, 2022, there was approximately $1.1 million of total unrecognized compensation cost related to 188,643 nonvested stock options granted. The cost is expected to be recognized over a weighted-average period of 2.89 years. The options have a weighted-average remaining contractual life of 9.67 years.
The fair value of option awards was estimated on the date of grant using the Monte Carlo simulation model. Expected volatilities are based on historical volatilities of the Company’s common stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the options is based on the U.S. Treasury yield curve in effect at the time of the grants.
The fair value of options granted was determined using the following weighted-average assumptions as of grant date.
Note 14. Warrants Liabilities
As of December 31, 2022, there were 380,500 Placement Agent Warrants and 3,000 Investor Warrants issued and outstanding. All of the warrants were issued on August 30, 2022. There were no warrants exercised, forfeited or canceled during the year ended December 31, 2022. Investor Warrants may only be exercised for a whole number of Preferred Stock shares. The Investor Warrants will be exercisable at any time at the option of the Warrant Holders. The Investor Warrants will expire five years from the issue date of the Investor Warrants (September 2, 2027) or earlier upon redemption or liquidation. The exercise price per share of preferred stock under the Investor Warrants is $2,000. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the resale of the Warrant Shares by the Holder, pursuant to the terms and conditions of the Securities Purchase Agreement, then the Investor Warrants may also be exercised, in whole or in part, at such time by means of a cashless exercise.
F-24
%
% %
Number Outstanding
Weighted Average Exercise Price
Weighted Average Remaining Contractual Life (Years)
—
40,000
—
—
—
40,000
40,000
—
5.80
—
—
—
5.80
5.80
5.80
—
8.83
—
—
—
8.83
8.83
8.83
Balance outstanding at December 31, 2021
Granted
Exercised
Forfeited
Cancelled
Balance outstanding at December 31, 2022
Options exercisable at December 31, 2022
Weighted average fair value of options granted during the year
Awards Issued Outside of Equity Incentive Plans Restricted Stock Units
$ $ $ $ $ $ $ $
Risk-free interest rate
Expected term (in years)
Expected stock price volatility
Dividend yield
3.5
10
120
0
The Placement Agent Warrants are exercisable into 380,500 shares of the Company’s common stock at an exercise price per common stock share of $4.00. The Placement Agent Warrants may be exercised at any time at the option of the Placement Agent and expire on September 2, 2027. If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the resale of the Warrant Shares by the Holder, pursuant to the terms and conditions of the Purchase Agreement, then the Placement Agent Warrants may also be exercised, in whole or in part, at such time by means of a cashless exercise.
The Company determined that the warrants do not meet the definition of a liability under FASB ASC Topic 480. However, they do meet the definition of a derivative under FASB ASC Topic 815 because at the time the warrants were issued, the Company had insufficient common stock shares to settle the warrants when considering all other commitments that may require the issuance of common stock shares. The Company determined that the fair value of the warrants on their issuance date of August 30, 2022 was approximately $6.1 million and elected to classify the preferred stock shares and warrants as liabilities. On December 29, 2022, the Company effected a 1-for-200 reverse stock split of our common stock. As result of the reverse stock split, the warrants were reclassified from liabilities to equity. The Company recorded a loss of approximately $2.4 million from the change in fair value of the derivative warrant liability on its Consolidated Statements of Operations for the year ended December 31, 2022.
The Company’s warrants were valued on the applicable dates using the Monte Carlo Simulation Model. Significant inputs into this technique at measurement dates are as follows:
December 29, 2022 August 30, 2022 (1) (2)
$$ $$ $$
%% %% %%
(1) Date of issuance
(2) Measurement date prior to reverse stock split
(3) The fair value of the stock was determined by using the Company’s closing stock price as reflected in the OTC Markets.
(4) The term is the contractual remaining term.
(5) The expected life is the contractual term of the warrants.
(6) The risk-free rates used for inputs represent the yields on the valuation date with periods consistent with the contractual remaining term.
The Company incurred a day one loss of approximately $1.0 million because the Company had insufficient authorized common stock shares to settle the warrants.
Note 15. Commitments and Contingencies Legal Matters
On May 3, 2022, a complaint was filed by the Plaintiff Positive Health Alliance, Inc. (“PHA”) against Pharmco LLC, a wholly owned subsidiary of the Company, in the U.S. Circuit Court of Miami Dade, Florida, alleging that defendant failed to pay amounts due and owing to PHA under the parties’ contract for discounted prescription drugs. PHA is seeking judgment against Pharmco for compensatory damages in the amount of $407,504, plus attorneys’ fees and costs. PHA and Pharmco entered into a settlement agreement on July 1, 2022, pursuant to which Pharmco paid to PHA the total amount of $407,504 in 13 installment payments. The complaint was dismissed with prejudice on July 8, 2022. The balance outstanding was approximately $280,000 and $408,000 at December 31, 2022 and 2021, respectively (recorded in Accounts Payable and Accrued Liabilities).
F-25
Fair market value of the Company’s stock(3)
Exercise price
Stock price
Term (in years) (4)
Expected life (in years) (5)
Volatility
Risk-free interest rate (6)
Warrants measurement input
4.40
4.00
4.00
5
5
90
3.3
3.3
6.00
4.00
4.00
5
5
90
4.0
4.0
On June 8, 2022, a complaint was filed by the Company against KeyCentrix, LLC (“KCL”), in the U.S. District Court for the Southern District of Florida, alleging fraudulent inducement, breach of express warranty and breach of implied warranty. The complaint stems from an agreement by KCL to license to the Company certain pharmacy management software known as “Newleaf” for use in the operations of pharmacies operated by the Company.
Note 16. Related Party Transactions
During the year ended December 31, 2021, the Company had a consulting arrangement with Spark Financial Consulting (“Spark”), which is a consulting company owned by an employee of the Company. Spark provides business development services including but not limited to recruiting, targeting and evaluation of potential mergers and acquisitions, finding third party contractors and assisting with related negotiations in exchange for a monthly fee of $16,000 in 2021. Additionally, Spark may be entitled to additional fees for additional consulting services. During the year ended December 31, 2021, the Company paid Spark $118,769. The agreement was terminated during the third quarter of 2021.
The Company had an employment agreement with a certain pharmacist, Head of the Compounding Department, who is the first paternal cousin to an employee of the Company. In consideration for duties performed, including but not limited to, marketing, patient consultation, formulary development, patient and physician education, training, recruitment, sales management, as well as pharmacist responsibilities, the Company agreed to provide monthly compensation of $15,000 or $10,000 plus 5% commission on monthly gross profits generated by the Compounding Department, whichever is greater. During the year ended December 31, 2021, payments to the pharmacist were $63,495. The employment agreement was terminated during the third quarter of 2021.
On August 30, 2022, NextPlat, Charles M. Fernandez, Rodney Barreto, and certain other purchasers purchased from Iliad Research a Secured Convertible Promissory Note, dated March 6, 2019, made by the Company to Iliad (the “Note”). The accrued and unpaid principal and interest under the note at the time of the purchase was approximately $2.8 million. The aggregate purchase price paid to Iliad for the Note was $2.3 million of which NextPlat contributed $1.0 million and Messrs. Fernandez and Barreto contributed $400,000 each (the “Note Purchase”). In connection with the Note Purchase, NextPlat, Messrs. Fernandez and Barreto and the other purchasers of the Note entered into a Debt Modification Agreement with the Company. In consideration of the concessions in the Debt Modification Agreement, the Company issued 105,000 shares of its common stock to the purchasers of the Note, of which NextPlat, Messrs. Fernandez and Barreto, received 45,653, 18,261, and 18,261 shares, respectively.
Note 17. Retirement Plan
The Company sponsors a 401(k) retirement plan (“the Plan”) covering qualified employees of Pharmco 901, Pharmco 1002 and FPRX, as defined. Employees who have been employed more than one year are eligible to participate in the Plan. Through September 30, 2021, the Company matched the employee’s contribution up to a maximum of 3% of the eligible employee’s compensation. The Company contributed approximately $2,200 in matching contributions for the year ended December 31, 2021. The Company did not make any matching contributions for the year ended December 31, 2022.
F-26
PROGRESSIVE CARE INC. AND SUBSIDIARIES SCHEDULE II – VALUATION ACCOUNTS
Balance at Beginning of Period
Additions Charged (Credited) to Expense
Net (Deductions) Recoveries
Balance at End of Period
105,500
2,177,560
207,200
2,297,070
208,953
—
(3,300
—
(107,253
119,510
—
1,614,855
207,200
2,297,070
203,900
3,911,925
Year ended December 31, 2021
Account receivable, allowance for doubtful accounts
Deferred tax valuation allowance
Year ended December 31, 2022
Account receivable, allowance for doubtful accounts
Deferred tax valuation allowance
F-27
$$$)$ $$$$
$$)$$ $$$$
PROGRESSIVE CARE INC. AND SUBSIDIARIES
INDEX
Unaudited Consolidated Financial Statements for the Three and SixMonths Ended June 30, 2023 and 2022
Exhibit 99.2
Page
Condensed Consolidated Financial Statements (Unaudited) F-1
Condensed Consolidated Balance Sheets F-1
Condensed Consolidated Statements of Operations F-2
Condensed Consolidated Statements of Stockholders’ Equity F-3
Condensed Consolidated Statements of Cash Flows F-4
Notes to the Condensed Consolidated Financial Statements F-5
PROGRESSIVE CARE INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Condensed Consolidated Balance Sheets
June 30, 2023 December 31, 2022
(Unaudited)
$$
(Audited)
7,352,183
4,951,408
1,526,756
1,630,881
220,314
15,681,542
2,720,471
1,387,860
102,327
368,270
37,143
39,137
1,934,737
20,336,750
8,196,322
148,181
184,378
23,816
8,552,697
1,173,364
215,203
14,735
9,955,999
—
3
67,131
30,055,095
(19,741,478
10,380,751
20,336,750
6,742,876
3,671,786
2,004,805
713,284
245,983
13,378,734
2,582,753
1,387,860
126,696
446,180
53,814
38,637
2,053,187
18,014,674
7,384,336
226,931
200,314
33,616
7,845,197
2,248,626
278,602
24,198
10,396,623
—
3
66,947
22,525,214
(14,974,113
7,618,051
18,014,674
Assets
Current Assets
Cash
Accounts receivable – trade, net
Receivables - other, net
Inventory, net
Prepaid expenses
Total Current Assets
Property and equipment, net
Other Assets
Goodwill
Intangible assets, net
Operating right-of-use assets, net
Finance right-of-use assets, net
Deposits
Total Other Assets
Total Assets
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities
Notes payable and accrued interest
Operating lease liabilities
Finance lease liabilities
Total Current Liabilities
Long-term Liabilities
Notes payable, net of current portion
Operating lease liabilities, net of current portion
Finance lease liabilities, net of current portion
Total Liabilities
Commitments and Contingencies
Stockholders’ Equity
Preferred Stock, Series B ($0.001 par value, 100,000 shares designated; 3,000 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)
Common stock ($0.0001 par value, 100,000,000 shares authorized; 5,188,033 and 3,347,440 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See accompanying notes to the unaudited condensed consolidated financial statements. F-1
$$
$$
))
$$
PROGRESSIVE CARE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022
$$$$
11,556,085
7,997,239
3,558,846
2,922,674
12,000
2,934,674
624,172
—
—
(5,205,609
—
2,500
6,751
(64,840
(5,261,198
(4,637,026
—
(4,637,026
(1.05
4,426,978
9,973,584
7,943,231
2,030,353
2,207,723
19,900
2,227,623
(197,270
(220,300
(237,173
—
(147,204
—
—
(77,909
(682,586
(879,856
(866
(880,722
(0.32
2,744,910
22,948,029
16,242,498
6,705,531
6,046,464
21,100
6,067,564
637,967
—
—
(5,205,609
—
2,500
12,417
(214,640
(5,405,332
(4,767,365
—
(4,767,365
(1.22
3,895,532
20,024,580
15,613,620
4,410,960
4,761,687
(17,900
4,743,787
(332,827
(1,173,400
(62,173
—
(147,204
11,562
—
(537,290
(1,908,505
(2,241,332
(866
(2,242,198
(0.82
2,736,244
Revenues, net
Cost of revenue
Gross profit
Operating expenses
Selling, general and administrative expenses
Bad debt expense (recovery)
Total operating expenses
Income (loss) from operations
Other income (loss)
Change in fair value of derivative liabilities
Loss on debt extinguishment
Debt conversion expense
Other finance costs
Gain on sale or disposal of property and equipment
Interest income
Interest expense
Total other loss
Loss before income taxes
Provision for income taxes
Net loss attributable to common shareholders
Basic and diluted weighted average loss per common share
Weighted average number of common shares outstanding during the year – basic and diluted
See accompanying notes to the unaudited condensed consolidated financial statements. F-2
))
))
)) ))
))
)))) )))) ))))
)) $)$)$)$)
$)$)$)$)
)
PROGRESSIVE CARE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Stockholders’ Equity Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)
Preferred Stock, Series B $0.001 Par Value
Common Stock $0.0001 Par Value Shares Amount
Additional Paid-in Capital
Accumulated Deficit
Total Stockholders’ Equity
Shares
Amount
Balance at December 31, 2022
Stock-based compensation
Net loss for the three months ended March 31, 2023
Balance at March 31, 2023
Stock-based compensation
Issuance of common stock for PIPE transaction
Cost associated with issuance of common stock for PIPE transaction
Issuance of common stock and common stock purchase warrants for debt conversion
Net loss for the three months ended June 30, 2023
Balance at June 30, 2023
3,000
—
—
3,000
—
—
—
—
—
3,000
3
—
—
3
—
—
—
—
—
3
3,347,440
10,861
—
3,358,301
62,353
455,000
—
1,312,379
—
5,188,033
66,947
1
—
66,948
6
46
—
131
—
67,131
22,525,214
50,001
—
22,575,215
199,594
999,954
(120,000
6,400,332
—
30,055,095
(14,974,113
—
(130,339
(15,104,452
—
—
—
—
(4,637,026
(19,741,478
7,618,051
50,002
(130,339
7,537,714
199,600
1,000,000
(120,000
6,400,463
(4,637,026
10,380,751
Preferred Stock, Series A $0.001 Par Value
Common Stock $0.0001 Par Value
Shares Amount
Additional Paid-in
Capital
Accumulated Deficit
Total Stockholders’ Equity (Deficit)
$$$$)$
)) )
))
)) $$$$)$
Shares
Amount
51
—
—
—
51
—
51
—
—
—
—
—
—
—
2,724,422
3,094
17,297
—
2,744,813
—
2,744,813
54,487
62
348
—
54,897
—
54,897
8,862,050
20,938
104,652
—
8,987,640
—
8,987,640
(8,528,937
—
—
(1,361,476
(9,890,413
(880,722
(10,771,135
387,600
21,000
105,000
(1,361,476
(847,876
(880,722
(1,728,598
Balance December 31, 2021
Issuance of common stock for services
Stock-based compensation
Net loss for the three months ended March 31, 2022
Balance March 31, 2022
Net loss for the three months ended June 30, 2022
Balance June 30, 2022
$$$$)$
)) )) ))
$ $$$)$) See accompanying notes to the unaudited condensed consolidated financial statements.
F-3
PROGRESSIVE CARE INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
Cash flows from operating activities:
Net loss
$
2023
(4,767,365)
95,646
21,100 249,602 128,211
— 5,205,609 — 16,672 77,909 — 46,552 10,224 24,369
(2,500)
(1,099,995) 277,322
(917,597) 25,669
(500) 850,660
(91,379) 150,209
(233,364) 2,500 —
(230,864)
(172,595) (17,443)
1,000,000 (120,000)
689,962
609,307 6,742,876 7,352,183
36,734 —
1,194,855 6,400,463 — — —
$
2022
(2,242,198)
63,478 (17,900) 126,000
285,870 62,173 — 147,204 16,672 73,913 1,173,400 435,330 13,078 16,048
(11,562)
48,101 —
(24,212) 23,951 — 840,117
(70,317) 959,146
— 11,562
(10,000) 1,562
(126,651) (19,238)
—
— (145,889)
814,819 1,412,108 2,226,927
33,702 866
—
— 484,377 21,000 20,395
Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation
Change in provision for doubtful accounts
Stock-based compensation
Amortization of debt issuance costs and debt discounts Loss on debt extinguishment
Debt conversion expense
Other financing costs
Amortization of right-of-use assets - finance leases Amortization of right-of-use assets - operating leases Change in fair value of derivative liability
Change in accrued interest on notes payable
Change in accrued interest on lease liabilities Amortization of intangible assets
Gain on sale or disposal of property and equipment Changes in operating assets and liabilities:
Accounts receivable Grant receivable Inventory
Prepaid expenses Deposits
Accounts payable and accrued liabilities
Operating lease liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from sale or disposal of property and equipment Purchase of intangible assets
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Payments on notes payable
Payments on finance lease liabilities
Issuance of common stock for PIPE transaction Payment of stock issuance costs
Net cash provided by (used in) financing activities
Increase in cash
Cash at beginning of period Cash at end of period
Supplemental disclosures of cash flow information: Cash paid for interest
Cash paid for income taxes
Supplemental schedule of non-cash investing and financing activities:
Debt conversion of long-term notes payable and accrued interest, net of unamortized debt discount and debt issuance costs
Issuance of common stock and common stock purchase warrants for debt conversion
Debt extension fees and other financing costs added to note principal
Issuance of common stock for services rendered
Insurance premiums financed through issuance of note payable
See accompanying notes to the unaudited condensed consolidated financial statements. F-4
$
$ $
$ $ $ $ $
$
$ $
$ $ $ $ $
PROGRESSIVE CARE INC. AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements June 30, 2023
(Unaudited)
Unless the context requires otherwise, references to the “Company”, “we”, “us”, “our”, “our Company”, or “our business” refer to Progressive Care Inc. and its subsidiaries.
Note 1. Organization & Nature of Operations
Progressive Care Inc. (“Progressive”) was incorporated under the laws of the state of Delaware on October 31, 2006.
Progressive, through its wholly-owned subsidiaries, Pharmco, LLC (“Pharmco 901”), Touchpoint RX, LLC doing business as Pharmco Rx 1002, LLC (“Pharmco 1002”), Family Physicians RX, Inc. doing business as PharmcoRx 1103 and PharmcoRx 1204 (“FPRX” or “Pharmco 1103” and “Pharmco 1204”) (pharmacy subsidiaries collectively referred to as “Pharmco”), and ClearMetrX Inc. (“ClearMetrX”) is a personalized healthcare services and technology company that provides prescription pharmaceuticals and risk and data management services to healthcare organizations and providers.
Pharmco 901 was formed on November 29, 2005 as a Florida Limited Liability Company and is a 100% owned subsidiary of Progressive. Pharmco 901 was acquired by Progressive on October 21, 2010. We currently deliver prescriptions to Florida’s diverse population and ship medications to patients in states where we hold non-resident pharmacy licenses as well. We currently hold Florida Community Pharmacy Permits at all Florida pharmacy locations and our Pharmco 901 location is licensed as a non-resident pharmacy in the following states: Arizona, Colorado, Connecticut, Georgia, Illinois, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Texas, and Utah. We are able to dispense to patients in the state of Massachusetts without a non-resident pharmacy license because Massachusetts does not require such a license for these activities.
Pharmco 1103 is a pharmacy with locations in North Miami Beach and Orlando, Florida that provides Pharmco’s pharmacy services to Broward County, the Orlando/Tampa corridor, and the Treasure Coast of Florida. Progressive acquired all the ownership interests in Pharmco 1103 in a purchase agreement entered into on June 1, 2019.
Pharmco 1002 is a pharmacy located in Palm Springs, Florida that provides Pharmco’s pharmacy services to Palm Beach, St. Lucie and Martin Counties, Florida. Progressive acquired all the ownership interests in Pharmco 1002 in a purchase agreement entered into on July 1, 2018.
ClearMetrX was formed on June 10, 2020 and provides third-party administration (“TPA”) services to 340B covered entities. ClearMetrX also provides data analytics and reporting services to support and improve care management for health care organizations.
RXMD Therapeutics was formed on October 1, 2019. RXMD Therapeutics had no operating activity to date.
Note 2. Basis of Presentation and Principles of Consolidation
The accompanying Unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), consistent in all material respects with those applied in the 2022 Form 10-K, for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the 2022 Form 10-K. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of stockholders’ equity and statements of cash flows for such interim periods presented. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year.
F-5
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Certain 2022 financial information has been reclassified to conform to the 2023 presentation. Such reclassifications do not impact the Company’s previously reported financial position or net income (loss).
Note 3. Summary of Significant Accounting Policies
The significant accounting policies of the Company were described in Note 3 to the Audited Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes to the Company’s significant accounting policies for the six months ended June 30, 2023.
Concentrations
The Company had significant concentrations with one vendor. The purchases from this significant vendor were 97% and 96% of total vendor purchases for the three months ended June 30, 2023 and 2022, respectively, and 97% for the six months ended June 30, 2023 and 2022, respectively.
Recently Adopted Accounting Standards
In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-04, “Liabilities (Topic 405) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121”, to amend and add various SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Bulletin No. 121. The Company adopted this conforming guidance upon issuance and the adoption had no material impact on our condensed consolidated financial statements and related disclosures.
In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statement (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718)”, to amend various SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 120, among other things. The Company adopted this conforming guidance upon issuance and the adoption had no material impact on our condensed consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which introduces an impairment model based on expected, rather than incurred, losses. Additionally, it requires expanded disclosures regarding (a) credit risk inherent in a portfolio and how management monitors the portfolio’s credit quality; (b) management’s estimate of expected credit losses; and (c) changes in estimates of expected credit losses that have taken place during the period. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016-13. In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments.” This ASU improves the Codification and amends the interaction of Topic 842 and Topic 326. ASU 2016-13 and related amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance effective January 1, 2023 and the adoption had no material impact on our condensed consolidated financial statements and related disclosures. On an ongoing basis, the Company will contemplate forward-looking economic conditions in recording lifetime expected credit losses for the Company’s financial assets measured at cost.
F-6
Subsequent Events
Appointment of Directors
Effective July 17, 2023, the Board of Directors of the Company, appointed Elizabeth Alcaine and Anthony Armas as directors of the Company. In connection with such appointment, Ms. Alcaine and Mr. Armas entered into Director Agreements with the Company and were each issued $50,000 in shares of the Company's common stock. Annually, after execution of the Agreement and subject to continued service on the Board, Ms. Alcaine and Mr. Armas will each be issued the number of shares of the Company’s common stock equivalent to $50,000 as determined based on the average closing price on the three trading days immediately preceding the last day of such anniversary date.
Change in Control Transactions
On July 1, 2023, NextPlat Corp (“NextPlat”), Charles M. Fernandez, and Rodney Barreto exercised common stock purchase warrants and were issued common stock shares by the Company. Charles M. Fernandez serves as the Chairman and Chief Executive Officer of the Company and the Chief Executive Officer, Executive Chairman and Director of NextPlat. Rodney Barreto serves as the Vice-Chairman of the Company and a Director of NextPlat. NextPlat exercised common stock purchase warrants on a cashless basis and was issued 402,269 common stock shares. NextPlat also exercised common stock purchase warrants on a cash basis and paid consideration in the amount of $506,000 and was issued 230,000 common stock shares. Mr. Fernandez exercised common stock purchase warrants on a cashless basis and was issued 211,470 common stock shares. Mr. Barreto exercised common stock purchase warrants on a cashless basis and was issued 130,571 common stock shares. After the exercise of the common stock purchase warrants, NextPlat, Messrs. Fernandez and Barreto collectively owned 53% of the Company’s voting common stock. As of June 30, 2023, prior to the exercise of common stock purchase warrants, NextPlat and Messrs. Fernandez and Barreto collectively owned approximately 46% of the Company’s voting common stock.
Also, on June 30, 2023, NextPlat, along with Messrs. Fernandez and Barreto, entered into a voting agreement whereby at any annual or special shareholders meeting of the Company’s stockholders, and whenever the holders of the Company’s common stock act by written consent, Messrs. Fernandez and Barreto agreed to vote all of the common stock shares (including any new shares hereafter acquired or acquired through the conversion of securities convertible into Common Stock) that they own, directly or indirectly, in the same manner that NextPlat votes its Common Stock and equivalents. The voting agreement is irrevocable and perpetual in term.
As a result of the common stock purchase warrant exercises and the entry into the voting agreement, the Company concluded that there was a change in control in the Company under the voting interest model in U.S. GAAP. As of July 1, 2023, NextPlat has the right to control more than 50 percent of the voting interest in the Company through the concurrent common stock purchase warrant exercises and voting agreement noted above. Therefore, under U.S. GAAP, beginning on July 1, 2023, NextPlat will include Progressive Care’s financial statements in its consolidated financial statements.
F-7
Note 4. Fair Value Measurements
Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
? Cash, accounts receivable, and accounts payable and accrued liabilities:The amounts reported in the accompanying Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature.
? Notes payable and lease liabilities: The carrying amount of notes payable approximated fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing. The carrying value of lease liabilities approximated fair value due to the implicit rate in the lease in relation to the Company’s borrowing rate and the duration of the leases (Level 2 inputs).
Common Stock Purchase Warrants
As of June 30, 2023, the Company had common stock purchase warrants classified as Level 3 equity instruments. The fair value of the common stock purchase warrants on the date of issuance was approximately $4.6 million. The Company used the Monte Carlo simulation model for valuation of the common stock purchase warrants. Key inputs into the Monte Carlo simulation model were as follows at the valuation date: risk-free interest rate: 3.5%-3.7%; expected term: 3-5.6 years; expected volatility: 93%-102%; exercise price: $2.20. For additional information on the initial issuance of the common stock purchase warrants, see also “Note 12. Stockholder’s Equity, Common Stock and Common Stock Purchase Warrants”.
F-8
Note 5. Revenue
The Company recognizes pharmacy revenue and 340B contract revenue from dispensing prescription drugs at the time the drugs are physically delivered to a customer or when a customer picks up their prescription or purchases merchandise at the store, which is the point in time when control transfers to the customer. Each prescription claim is considered an arrangement with the customer and is a separate performance obligation. Payments are received directly from the customer at the point of sale, or the customers’ insurance provider is billed electronically. For third-party medical insurance and other claims, authorization is obtained to ensure payment from the customer’s insurance provider before the medication is dispensed to the customer. Authorization is obtained for these sales electronically and a corresponding authorization number is issued by the customers’ insurance provider.
The Company recognizes COVID-19 testing revenue when the tests are performed and results are delivered to the customer. Each test is considered an arrangement with the customer and is a separate performance obligation. Payment is generally received in advance from the customer.
Billings for most prescription orders are with third-party payers, including Medicare, Medicaid, and insurance carriers. Customer returns are nominal. Prescription revenues were 85% and 93% of total revenue for the three months ended June 30, 2023 and 2022, respectively, and 88% and 89% for the six months ended June 30, 2023 and 2022, respectively.
The Company accrues an estimate of pharmacy benefit manager (“PBM”) fees, including direct and indirect remuneration (“DIR”) fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of revenue at the time revenue is recognized. Changes in the estimate of such fees are recorded as an adjustment to revenue when the change becomes known.
The following table disaggregates net revenue by categories:
Three Months Ended June 30, 2023 2022
$$
)) $$
Six Months Ended June 30, 2023 2022
$$
)) $$
9,864,709
2,093,919
8,147
5,688
11,972,463
(416,378
11,556,085
9,275,774
706,102
368,197
1,450
10,351,523
(377,939
9,973,584
Prescription revenue
340B contract revenue
COVID-19 testing revenue
Rent and other revenue
Sub total
PBM fees
Revenues, net
20,305,653
3,670,215
53,603
5,703
24,035,174
(1,087,145
22,948,029
17,881,657
1,094,057
1,659,214
1,657
20,636,585
(612,005
20,024,580
Prescription revenue
340B contract revenue
COVID-19 testing revenue
Rent and other revenue
Sub total
PBM fees
Revenues, net
F-9
Note 6. Earnings (Loss) per Share
The components of basic and diluted earnings (loss) per share (“EPS”) were as follows:
(4,637,026
4,426,978
—
4,426,978
(1.05
(1.05
(880,722
2,744,910
—
2,744,910
(0.32
(0.32
Net loss attributable to common shareholders
Basic weighted average common shares outstanding
Potentially dilutive common shares
Diluted weighted average common shares outstanding
Basic weighted average loss per common share
Diluted weighted average loss per common share
(4,767,365
3,895,532
—
3,895,532
(1.22
(1.22
(2,242,198
2,736,244
—
2,736,244
(0.82
(0.82
Net loss attributable to common shareholders
Basic weighted average common shares outstanding
Potentially dilutive common shares
Diluted weighted average common shares outstanding
Basic weighted average loss per common share
Diluted weighted average loss per common share
Note 7. Accounts Receivable – Trade, net
Accounts receivable consisted of the following at:
Three Months Ended June 30,
2023 2022 $)$)
$)$) $)$)
Six Months Ended June 30,
2023 2022 $)$)
$)$) $)$)
June 30, 2023 December 31, 2022
$$ ))
$$
5,176,408
(225,000
4,951,408
3,875,686
(203,900
3,671,786
Gross accounts receivable – trade
Less: allowance for doubtful accounts
Accounts receivable – trade, net
The Company recognized bad debt expense in the amount of approximately $12,000 and $19,900 for three months ended June 30, 2023 and 2022, respectively. The Company recognized bad debt expense (recovery) in the amount of approximately $21,100 and ($17,900) for the six months ended June 30, 2023 and 2022, respectively.
Accounts receivable – trade, net as of January 1, 2022 and June 30, 2022 were approximately $2.2 million, respectively. The Company generated reimbursements from three significant PBMs:
F-10
Six Months Ended June 30, 2023 2022
%% %% %%
38
28
19
55
6
25
A
B
C
Note 8. Property and Equipment, net
Property and equipment, net consisted of the following:
June 30, 2023 December 31, 2022
$$
)) $$
1,651,069
513,075
459,461
444,909
281,154
184,000
101,230
3,634,898
(914,427
2,720,471
1,651,069
513,075
251,715
423,829
276,614
184,000
101,230
3,401,532
(818,779
2,582,753
Building
Building improvements
Vehicles
Furniture and equipment
Leasehold improvements and fixtures
Land
Computer equipment
Total
Less: accumulated depreciation
Property and equipment, net
Depreciation expense was approximately $52,000 and $29,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $96,000 and $63,000 for the six months ended June 30, 2023 and 2022, respectively.
Note 9. Intangible Assets
Intangible assets consisted of the following at:
June 30, 2023 December 31, 2022
$$
)) $$
362,000
263,000
166,000
86,424
67,933
945,357
(843,030
102,327
362,000
263,000
166,000
86,424
67,933
945,357
(818,661
126,696
Trade names
Pharmacy records
Non-compete agreements
Software
Website
Subtotal
Less: accumulated amortization
Net intangible assets
Amortization of intangible assets amounted to approximately $12,000 and $8,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $24,400 and $16,000 for the six months ended June 30, 2023 and 2022, respectively. The following table represents the total estimated future amortization of intangible assets for the five succeeding years:
Year
Note 10. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following at:
F-11
$
$
$$
$$
Amount
December 31, 2022
2023 (remaining six months)
2024
2025
2026
2027
Total
24,403
30,390
17,285
17,285
12,964
102,327
June 30, 2023
7,189,868
198,823
650,000
157,631
8,196,322
6,517,496
228,957
500,589
137,294
7,384,336
Accounts payable – trade
Accrued payroll and payroll taxes
Accrued PBM fees
Other accrued liabilities
Total
Note 11. Notes Payable
Notes payable consisted of the following at:
June 30, 2023 December 31, 2022
$$
—
1,183,427
25,000
109,930
3,188
1,321,545
—
1,321,545
(148,181
1,173,364
2,837,910
1,225,913
25,000
137,017
70,302
4,296,142
(1,820,585
2,475,557
(226,931
2,248,626
A. Convertible note payable and accrued interest - collateralized
B. Mortgage note payable - commercial bank - collateralized
C. Note payable - uncollateralized
D. Notes payable - collateralized
Insurance premiums financing
Subtotal
Less: unamortized debt discount
Total
Less: current portion of notes payable
Long-term portion of notes payable
The corresponding notes payable above are more fully discussed below: (A) Convertible Note Payable – collateralized
NextPlat Investors
In August 2022, the Company entered into the Modification Agreement with the NextPlat investors wherein the terms were modified for an existing Secured Convertible Promissory Note originally held by Iliad Research (“the Note”) and sold to the NextPlat investors (“the NextPlat Investors Note”). The NextPlat investors purchased the Note as part of a Confidential Note Purchase and Release Agreement between Iliad Research and the NextPlat investors. As of the date of the Securities Purchase Agreement (“SPA”), the aggregate amount of principal and interest outstanding on the NextPlat Investors Note was approximately $2.8 million. As part of the Modification Agreement, the NextPlat investors agreed to modify the following terms of the NextPlat Investors Note:
1. The Maturity Date was extended to August 31, 2027.
2. The Outstanding Balance shall bear interest at the simple annual rate of five percent (5%) per annum.
3. The Company is prohibited from prepaying the Note.
4. The Conversion Price for the Note was modified to a fixed price of $4.00 per share of common Stock.
5. The Note shall provide for mandatory conversion upon the later to occur of (a) the completion of the Company’s reverse stock split, and (b) the listing of the Company’s common stock on a national exchange, including the Nasdaq Capital Market, the Nasdaq Global Market, or the New York Stock Exchange.
On May 5, 2023, the Company entered into a Debt Conversion Agreement (the “DCA”) with NextPlat and the other holders (the “Holders”) of the Amended and Restated Secured Convertible Promissory Note. Pursuant to the DCA, NextPlat and the other Holders agreed to modify and convert the total $2.9 million of outstanding principal and accrued and unpaid interest to Common Stock at a conversion price of $2.20 per share (the “Debt Conversion”) for a total of 1,312,379 shares. Additionally, the Company issued 330,000 common stock purchase warrants to certain existing Progressive Care investors to induce them to approve the Debt Conversion (the “Inducement Warrants”). The Inducement Warrants were recorded at fair value as equity instruments. The Debt Conversion was recorded using inducement accounting and resulted in a total debt conversion expense of approximately $5.2 million for the six months ended June 30, 2023. Debt conversion expense consisted of debt issuance costs and debt discount of approximately $1.7 million, the fair value of the common stock purchase warrants issued of approximately $4.6 million, partially offset by the loss from inducement accounting of approximately $1.1 million.
F-12
)) $$
)
Debt Issuance Costs and Debt Discount Associated with the NextPlat Investors Note
Debt issuance costs consist of fees incurred from the Placement Agent and Investment Advisor associated with the NextPlat Investors Debt Modification Agreement. Debt discount consists of the discount recorded from the issuance of approximately 105,000 shares of common stock to the NextPlat Investors as consideration for the Debt Modification Agreement.
Debt issuance costs and debt discount are amortized to interest expense over the term of the related debt using the straight-line method. Total amortization expense for the six months ended June 30, 2023 was approximately $128,000.
As a result of the Debt Conversion, the remaining balance of debt issuance costs and debt discount of approximately $1.7 million at the date of the Debt Conversion was written off and recognized as part of debt conversion expense for the six months ended June 30, 2023 on the Condensed Consolidated Statements of Operations.
(B) Mortgage Note Payable – collateralized
In 2018, Pharmco 901 closed on the purchase of land and building located at 400 Ansin Boulevard, Hallandale Beach, Florida. The purchase price was financed in part through a mortgage note and security agreement entered into with a commercial lender in the amount of $1,530,000. The promissory note is collateralized by the land and building, bears interest at a fixed rate of 4.75% per annum, matures on December 14, 2028 and is subject to a prepayment penalty. Principal and interest will be repaid through 119 regular payments of $11,901 that began in January 2019, with the final payment of all principal and accrued interest not yet paid on December 14, 2028. Note repayment is guaranteed by Progressive Care Inc.
(C) Note Payable – Uncollateralized
As of June 30, 2023 and December 31, 2022, the uncollateralized note payable represents a non-interest-bearing loan that is due on demand from an investor. (D) Notes Payable – Collateralized
In September 2019, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to pay off a capital lease obligation on pharmacy equipment in the amount of approximately $85,000. The terms of the promissory note payable require 48 monthly payments of $2,015, including interest at 6.5%. The balance outstanding on the note payable was approximately $4,000 and $16,000 as of June 30, 2023 and December 31, 2022, respectively.
In April 2021, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of approximately $30,000. During September 2021, pharmacy equipment was returned since the installation was cancelled and the note was amended. The amended promissory note payable requires 46 monthly payments of $331, including interest at 6.9%. The balance outstanding as of June 30, 2023 and December 31, 2022 on the note payable was approximately $7,400 and $9,000, respectively.
In July 2022, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of approximately $90,000. The terms of the promissory note payable require 60 monthly payments of $1,859, including interest at 8.78% starting January 2023. The balance outstanding on the note payable was approximately $82,000 and $90,000 as of June 30, 2023 and December 31, 2022, respectively.
In September 2022, the Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase a vehicle in the amount of approximately $25,000. The terms of the promissory note payable require 24 monthly payments of $1,143, including interest at 8.29% starting October 2022. The balance outstanding on the note payable was approximately $16,000 and $22,000 as of June 30, 2023 and December 31, 2022, respectively.
F-13
Year
Amount
Principal outstanding as of June 30, 2023, is expected to be repayable as follows:
2023 (remaining six months)
2024
2025
2026
2027
Thereafter
Total
90,341
121,126
114,419
118,630
123,597
753,432
1,321,545
$
Interest expense on these notes payable, exclusive of debt discount and debt issue cost amortization, was approximately $31,000 and $77,000 for the three months ended June 30, 2023 and 2022, respectively, and $82,000 and $250,000 for the six months ended June 30, 2023 and 2022, respectively.
Note 12. Stockholders’ Equity Preferred Stock
The Company has 10,000,000 shares of preferred stock authorized.
On August 30, 2022, pursuant to a SPA with NextPlat, the Company sold 3,000 units wherein each unit is made up of one share of Series B Convertible Preferred Stock, $0.001 par value, and Investor Warrants. Each warrant entitles the holder to purchase one share of Series B Convertible Preferred Stock at an exercise price of $2,000. The Investor Warrants may also be exercised, in whole or in part, by means of a cashless exercise. The Series B Convertible Preferred Stock has a stated value of $2,000 per share and each Preferred Stock share has the equivalent voting rights of 500 common stock shares. Each share of Series B Convertible Preferred Stock is convertible at any time at the option of the holder into shares of the Company’s common stock determined by dividing the stated value by the conversion price of $4.00.
As of June 30, 2023 and December 31, 2022, 100,000 shares are designated as Series B Preferred Stock, par value $0.001 per share and 9,900,000 shares of undesignated preferred shares, par value $0.001 per share.
With respect to all matters upon which stockholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding shares of Preferred Stock shall vote together with the holders of common stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Certificate of Incorporation or By-laws.
F-14
$
Common Stock and Common Stock Purchase Warrants
On December 29, 2022, we effected a 1-for-200 reverse stock split of our common stock and the number of shares of common stock that we are authorized to issue was reduced to 100 million. All fiscal year 2022 common stock share information has been retrospectively adjusted to reflect the reverse stock split.
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
On May 5, 2023, the Company entered into an SPA with NextPlat, pursuant to which NextPlat agreed to purchase 455,000 newly issued units of securities from the Company (the “Units”) at a price per Unit of $2.20 for an aggregate purchase price of $1.0 million (the “Unit Purchase”). Each Unit consists of one share of common stock, par value $0.0001 per share, of Progressive Care (“Common Stock”) and one common stock purchase warrant to purchase a share of Common Stock (the “PIPE Warrants”). The PIPE Warrants have a three-year term and will be immediately exercisable. Each PIPE Warrant is exercisable at $2.20 per share of Common Stock. The Company received cash proceeds of $880,000, net of placement agent commission of $70,000 and legal fees of $50,000. The Company accounted for the PIPE Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the PIPE Warrants was approximately $1.0 million.
Simultaneous with the closing, the Company entered into a DCA with NextPlat and the other Holders of that certain Amended and Restated Secured Convertible Promissory Note, dated as of September 2, 2022, made by the Company in the original face amount of $2.8 million (the “Note”). Pursuant to the DCA, NextPlat and the other Holders agreed to modify and convert the total $2.9 million of outstanding principal and accrued and unpaid interest to Common Stock at a conversion price of $2.20 per share (the “Debt Conversion”). Of the total 1,312,379 shares of Common Stock issued upon conversion of the Note pursuant to the DCA, NextPlat received 570,599 shares, Charles M. Fernandez, the Company’s Chairman and Chief Executive Officer, received 228,240 shares, and Rodney Barreto, the Company’s Vice-Chairman of the Board of Directors, received 228,240 shares. In addition, each of the Holders also received a common stock purchase warrant to purchase one share of Common Stock for each share of Common Stock they received upon conversion of the Note (the “Conversion Warrants”). The Conversion Warrants have a three-year term and will be immediately exercisable. Each Conversion Warrant is exercisable at $2.20 per share of Common Stock. The Company accounted for the Conversion Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the Conversion Warrants was approximately $2.7 million.
At the same time, the Company and NextPlat entered into a First Amendment (the “Amendment”) to that certain Securities Purchase Agreement dated November 16, 2022 (the “Debenture Purchase Agreement”). Under the Debenture Purchase Agreement, the Company agreed to issue, and NextPlat agreed to purchase, from time to time during the three-year term of the Debenture Purchase Agreement, up to an aggregate of $10.0 million of secured convertible debentures to NextPlat (the “Debentures”). Pursuant to the Amendment, NextPlat and the Company agreed to amend the Debenture Purchase Agreement and the form of Debenture to have a conversion price of $2.20 per share. As of June 30, 2023, no Debentures have been purchased by NextPlat under the Debenture Purchase Agreement.
Dawson James Securities, Inc. (the “Placement Agent”) served as placement agent for the Unit Purchase. In consideration for the Placement Agent’s services, the Company issued to the Placement Agent and its affiliates warrants to purchase 91,000 shares of Common Stock (the “Placement Agent Warrants”). The Placement Agent Warrants have a five-year term and will be exercisable in December 2023. Each Placement Agent Warrant is exercisable at $2.20 per share of Common Stock. The Company accounted for the Placement Agent Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the Placement Agent Warrants was approximately $0.2 million.
In addition, the Company issued 330,000 warrants to certain existing Progressive Care investors to induce them to approve the transaction contemplated by the SPA (the “Inducement Warrants”). Charles M. Fernandez and Rodney Barreto received Inducement Warrants to purchase 190,000 and 30,000 shares of Common Stock, respectively. The Inducement Warrants have a three-year term and will be immediately exercisable. Each Inducement Warrant is exercisable at $2.20 per share of Common Stock. The Company accounted for the Inducement Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the Inducement Warrants was approximately $0.7 million.
F-15
Note 13. Stock-Based Compensation
The Company recorded total stock-based compensation expense of approximately $190,000 and $25,000 for the three months ended June 30, 2023 and 2022, respectively, and approximately $250,000 and $55,000 for the six months ended June 30, 2023 and 2022, respectively, relating to shares of common stock issued to directors for services provided. There were no income tax benefits recognized from stock-based compensation during the six months ended June 30, 2023 and 2022 due to cumulative losses and valuation allowances.
Note 14. Commitments and Contingencies Legal Matters
On May 3, 2022, a complaint was filed by the Plaintiff Positive Health Alliance, Inc. (“PHA”) against Pharmco LLC, a wholly owned subsidiary of the Company, in the U.S. Circuit Court of Miami Dade, Florida, alleging that defendant failed to pay amounts due and owing to PHA under the parties’ contract for discounted prescription drugs. PHA is seeking judgment against Pharmco for compensatory damages in the amount of $407,504, plus attorneys’ fees and costs. PHA and Pharmco entered into a settlement agreement on July 1, 2022, pursuant to which Pharmco paid to PHA the total amount of $407,504 in 13 installment payments. The complaint was dismissed with prejudice on July 8, 2022. The balance outstanding was approximately $50,000 and $280,000 as of June 30, 2023 and December 31, 2022, respectively (recorded in Accounts payable and accrued liabilities).
On June 8, 2022, a complaint was filed by the Company against KeyCentrix, LLC (“KCL”), in the U.S. District Court for the Southern District of Florida, alleging fraudulent inducement, breach of express warranty and breach of implied warranty. The complaint stems from an agreement by KCL to license to the Company certain pharmacy management software known as “Newleaf” for use in the operations of pharmacies operated by the Company.
Note 15. Related Party Transactions
On May 5, 2023, the Company entered into an SPA with NextPlat, pursuant to which NextPlat agreed to purchase 455,000 newly issued Units of securities from the Company at a price per Unit of $2.20 for an aggregate purchase price of $1.0 million (the “Unit Purchase”). Each Unit consists of one share of common stock, par value $0.0001 per share, Common Stock and one common stock purchase warrant to purchase a share of Common Stock (the “PIPE Warrants”).
On May 9, 2023, pursuant to the DCA, NextPlat received 570,599 shares, Charles M. Fernandez received 228,240 shares, and Rodney Barreto received 228,240 shares. To induce the approval of the debt conversion pursuant to the DCA, Messrs. Fernandez and Barreto received Inducement Warrants to purchase 190,000 and 30,000 shares of Common Stock, respectively. In addition, NextPlat and Messrs. Fernandez and Barreto also received a common stock purchase warrant to purchase one share of Common Stock for each share of Common Stock they received upon conversion of the Note.
On February 1, 2023, the Company entered into a Management Services Agreement (the “Management Agreement”) with NextPlat Corp to provide certain management and administrative services to the Company for $25,000 per month fee. On May 1, 2023, the Management Agreement was amended to update the fee to $20,000 per month. During the six months ended June 30, 2023, the Company paid $115,000 to NextPlat as management fees.
On August 30, 2022, NextPlat, Charles M. Fernandez, Rodney Barreto, and certain other purchasers purchased from Iliad Research a Secured Convertible Promissory Note, dated March 6, 2019, made by the Company to Iliad (the “Note”). The accrued and unpaid principal and interest under the note at the time of the purchase was approximately $2.8 million. In connection with the Note Purchase, NextPlat, Messrs. Fernandez and Barreto and the other purchasers of the Note entered into a Debt Modification Agreement with the Company. In consideration of the concessions in the Debt Modification Agreement, the Company issued 105,000 shares of its common stock to the purchasers of the Note, of which NextPlat, Messrs. Fernandez and Barreto, received 45,653, 18,261, and 18,261 shares, respectively.
F-16
Unaudited Pro Forma Condensed Combined Balance Sheet NextPlat Corp and Progressive Care Inc.
June 30, 2023
ASSETS
Current Assets
Cash
Accounts receivable, net
Other receivables, net
Inventory
Unbilled revenue
VAT receivable
Prepaid expenses – current portion Total Current Assets
Property and equipment, net
Other Assets Goodwill
Operating right-of-use assets, net Finance right-of-use assets, net Intangible assets, net
Equity method investment
Prepaid expenses – long term portion Deposits
Total Other Assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses Contract liabilities
Notes payable and accrued interest
Note payable Coronavirus loans– current portion Due to related party
Operating lease liabilities - current
Finance lease liabilities - current
Income taxes payable
Total Current Liabilities
Long Term Liabilities:
Notes payable - long term
Notes payable Coronavirus – long term Operating lease liabilities – long term Finance lease liabilities - long term Total Liabilities
Stockholders' Equity Preferred stock
Common stock Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss Total stockholders' equity
Non-controlling interest
Total Liabilities and Stockholders' Equity Book value per share
Shares of common stock outstanding
Progressive Care, Inc.
20,605,670
589,119 4,951,408
- 1,526,756 2,066,214 1,630,881 175,410 - 432,777 - 347,341 220,314 24,216,531 15,681,542
1,032,006 2,720,471
- 1,387,860
756,819 368,270 - 37,143 37,500 102,327 4,820,888 -
49,373 - - 39,137 5,664,580 1,934,737 30,913,117 $ 20,336,750
1,284,470 $ 8,196,322 58,873 - - 148,181 63,171 - 20,000 - 204,465 184,378 - 23,816 160,974 - 1,791,953 8,552,697
- 1,173,364 131,607 - 567,071 215,203
- 14,735 2,490,631 9,955,999
- 3 1,870 67,131 65,171,061 30,055,095
(36,674,775) (19,741,478) (75,670) - 28,422,486 10,380,751
30,913,117 $ 20,336,750 1.52 $ 2.00 18,699,596 5,188,033
F-1
Pro Forma
Adjustments Reference
$- A
Pro Forma Combined
Exhibit 99.3
NextPlat Corp
$
$
7,352,183
$
27,957,853 5,540,527 1,526,756 3,697,095
175,410 432,777 567,655
39,898,073 4,997,266
- 2,465,000 1,125,089 37,143 14,859,827
- 49,373 39,137 18,575,569 63,470,908
9,480,792 58,873 148,181 63,171 20,000 388,843 23,816 160,974 10,344,650
1,173,364 131,607 782,274
14,735 12,446,630
3 1,870 90,169,691
(54,976,616) (75,670)
35,119,278 15,905,000 63,470,908
1.88 18,699,596
$
$
1,244,789 D
(1,387,860) E 2,465,000 E
14,720,000 D 506,000 A 1,439,637 C
(6,766,525) C,F
10,976,252 12,221,041
$
$
$ $
$
(67,131) A 506,000 A (21,527,254) E 15,964,789 D 1,439,637 C
(3,683,959) 15,905,000 E 12,221,041
$ $
Unaudited Pro Forma Condensed Combined Statement of Operations NextPlat Corp and Progressive Care Inc.
Six months ended June 30, 2023
Net sales
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative
Bad debt expense
Total operating expenses
Income (Loss) before other (income) expense
Other (income) expense:
Interest expense
Debt conversion expense
Interest income
Gain on sale or disposal of property and equipment
Other income
Foreign currency exchange rate variance
Total other (income) expense
Loss before income taxes
Income taxes
Loss before equity method investment
Equity in net loss of affiliate
Net loss
Reference
G
G
F
NextPlat Corp
Progressive Care, Inc.
Pro Forma Adjustments
$$$
)
) ))
))) )) )) ))
)
)))
)) )))
) $)$)$)
F-2
5,833,515
22,948,029
28,781,544
4,368,830
16,242,498
20,611,328
1,464,685
6,705,531
-
8,170,216
6,058,554
6,046,464
(115,000
11,990,018
6,058,554
-
21,100
21,100
6,067,564
(115,000
12,011,118
(4,593,869
637,967
115,000
(3,840,902
9,708
214,640
224,348
(182,748
-
5,205,609
5,205,609
(12,417
(195,165
-
(2,500
(2,500
(315,845
-
115,000
(200,845
(68,673
-
(68,673
(557,558
5,405,332
-
4,962,774
(4,036,311
(4,767,365
(8,803,676
(52,023
(52,023
(4,088,334
(4,767,365
-
-
(8,855,699
(1,439,637
1,439,637
-
(5,527,971
(4,767,365
-
1,439,637
Pro Forma Combined
(8,855,699
Unaudited Pro Forma Condensed Combined Statement of Operations NextPlat Corp and Progressive Care Inc.
Year Ended December 31, 2022
Net sales
Cost of sales
Gross profit
Operating expenses:
Selling, general and administrative
Bad debt expense
Total operating expenses
Income (Loss) before other (income) expense
Other (income) expense:
Change in fair value of derivative liabilities
Gain on debt extinguishment
Grant revenue
Other finance costs
Abandoned offering costs
Day one loss on issuance of units
Day one loss on debt modification
Interest expense
Interest income
Gain on sale or disposal of property and equipment
Other income
Foreign currency exchange rate variance
Total other (income) expense
Loss before income taxes
Income taxes
Loss before equity method investment
Equity in net loss of affiliate
Net loss
Series A Preferred Stock dividend associated with induced conversion
Net loss attributable to Common Shareholders
Reference
F
NextPlat Corp
Progressive Care, Inc.
Pro Forma Adjustments
$$$
)) )))
)) ))
))) ))
)))
))) )))
) $)$)$)
)) $)$)$)
F-3
11,710,142
40,601,859
9,221,294
30,898,783
2,488,848
9,703,076
9,690,631
12,285,174
9,690,631
-
(3,300
(3,300
12,281,874
21,972,505
(7,201,783
(2,578,798
(9,780,581
-
3,322,500
3,322,500
-
(953,228
(953,228
-
(2,079,297
(2,079,297
-
147,622
147,622
-
635,545
635,545
-
1,026,155
1,026,155
-
523,526
523,526
24,497
797,715
822,212
(20,814
(84,742
(105,556
-
(11,562
(11,562
-
-
128,648
-
128,648
-
132,331
3,324,234
3,456,565
(7,334,114
(5,903,032
(13,237,146
(87,000
(866
(87,866
(7,421,114
(5,903,898
(13,325,012
(1,739,475
-
1,739,475
-
(9,160,589
(5,903,898
1,739,475
(13,325,012
-
(541,278
(9,160,589
(6,445,176
1,739,475
-
Pro Forma Combined
52,312,001
40,120,077
12,191,924
21,975,805
(541,278
(13,866,290
NEXTPLAT CORP AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Financial Statements
Note 1. Basis of Presentation
The accompanying Unaudited Pro Forma Condensed Combined Financial Statements (the “Pro Forma Statements”) present the proforma combined financial position and results of operations of the combined company based upon the historical consolidated financial statements of NextPlat Corp (“NextPlat” or the “Company”) and the historical consolidated financial statements of Progressive Care Inc. (“Progressive Care”), after giving effect to the Acquisition and adjustments described in these footnotes, and are intended to reflect the impact of the Acquisition on NextPlat.
On August 30, 2022, NextPlat entered into a Securities Purchase Agreement (the “SPA”) between NextPlat and Progressive Care, under which NextPlat, its Executive Chairman and Chief Executive Officer, Charles M. Fernandez, board member, Rodney Barreto, and certain other investors invested an aggregate of $8.3 million into Progressive Care. In connection with the SPA, NextPlat purchased 3,000 newly issued Units of Progressive Care valued at $6 million, with each Unit comprised of one share of Progressive Care’s Series B Convertible Preferred Stock, $0.001 par value, and one Investor Warrant to purchase a share of Series B Convertible Preferred Stock at an exercise price of $2,000 The Investor Warrants may also be exercised, in whole or in part, by means of a cashless exercise. The Convertible Preferred Stock has a stated value of $2,000 per share and each Preferred Stock share has the equivalent voting rights of 500 common stock shares (after giving effect to the Reverse Stock Split described below). Each share of Series B Convertible Preferred Stock is convertible at any time at the option of the holder into shares of Progressive Care Common Stock shares determined by dividing the stated value by the conversion price which is $4.00 (after giving effect to the Reverse Stock Split described below).
In addition, on August 30, 2022, NextPlat Corp, Messrs. Fernandez and Barreto, and certain other investors (collectively, the “NextPlat Investors”) entered into a Modification Agreement wherein the terms were modified for an existing Secured Convertible Promissory Note (the “Note”) originally held by a third party note holder and sold to the NextPlat Investors. The NextPlat Investors purchased the Note as part of a Confidential Note Purchase and Release Agreement between the former note holder and the NextPlat Investors. As of the date of the SPA, the aggregate amount of principal and interest outstanding on the Note was approximately $2.8 million. As part of the Modification Agreement, various terms of the Note were modified, among them, the Conversion Price for the Note was modified to a fixed price of $4.00 per share of common stock (after giving effect to the Reverse Stock Split described below). In addition, the Note was modified to provide for mandatory conversion upon the later to occur of (a) the completion of the Company’s reverse stock split, and (b) the listing of the Company’s common stock on a national exchange, including the Nasdaq Capital Market, the Nasdaq Global Market, or the New York Stock Exchange. Also, pursuant to the SPA, Messrs. Fernandez and Barreto were nominated for election to Progressive Care’s Board of Directors.
On September 13, 2022, the Progressive Care Board of Directors appointed Charles M. Fernandez as Chairman of the Board of Directors and Rodney Barreto as the Vice Chairman of the Board of Directors. In connection with these appointments, Alan Jay Weisberg, Progressive Care’s current Chairman and Chief Executive Officer, was appointed to serve as a Vice Chairman. On September 12, 2022, two of Progressive Care’s Directors, Birute Norkute and Oleg Firer, resigned as Directors. On October 7, 2022, the Progressive Care Board of Directors unanimously voted to approve the appointment of Pedro Rodriguez, MD to the Board. Dr. Rodriguez was nominated to the Progressive Care Board by NextPlat.
On November 11, 2022, Mr. Weisberg resigned from his positions as Progressive Care’s Chief Executive Officer and co-Vice-Chairman of the Board of Directors. On the same date, the Board appointed Mr. Fernandez to serve as the new Chief Executive Officer immediately.
On December 29, 2022, Progressive Care filed a Certificate of Amendment to Articles of Incorporation (the “Amendment to Articles”) with the Secretary of State of the State of Delaware. Pursuant to the Amendment to Articles, each 200 shares of Progressive Care’s common stock outstanding was converted into one share of common stock (the “Reverse Stock Split”) and the number of shares of common stock that Progressive Care is authorized to issue was reduced to 100 million (the “Reduction in Authorized Stock”). The Reverse Stock Split and the Reduction in Authorized Stock were approved by the Progressive Care Board of Directors and the shareholders.
F-4
On May 5, 2023, NextPlat entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care, pursuant to which NextPlat purchased 455,000 newly issued units of securities from Progressive Care (the “Units”) at a price per Unit of $2.20 for an aggregate purchase price of $1 million (the “Unit Purchase”). Each Unit consisted of one share of common stock, par value $0.0001 per share, of Progressive Care and one warrant to purchase a share of common stock (the “PIPE Warrants”). The PIPE Warrants have a three-year term and are immediately exercisable. Each PIPE Warrant is exercisable at $2.20 per share of common stock. On May 9, 2023, the Companies closed the transactions contemplated in the SPA. Progressive Care received cash proceeds of $880,000, net of placement agent commission of $70,000 and legal fees of $50,000.
Simultaneous with the closing, Progressive Care entered into a Debt Conversion Agreement (the “DCA”) with NextPlat and the other holders (the “Holders”) of that certain Amended and Restated Secured Convertible Promissory Note, dated as of September 2, 2022, made by the Company in the original face amount of approximately $2.8 million (the “Note”). Pursuant to the DCA, NextPlat and the other Holders agreed to convert the total approximately $2.9 million of outstanding principal and accrued and unpaid interest to Common Stock at a conversion price of $2.20 per share (the “Debt Conversion”). Of the total 1,312,379 shares of Common Stock issued upon conversion of the Note pursuant to the DCA, NextPlat received 570,599 shares, Charles M. Fernandez, the Company’s Chairman and Chief Executive Officer, received 228,240 shares, and Rodney Barreto, the Company’s Vice-Chairman of the Board of Directors, received 228,240 shares. In addition, each of the Holders also received a warrant to purchase one share of Common Stock for each share of Common Stock they received upon conversion of the Note (the “Conversion Warrants”). The Conversion Warrants have a three-year term and are immediately exercisable. Each Conversion Warrant is exercisable at $2.20 per share of Common Stock. In addition, the Company issued 330,000 warrants to certain existing Progressive Care investors to induce them to approve the transaction contemplated by the SPA (the “Inducement Warrants”). Charles M. Fernandez and Rodney Barreto received Inducement Warrants to purchase 190,000 and 30,000 shares of Common Stock, respectively. The Inducement Warrants have a three-year term and are immediately exercisable. Each Inducement Warrant is exercisable at $2.20 per share of Common Stock.
On July 1, 2023, NextPlat, along with Messrs. Fernandez and Barreto, exercised common stock purchase warrants and were issued common stock shares by Progressive Care. NextPlat exercised common stock purchase warrants on a cashless basis and was issued 402,269 common stock shares. NextPlat also exercised common stock purchase warrants on a cash basis and paid consideration in the amount of $506,000 and was issued 230,000 common stock shares. Mr. Fernandez exercised common stock purchase warrants on a cashless basis and was issued 211,470 common stock shares. Mr. Barreto exercised common stock purchase warrants on a cashless basis and was issued 130,571 common stock shares. After the exercise of the common stock purchase warrants, NextPlat, Messrs. Fernandez and Barreto collectively owned approximately 53% of the Company’s voting common stock. As of June 30, 2023, prior to the exercise of the common stock purchase warrants, NextPlat and Messrs. Fernandez and Barreto collectively owned approximately 46% of the Company’s voting common stock.
Also, on June 30, 2023, NextPlat, along with Messrs. Fernandez and Barreto, entered into a voting agreement whereby at any annual or special shareholders meeting of Progressive Care’s stockholders, and whenever the holders of Progressive Care’s common stock act by written consent, Messrs. Fernandez and Barreto agreed to vote all of the common stock shares (including any new shares acquired after the date of the voting agreement or acquired through the conversion of securities convertible into Common Stock) that they own, directly or indirectly, in the same manner that NextPlat votes its common stock and equivalents. The voting agreement is irrevocable and perpetual in term.
As a result of the common stock purchase warrant exercises and the entry into the voting agreement, NextPlat concluded that there was a change in control in Progressive Care under the voting interest model in U.S. GAAP. As of July 1, 2023, NextPlat has the right to control more than 50 percent of the voting interest in Progressive Care through the concurrent common stock purchase warrant exercises and voting agreement noted above.
The accompanying Pro Forma Statements are presented for illustrative purposes only and do not give effect to any cost savings, revenue synergies or restructuring costs which may result from the integration of NextPlat’s and Progressive Care’s operations. The accompanying Pro Forma Statements have been adjusted to reflect adjustments to NextPlat’s historical consolidated financial information that are (i) directly attributable to the Acquisition, (ii) factually supportable and (iii) to reclassify certain Progressive Care items to conform to NextPlat’s presentation. The Unaudited Pro Forma Combined Statements of Operations reflect the Acquisition as if it had been completed on January 1, 2022. The Unaudited Pro Forma Condensed Combined Balance Sheet reflects the Acquisition as if it was completed on January 1, 2023.
F-5
Note 2. Preliminary Purchase Price Allocation
The Company has performed a preliminary valuation analysis of the fair market value of the net assets acquired in the Acquisition. The following table summarizes the preliminary allocation of the purchase price as of the date of the Acquisition. The purchase price consists of the fair market value of Progressive Care’s net assets as of July 1, 2023.
Total purchase consideration
Fair value of non-controlling interest
Total consideration
Identifiable net assets acquired:
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Property and equipment, net
Right of use assets, net
Intangible assets, net:
Trade name
Development technology
Pharmacy records
Other
Deposits
Accounts payable and accrued expenses
Notes payable and accrued interest - current portion
Lease liabilities - current portion
Notes payable - long term
Lease liabilities - long term
Net assets acquired
Goodwill
Preliminary Allocation
11,517,000
15,905,000
27,422,000
7,352,000
6,478,000
1,631,000
220,000
3,965,000
405,000
4,060,000
2,560,000
8,100,000
102,000
39,000
(8,196,000
(148,000
(208,000
(1,173,000
(230,000
24,957,000
2,465,000
The preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma condensed combined statement of operations. The final purchase price allocation is subject to change as more detailed analyses are completed and additional information about the fair value of assets acquired becomes available during the measurement period.
F-6
$ $
$
$
) ) ) ) )
Note 3. Pro Forma Adjustments
The pro forma adjustments are based on the Company’s preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:
A. B.
C. D. E.
Adjustment to cash for exercise of common stock purchase warrants to acquire 230,000 shares of Progressive Care common stock on July 1, 2023.
Adjustment to Progressive Care’s stockholders’ equity for cashless exercise of common stock purchase warrants to acquire Progressive Care common stock on July 1, 2023 as follows:
NextPlat Corp Charles M. Fernandez Rodney Barreto
402,269 shares 211,470 shares 130,571 shares
To record elimination of NextPlat equity in earnings of equity method investee (Progressive Care).
To record adjustment for fair value measurement of previously-held equity interest (PHEI) in Progressive Care in accordance with FASB ASC 805-10-25-10.
To record purchase price allocation to net assets of Progressive Care, to record fair value of non-controlling interest, and to record goodwill for value obtained in excess of net assets acquired.
Purchase price allocation:
Consideration paid
Fair-value of non-controlling interest
Allocated to:
Historical book value of Progressive Care, Inc. assets and liabilities
Elimination of Progressive Care, Inc. purchased goodwill
Fair value adjustments:
Trade name
Developed technology
Pharmacy records
Building & other intangibles
Goodwill
11,517,000
15,905,000
27,422,000
10,381,000
(1,388,000
4,060,000
2,560,000
8,100,000
1,244,000
2,465,000
-
F. G.
To record elimination of NextPlat equity in net loss of affiliate (Progressive Care). To eliminate intercompany management service income and expense.
F-7
$ $
$
$
)
UPDATE: New to The Street Proudly Announces its 500th Special Edition 1-hour Broadcast with Guest Appearances, Airs on Newsmax, Saturday, September 9, 2023, 3:00-4:00 PM ET
NEW YORK, Sept. 08, 2023 (GLOBE NEWSWIRE) -- In a release issued by FMW Media Works Corp today at 9:30 am EST, the timing of the broadcast was mentioned as Saturday, September 9, 2023, 3:30 PM ET. The correct time is Saturday, September 9, 2023, 3:00-4:00 PM ET. The updated release follows.
FMW Media Works’ show New to The Street celebrates its 500th episode with a line-up of interesting corporate guest appearances. The show will air on Newsmax, Saturday, September 9, 2023, at 3:00-4:00 PM ET.??
New to The Street’s 500th TV episode line-up, features nine (9) interviews of the following Corporate representatives:
1). Hemp Cigarettes/Hemp Products – Hempacco Co., Inc.'s (NASDAQ: HPCO) ($HPCO) interviews with Sandro Piancone, Co-Founder/CEO
2). Pet Health – PetVivo Holdings, Inc.'s (NASDAQ: PETV) (NASDAQ: PETVW) ($PETV) interview with John Lai, CEO/President.
3). Blockchain Data Management/Compliance - Iagon's (CRYPTO: IAG) ($IAG) interview with Dr. Navjit Dhaliwal, CEO
4). Financial Market Strategies/Blockchain – Blue Castle Ventures LTD.'s (CRYPTO: BCVD) ($BCVD) interviews with David Rojas, CEO/Founder.
5). Gold/Silver Mining – Lahontan Gold Corp.'s (OTCQB: LGCXF) (TSXV: LG) ($LGCXF) interview with Kimberly Ann, Founder, CEO, President, and Director.
6). “Breaking it Down” Segment -TV Host Ana Berry with Jacob Cohen, Chief Executive Officer of Mangoceuticals, Inc. (NASDAQ: MGRX) ($MGRX).
7). Fintech – AppTech Payments Corp.’s (NASDAQ: APCX) (NASDAQ: APCXW) ($APCX) ("AppTech") interview with Luke D'Angelo, CEO/Chairman.
8). Sustainable Solutions - The Sustainable Green Team, Ltd.'s (OTCQX: SGTM) ($SGTM) interview with Brian Rivera, Director of Administration, and Brian Meier, Chief Operating Officer.
9). "Sekur Privacy & Sekur Security Segment – The Weekly Hack" interview with internet privacy expert Mr. Alain Ghiai, CEO, Sekur Private Data, Ltd. (OTCQX: SWISF) (CSE: SKUR) (FRA: GDT0) ($SWISF) (Sekur®).
Episode 500
Sandro Piancone, Co-Founder/CEO of Hempacco Co., Inc. (NASDAQ: HPCO) ($HPCO) appears on New to The Street’s 500th episode, providing TV Host Jane King and viewers with his corporate update. Hempacco's mission is to become the largest disrupter of the $1T tobacco industry with its Hemp Disrupting Tobacco™ products. Recently, the HPCO entered a joint-venture agreement with music entertainer Snoop Dogg to create and sell a line of hemp-derived consumer products. The JV product “Dogg lbs” (pronounced dog pounds) is hemp-derived CBD and Delta-9 infused gummies that comes in 3-flavor profiles, blue/raspberry, cherry/lemon, and grape, available in 5-count and 20-count sizes. As the first of its kind in the CBD/ Hemp marketplace, “Dogg lbs” packaging has a QR code which immediately downloads an Augmented Reality (AR) video of Snoop Dogg talking to the consumer. The product launch was a great success at the recent Champ Trade Show in Las Vegas Nevada. Sandro further explains that the marketing plan is to continue to sign-up master distributors who have existing locations to place products. Currently, they signed three master distributors, New York, Chicago and one in Alabama who combined have around 100,000 locations. The distributors in the mid-west and south ordered about two truckloads of product, which equates to $1M. The Company expects to roll out further Snoop Dogg JV products currently in production. All packaging is childproof, featuring a QR code for AR video download. The on-screen QR code is available during the show; Hempacco Co., Inc. - https://hempaccoinc.com/ & https://realstuffsmokables.com/.
On the 500th episode, New to The Street's TV Host Jane King talks with John Lai, CEO/President of PetVivo Holdings, Inc.'s (NASDAQ: PETV) (NASDAQ: PETVW) ($PETV) ("PetVivo") about the Company. PetVivo manufactures, commercializes, and licenses innovative medical devices and pet therapeutics. John updates viewers about the Company's patented product, Spryng with OsteoCushion Technology, a veterinarian's tool to help pet owners manage their pets' osteoarthritis and joint-related ailments. Today's Veterinary Practice recently published a peer-reviewed article about Spryng's efficacy. The Author, Dr. Tamara Grubb, DVM, Ph.D., DACVAA, wrote the article: "Select Drugs and Compounds for Canine Osteoarthritis Management," which addresses osteoarthritis' current treatments and the successfulness of new novel therapies. One such new therapy mentioned is Spryng, and how it looks at the bone-on-bone causes of osteoarthritis, a front-line use treatment, and an effective alternative to dogs that cannot take NSAIDs (Non-steroidal anti-inflammation drugs). John believes Dr. Grubb will discuss Spryng and her article in upcoming veterinarian conferences. As of June 30, 2023, Spryng is now used in 450 clinical locations in 47 states, up from 50 locations in 2022. As Spryng becomes more widely known as an effective disruptive technology for treating dogs, horses, and cats with osteoarthritis, PETV sees upward growth. The on-screen QR code is available during the show; download or visit PetVivo Holdings, Inc. - https://petvivo.com/ & Spryng with OsteoCushion Technology - https://www.sprynghealth.com/.
TV Host Jane King on New to The Street’s 500th episode talks with Dr. Navjit Dhaliwal, CEO about Iagon’s (CRYPTO: IAG) ($IAG) blockchain technology for data compliance and storage needs. The Company started in 2017 and saw an immediate need for a decentralized application for data management. From its patented geolocation technology, Iagon offers its end-users direct access to specific data inputs, meeting compliance rules and regulations. Countries enforce data privacy uses worldwide, and Iagon can assist timely and efficiently with end-user needs to meet compliance regulatory conditions. Centrally located, big tech platforms have limitations on data security protocols outside of some jurisdictions' compliance rules. Iagon's decentralized platform spreads data through numerous locations and is blockchain-protected. The blockchain provides performance properties, viability enhancements, trustworthiness, and location verification on data integrity. Iagon's use of a W3 (Web 3.0) blockchain in maintaining, storing, and controlling data exceeds the limitation of Web 2.0 applications and programs. End-users who adopt Iagon's technological approach to data management can meet or exceed the regulatory requirements necessary for data storage. Decentralized data storage provides end-users with a customizable system for its data and security requirements layered with encryption protocols. Entities dealing with medical HIPPA privacy rules and the European Union's GDPR (General Data Protection Regulation) compliance rules need immediate solutions to avoid compliance penalties and fines while significantly limiting the potential threat of a data cybersecurity breach. As worldwide compliance rules/regulations increase, Iagon believes many entities will adopt its blockchain data management platform. The on-screen QR code is available during the show; download or visit Iagon - https://iagon.com/.
Blue Castle Ventures, LTD’s. (CRYPTO: BCVD) ($BCVD) ("Blue Castle") Chief Executive Officer / Founder, David Rojas is on the 500th episode talking with New to The Street’s TV Host Jane King about his Company. Blue Castle provides and develops strategic asset-backed financial products for worldwide financial markets. Additionally, Blue Castle offers financial training courses and digital blockchain certification. David tells viewers that the financial courses are helping many who have shown successful trades. David talks about his concerns with the overall market where many industry segments are not performing well. The companies that have an AI (Artificial Intelligence) platform seem to be the only high-tech entities doing well in stock price appreciation. But he has concerns with AI entities because these stock valuations remain very high, and macroeconomic pressures could hamper these public companies’ abilities to maintain such high valuations. He likes quantum computer companies and believes that the shift to quantum computing will change and greatly enhance end-users’ control over data and computations going forward. David believes that rules and regulations are always important to maintain market integrities and operations, and he expects more rules in the blockchain sector. Anyone interested in open an account and would like to join a training class can contact the Blue Castle for more information. Blue Castle Ventures, Ltd. does not trade cryptocurrencies nor carry out transactions or investments with cryptocurrencies. All the Company's operations are in US dollars. The Company's blockchain, $BCVD, is a cryptography and security system. The on-screen QR code is available during the show; download or visit Blue Castle Ventures, Ltd. - https://bluecastleventures.ca/.
Kimberly Ann, Founder, CEO, President, and Director of Lahontan Gold Corp. (OTCQB: LGCXF) (TSXV: LG) ($LGCXF) is on New to Street’s 500th show talking to TV Host Jane King. From the Company’s Gold mining site in Nevada, Kimberly explains the Company’s junior mining business. LGCXF’s Santa Fe property is the Company’s flagship holding, a past gold producer, and management has expectation of getting the open-pit gold mining operations going once again. The Company’s holdings are held in Mineral County, Nevada, the friendliest US state to the mining industry. Gold and silver are so important to high-tech and alternative energy products, Kimberly explains the scarcity of necessary metals and that everyone should own precious metals. In the ensuing months ahead, the Company will update more on its drilling results at its Santa Fee mine and provide more information on its other property holdings. Lahontan Gold has a Canadian 43-101 report on its Santa Fee operations. LGCXF has a five-year operational plan that they continue to advance on all its mining projects. The on-screen QR code is available during the show; download or visit Lahontan Gold Corp. - https://lahontangoldcorp.com/.
“Breaking it Down” Segment premiers on New to The Street’s 500th episode, hosted by Ana Berry. On this segment, Ana talks with Jacob Cohen, Chief Executive Officer of Mangoceuticals, Inc. (NASDAQ: MGRX) ($MGRX) (“MangoRX”). MangoRx is a Company that focuses on developing, marketing, and selling various men's health and wellness products through its telemedicine platform. Jacob explains what makes MangoRx product different than competitors’ product in the treatment for erectile dysfunction (ED). Using a combination of Sildenafil (Viagra) or Tadalafil (Cialis), oxytocin and L-Arginine amino acid, Mango is immediately absorbed under the tongue. This absorption, in most uses, can provide immediate results for those suffering from ED. The Company’s product line Mango is a play on words “Man Go,” with a focus on providing health and wellness so a man can be the best in bed, boardroom, and gym. Men’s health and wellness market is a growing $4B marketplace, and unfortunately, younger men are experiencing ED issues. Management is aggressively marketing Mango to the younger demographic using digital marketing and influencers. Jacob says that using Mango can change oneself from erectile dysfunction to erectile “Function,” boasting confidence and self-esteem. The Company’s marketing slogan “Make America Hard Again” is gaining lot of traction and popularity, and the website, https://makeamericahardagain.com/ offers hats, tee-shirts, water bottles and other products to promote and make awareness about ED. Jacob informs viewers that investors become customers, and customers become investors, an excellent marketing relationship for MangoRx. The Company expects to see continued growth upwardly now and throughout 2024. Mango is available online at www.mangorx.com. The on-screen QR code is available during the show; download or visit Mangoceuticals, Inc. - www.mangorx.com.
New to The Street’s TV Host Jane King on the 500th episode talks with Luke D'Angelo, CEO /Chairman of AppTech Payments Corp. (NASDAQ: APCX) (NASDAQ: APCXW) ($APCX) ("AppTech"). AppTech is a leading Fintech Company specializing in seamless commerce solutions, allowing corporations, small and midsized enterprises ("SMEs"), and consumers efficient digital payment solutions and options. Banks and merchant service providers offer no truly specialized solutions for payment processing. AppTech’s Specialty Payments division continues to offer innovations for merchants and customers in seamless payment transactions. Many AppTech clients want a customized solution where they can integrate texting, SMS, mobile and other platforms into an easy-to-use platform for receiving and sending payments. Luke sees strong growth from current services and expects further upside potential as the Company rolls out more fintech solutions. Regardless of current macroeconomic pressures, AppTech clients are seeking new and innovative solutions for timely, seamless, and efficient payment processing. The Company’s Fintech cloud-based patented platform Commerse™ is changing the legacy payment and banking industries. The on-screen QR code is available during the show; download or visit AppTech Payments Corp. - https://apptechcorp.com/.
On New to The Street’s 500th episode, The Sustainable Green Team, Ltd.'s (OTCQX: SGTM) ($SGTM) Brian Rivera, Director of Administration, and Brian Meier, Chief Operating Officer, are at the Nasdaq MarketSite Studio with TV Host Jane King. Viewers get an insight into SGTM's environmentally conscious solutions. Brian Rivera talks about using the word "Sustainability" and how many industries use the word in describing business operations. He believes that "Sustainable" business practices are actions that improve communities and their surrounding environments. With young children, Brian Rivera wants sustainable measures to ensure a better and cleaner future for the next generation. Some see wood and other organic matter as useless waste; he and the rest of the SGTM team see sustainability as converting waste into usable organic products. Brian Rivera explains the Company's newest product, HumiSoil, a technologically advanced product that uses humus to restore soil's organic nutrients and can create water in soils. HumiSoil is the answer to improve soil conditions and water hydration, which can significantly improve the yields of organic fruits, vegetables, and other agricultural products. Brian Meier, Chief Operating Officer, talks about managing the Company and its subsidiaries. With eight facilities and over 250 employees, Brian says that it takes the skills and the commitment of the Company's employees to create and grow sustainable products. The most crucial asset for SGTM is its employee resources. Brian Meier welcomes all viewers to visit the Company’s website to learn more about SGTM's sustainability products and services. The Company has a YouTube channel with many informative videos about the Company, HumiSoil, and other initiatives. The Sustainable Green Team, Ltd. and VRM BioLogik Group have a strategic relationship and a distribution agreement, whereas SGTM can sell HumiSoil in the North American market. The on-screen QR code is available during the show; The Sustainable Green Team, Ltd. - https://www.thesustainablegreenteam.com/ and Mulch Manufacturing, Inc. - https://mulchmfg.com/.
"Sekur Privacy & Sekur Security Segment – The Weekly Hack" is on New to The Street’s 500th episode. Internationally acclaimed internet privacy expert Mr. Alain Ghiai, CEO of Sekur Private Data Ltd. (OTCQX: SWISF) (CSE: SKUR) (FRA: GDT0) ($SWISF) and TV Host and Multi-media Journalist Ana Berry talk about business email compromise (BEC). Cybercrimials hack into a business email system and look for the most profitable vulnerabilities. Alain says these hackers scan and watch email patterns looking for specific private data, in some cases they wait week to month in planning a hack. Sekur offers secure and private solutions, protecting businesses and individuals from potential cybercrime. For reasonable prices, the Sekur product line-ups offer subscribers several services that reduce the possibility of a cyber hack. Businesses using SekurMail, SekurMessenger and SekurVPN services can have a very secure and private e-communication platform. SekurSend/SekurReply, Chat-by-Invite, SekurMail, and SekurMessenger all contain encryption technology to eliminate hack attempts and threats. And SekurVPN adds an additional layer of protection so that internet traffic is private and secure, and the end-user always appears to be in Switzerland. The Company owns and operates its servers in Switzerland, a country with strict privacy laws. PROMO CODE: PRIVACY is now available, giving a 15% savings on all product subscriptions, and the discount will remain active for five years. Sekur Private Data, Ltd. never data mines, never sells data, never tracks web traffic, and never asks for a phone number. The on-screen QR code is available during the show to download more info or visit Sekur Private Data, Ltd. – https://sekurprivatedata.com/, http://www.Sekur.com and https://www.sekurvpn.com/.
About Hempacco Co., Inc. (NASDAQ: HPCO) ($HPCO):
Hempacco Co., Inc.'s (NASDAQ: HPCO) ($HPCO) goal is Disrupting Tobacco's™ nearly $1 trillion industry with herb and hemp-based alternatives to nicotine cigarettes by manufacturing and marketing herb, spice, and cannabinoid smokables and rolling paper. Hempacco owns The Real Stuff™ functional hemp cigarette and rolling paper brands. Hempacco's operational segments include smokables and hemp rolling paper manufacturing, smokable technology development, The Real Stuff™ brand of functional smokables and rolling paper, and Cheech & Chong Hemp Cigarettes and Hemp Hop Smokables with Rick Ross, and Snoop Dogg joint venture of hemp-derived products. Learn more at hempaccoinc.com and order products at www.realstuffsmokables.com.
About PetVivo Holdings, Inc. (NASDAQ: PETV) (NASDAQ: PETVW) ($PETV):
PetVivo Holdings Inc. (NASDAQ: PETV) (NASDAQ: PETVW) ($PETV) is an emerging biomedical device company currently focused on the manufacturing, commercialization, and licensing of innovative medical devices and therapeutics for companion animals. The Company's strategy is to leverage human therapies for treating companion animals in a capital and time-efficient way. A key component of this strategy is the accelerated timeline to revenues for veterinary medical devices, which enter the market much earlier than more stringently regulated pharmaceuticals and biologics. PetVivo has a pipeline of seventeen products for treating animals and people. A portfolio of nineteen patents protects the Company's biomaterials, products, production processes, and use methods. The Company's lead product Spryng™ with OsteoCushion™ technology, a veterinarian-administered, intraarticular injection for managing lameness and other joint-related afflictions, including osteoarthritis, in dogs and horses, is currently available for commercial sale - https://petvivo.com/ and https://www.sprynghealth.com/.
About Iagon (CRYPTO: IAG) ($IAG):
Iagon was founded in 2017 in Hamar, Norway because people need to be in control of their data. The idea started as an attempt at solving significant issues related to how healthcare data is stored, with modern solutions severely lacking transparency for individuals at a national and international level. The initial ambition of Iagon was to create a secure way for individuals to hold and thereby own their health data and interact more effectively with health services. Iagon aims to build a marketplace for decentralized storage and computing resources. The first version of the protocol will implement a storage marketplace to make joining the shared storage economy simple and transparent for everyone. The protocol will allow storage providers to earn rewards by trading their excess storage to resource consumers on a marketplace at a transparent price while ensuring data privacy, security, and accessibility. Its token-based economy is based on computer, server, and data center owners who join the storage and processing power grids. In return for sharing the capabilities of their machine, they will be granted Iagon tokens that can be traded back to fat money, while any party who wishes to utilize their capabilities will purchase Iagon tokens to distribute them to the parties that provide their services to the blockchain grid - https://iagon.com/.
About Blue Castle Ventures, LTD. (CRYPTO: BCVD) ($BCVD):
Blue Castle Ventures, LTD. (CRYPTO: BCVD) ($BCVD) is the first Company in the world to have digital assets that have true physical collateral. NFTs are our main traded digital asset; these NFTs have an actual painting or collateral from a real artist. Blue Castle Ventures has its own blockchain system to guarantee operations. The Company also has products that emulate financial planning based on NFTs commercialization and stock trading - https://bluecastleventures.ca/.
About Lahontan Gold Corp. (OTCQB: LGCXF) (TSXV: LG) ($LGCXF):
Lahontan Gold Corp. (OTCQB: LGCXF) (TSXV: LG) ($LGCXF): is a Canadian mineral exploration company that holds, through its US subsidiaries, three top-tier gold and silver exploration properties in the Walker Lane of mining-friendly Nevada. Lahontan's flagship property, the 19 km2 Santa Fe Mine, had past production of 345,000 ounces of Gold and 711,000 ounces of silver between 1988 and 1995 from open pit mines utilizing heap-leach processing (Nevada Bureau of Mines and Geology, 1995). The Santa Fe Mine has an Indicated Mineral Resource of 1,112,000 oz Au Eq (grading 1.14 g/t Au Eq) and an Inferred Mineral Resource of 544,000 oz Au Eq (grading 1.00 g/t Au Eq), all pit-constrained (Au Eq is inclusive of recovery, please see Santa Fe Project Technical Report*). The Company will continue aggressively exploring Santa Fe during 2023 and begin evaluating development scenarios to bring the Santa Fe Mine back into production. Quentin J. Browne, P.Geo., Consulting Geologist to Lahontan Gold Corp., is the Qualified Person for the Company and approved the technical content of this news release - https://lahontangoldcorp.com/ (* Please see the Santa Fe Project Technical Report, Authors: Trevor Rabb and Darcy Baker, P. Geos. Effective Date: December 7, 2022, Report Date: March 2, 2023. The Technical Report is available on the Company's website and SEDAR.)
About Mangoceuticals Inc. (NASDAQ: MGRX) ($MGRX):
Mangoceuticals, Inc. (NASDAQ: MGRX) ($MGRX) (“MangoRx”) is a company focused on developing, marketing, and selling a variety of men's health and wellness products and services via a secure telemedicine platform. To date, the Company has identified men's wellness telemedicine services and products as a growing sector, especially related to erectile dysfunction (ED). The Company has developed a new brand of ED product under the brand name "Mango" (think: "Man, Go!"). Mango is a prescription medication that must be approved by a physician. After an individual has completed an online telehealth visit, our network of medical providers will review and approve a prescription if medically appropriate - www.mangorx.com.
About AppTech Payments Corp (NASDAQ: APCX) (NASDAQ: APCXW) ($APCX): ??
AppTech Payments Corp. (NASDAQ: APCX) (NASDAQ: APCXW) ($APCX) provides digital financial services for corporations, small and midsized enterprises ("SMEs"), and consumers through the Company's scalable cloud-based platform architecture and infrastructure, coupled with our commerce experiences development and delivery model. AppTech maintains exclusive licensing and partnership agreements and a full suite of patented technology capabilities - www.apptechcorp.com. ??
About The Sustainable Green Team, Ltd. (OTCQX: SGTM) ($SGTM)
The Sustainable Green Team, Ltd. (OTCQX: SGTM) ($SGTM) is an emerging provider of environmentally beneficial solutions for preserving natural resources and the municipal waste and recycling industries. The Company is a wholesale manufacturer and supplier of wood-based mulch and lumber products, primarily in the Midwest, Southeast, and Ohio Valley regions. The Company also provides arbor care and storm recovery services to municipalities, corporations, and consumers, primarily in the southeastern United States. The Company plans to expand its operations through organic growth and strategic acquisitions that are both accretive to earnings and positioned for rapid growth from the resulting synergistic opportunities identified. The Company's customers include governmental, residential, and commercial clients - https://www.thesustainablegreenteam.com/.
About Sekur Private Data Ltd. (OTCQX: SWISF) (CSE: SKUR) (FRA: GDT0) ($SWISF):
Sekur Private Data, Ltd. (OTCQX: SWISF) (CSE: SKUR) (FRA: GDT0) ($SWISF) is a cybersecurity and internet privacy provider of Swiss-hosted solutions for secure communications and secure data management. The Company distributes a suite of secure cloud-based storage, disaster recovery, document management, encrypted emails, and secure communication tools. It sells its products through its websites www.sekur.com, approved distributors, and telecommunication companies worldwide. Sekur Private Data, Ltd. serves consumers, businesses, and governments worldwide - https://www.sekurprivatedata.com and https://www.sekur.com; Twitter: @sekurprivate.
About New to The Street:
New to The Street is an FMW Media production that operates one of the longest-running US and International sponsored and syndicated Nielsen Rated programming television brands, "New to The Street. Since 2009, New to The Street has run biographical interview segment shows across major U.S. television networks. The Nielsen Rated and sponsored broadcasts programming platform reaches millions of homes in the US and international markets. FMW's New to The Street / Newsmax televised broadcasting platform airs its syndication on Saturdays at 3:30 – 4:00 PM ET. The show also appears on Bloomberg and the FOX Business Network as sponsored programming. FMW is also one of the nation's largest buyers of linear television, long and short-form paid programming - https://www.newsmaxtv.com/Shows/New-to-the-Street, https://www.newtothestreet.com/ & https://www.youtube.com/watch?v=4-G2--mRQUw&t=14s.
Forward-Looking Statements Disclaimer US/Canada:
This press release contains forward-looking statements within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. In some cases, you can identify forward-looking statements by the following words: "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "ongoing," "plan," "potential," "predict," "project," "should," "will," "would," or the negative of these terms or other comparable terminology. However, not all forward-looking statements contain these words. Forward-looking statements do not guarantee future performance or results and will not necessarily be accurate indications of the times at which such performance or results are achieved. This press release should be considered in all filings of the Companies contained in the Edgar Archives of the Securities and Exchange Commission at www.sec.gov.
This press release contains forward-looking information within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "expect", "likely" and "intend" and statements that an event or result "may", "will", "should", "could" or "might" occur or be achieved and other similar expressions. These statements reflect management's current beliefs and are based on information currently available to management as of the date hereof. Forward-looking information in this press release includes, without limiting the foregoing, expectations regarding agents that join Real. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
CONTACT:
FMW Media Contact: ?Monica Brennan ?monica @loanbroker-330-2564
"New to The Street" Business Development Office ?1-516-696-5900 ?Support@NewToTheStreet.com
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/dc9f276a-7329-4360-86ce-1081509a9f4b
A video accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/031c9926-381d-4a58-9f90-c3eb4e2a924a
?
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News
Immediate 340B Program Access Granted to Florida and South Carolina Post-Hurricane IanNovember 7, 2023
Following the havoc wreaked by Hurricane Ian, the U.S. Health Resources and Services Administration (HRSA) has expedited 340B program enrollment for Florida and South Carolina. Both states were designated as public health emergencies (PHEs) due to the hurricane's extensive damage, which included flooding and widespread power outages over two days.
September 6, 2023
Infectious Disease Management through PrEP
Infectious diseases, such as HIV, remain significant public health challenges worldwide. Pre-exposure prophylaxis (PrEP) is a powerful and innovative strategy that has emerged in recent years to combat the spread of HIV and reduce the risk of infection among high-risk individuals. PrEP involves the use of antiretroviral medications by individuals who are at substantial risk of contracting HIV to prevent the virus from establishing infection in the event of exposure. Let's explore how PrEP is being utilized as a groundbreaking approach to infectious disease management, focusing on HIV prevention.
August 29, 2023
Limitations on Contracting with Several Pharmacies: Ensuring Compliance in the 340B Drug Pricing Program
Contracting with multiple 340B pharmacies can offer advantages for covered entities participating in the 340B Drug Pricing Program. It can enhance medication access, improve patient care, and strengthen the overall healthcare services provided. However, to ensure compliance with Health Resources and Services Administration (HRSA) guidelines and maintain the program's integrity, covered entities must be mindful of specific limitations and considerations. In this blog post, we will explore the key limitations and best practices for managing multiple pharmacy relationships under the 340B program.
August 29, 2023
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NextPlat Corp (NASDAQ:NXPL) Shares Slammed 28% But Getting In Cheap Might Be Difficult Regardless
NextPlat Corp (NASDAQ:NXPL) shares have had a horrible month, losing 28% after a relatively good period beforehand. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 28% in that time.
Although its price has dipped substantially, you could still be forgiven for thinking NextPlat is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 3.7x, considering almost half the companies in the United States' Telecom industry have P/S ratios below 1.1x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.
Check out our latest analysis for NextPlat
How NextPlat Has Been Performing
The recent revenue growth at NextPlat would have to be considered satisfactory if not spectacular. One possibility is that the P/S ratio is high because investors think this good revenue growth will be enough to outperform the broader industry in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.
Want the full picture on earnings, revenue and cash flow for the company? Then our
free report on NextPlat
will help you shine a light on its historical performance.
How Is NextPlat's Revenue Growth Trending?
NextPlat's P/S ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the industry.
Retrospectively, the last year delivered a decent 3.0% gain to the company's revenues. This was backed up an excellent period prior to see revenue up by 90% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been superb for the company.
Comparing that to the industry, which is only predicted to deliver 5.9% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised revenue results.
With this information, we can see why NextPlat is trading at such a high P/S compared to the industry. Presumably shareholders aren't keen to offload something they believe will continue to outmanoeuvre the wider industry.
The Final Word
NextPlat's shares may have suffered, but its P/S remains high. Using the price-to-sales ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.
We've established that NextPlat maintains its high P/S on the strength of its recent three-year growth being higher than the wider industry forecast, as expected. At this stage investors feel the potential continued revenue growth in the future is great enough to warrant an inflated P/S. Unless the recent medium-term conditions change, they will continue to provide strong support to the share price.
There are also other vital risk factors to consider and we've discovered 3 warning signs for NextPlat (2 shouldn't be ignored!) that you should be aware of before investing here.
If you're unsure about the strength of NextPlat's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.??This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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It’s looking like RXMD is ready to trade up into the $6+ level by the end of the week.
The first collaboration between Seven Arts and THC will be the September 29, 2023, release of the new TAPROOT album, SC\SSRS. Taproot was formed in 1997 in Ann Arbor Michigan, releasing their debut album, GIFT, in 2000 under Atlantic Records. The debut release was followed by extensive touring touring including appearances on Ozzfest 2000 and 2001, and tours with Deftones, Incubus, Papa Roach, Slipknot, Mudvayne, Disturbed, and Linkin Park.
Why don’t you post it?
Seven Arts Entertainment Announces Joint Venture on Upcoming Album Releases
Press Release | 08/30/2023
ATLANTA, GA / ACCESSWIRE / August 30, 2023 / Seven Arts Entertainment Inc. (OTC PINK:SAPX), the "Company", a film and music production company, is pleased to announce a multi-release joint venture agreement with THC Music and Films.
THC Music and Films is a company privately controlled by Seven Arts' director, Thom Hazaert, a former major label A&R/Marketing executive. Hazaert was brought into the Company in August of 2022 to oversee A&R and content acquisitions for Seven Arts. His role with the Company continues to expand as Mr. Hazaert has also assumed a significant role in overseeing the Company's Dolby Atmos facility intended to serve the Atlanta film community.
With 25+ years of experience across music and film, both as a marketing and A&R consultant, director and content creator, and co-founder of seminal groundbreaking lifestyle marketing entity LOUDSIDE/TOTAL ASSAULT, with a past project and client list that includes Warner Bros Records, Warner Bros Pictures, Lions Gate, Geffen Records, Flip Records, Interscope Records, MCA Records, the SAW franchise, Scream Factory, Jive Records, Atlantic Records, Loud Records, Wu-Tang Clan, Limp Bizkit, Incubus, Def Leppard, Nine Inch Nails, Static-X, Rob Zombie, Tupac Shakur, Taproot, Korn, Papa Roch and many more, Hazaert is expected to take on a very significant role for the Company going forward.
The first collaboration between Seven Arts and THC will be the September 29, 2023, release of the new TAPROOT album, SC\SSRS. Taproot was formed in 1997 in Ann Arbor Michigan, releasing their debut album, GIFT, in 2000 under Atlantic Records. The debut release was followed by extensive touring touring including appearances on Ozzfest 2000 and 2001, and tours with Deftones, Incubus, Papa Roach, Slipknot, Mudvayne, Disturbed, and Linkin Park.
The bands sophomore release Welcome, their first pairing with legendary producer Toby Wright (Alice in Chains, Metallica) which Rolling Stone called, "a self-preserving transition from new metal to art metal", went on to sell over 500,000 copies and spawned the hit Rock singles "Poem", which peaked at #5 on the Mainstream Rock charts, and "Mine", helping propel the Welcome album to over 50 million digital streams.
2005 saw the release of Blue-Sky Research, also produced by Wright, the band's final release for Atlantic, which spawned the hit radio single "Calling" and featured collaborations with Billy Corgan (Smashing Pumpkins), Nick Hexum (311), and Stephen Carpenter (Deftones).
Taproot released several more full-length studio albums, including 2008's Our Long Road Home (Velvet Hammer), 2010's Plead The Fifth (Victory), with the single "Fractured (Everything I Said was True)" reaching the top 20 on the Active Rock Chart, and 2012's The Episodes, while continuing to tour consistently through 2013, when the band went on an indefinite hiatus, returning only to play a sporadic handful of local Michigan shows, before reforming officially this year.
With over 100 million combined streams across digital platforms, and 400k monthly listeners on Spotify, Taproot continues to be a strong force in Rock music, over 25 years after forming.
Additional joint venture collaborations between Seven Arts and THC will be announced shortly as well.
Stated Seven Arts director, Thom Hazaert : "I'm excited to be moving things forward and building momentum for Seven Arts with our recent and upcoming acquisitions and partnerships. It has been a unique and unprecedented time for the entertainment industry but also rewarding to embark on a unique vision and path forward for film and music divisions."
Stated Seven Arts CEO, Jason Black: "I'm extremely pleased with the collaborations and deals that Mr. Hazaert is bringing to the Company and look forward to increasing shareholder value into this fiscal year."
About: Seven Arts Entertainment Inc. is a media and entertainment company developing a diverse portfolio of intellectual properties in the film and music industries.
Forward-Looking Statements:
This press release contains forward-looking statements. The words 'believe,' 'may,' 'estimate,' 'continue,' 'anticipate,' 'intend,' 'should,' 'plan,' 'could,' 'target,' 'potential,' 'is likely,' 'will,' 'expect' and similar expressions, as they relate to us, are intended to identify forward-looking statements. The Company has based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Some or all of the results anticipated by these forward-looking statements may not be achieved. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Contact
That’s hurricane Idalia. Dam auto correct.
Hurricane Italian will be providing a lot of work for SGTM. More revenues from tree removal.
I wouldn’t consider a $5.00 + stock a penny stock.
News out!!
Disclosure Statement Pursuant to the Pink Basic Disclosure Guidelines Seven Arts Entertainment Inc.
3440 Oakcliff Road
Suite 104
Atlanta, GA 30340 _______________________________ 770-866-6250 sevenartsentertainment.com sevenartsent@gmail.com
7812
Annual Report
For the period ending June 30, 2023 (the “Reporting Period”)
Outstanding Shares
The number of shares outstanding of our Common Stock was: 2,038,444,252 as of 06/30/2023
1,503,444,252 as of 06/30/2022
Shell Status
Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933, Rule 12b-2 of the Exchange Act of 1934 and Rule 15c2-11 of the Exchange Act of 1934):
Yes: ? No: ?
Indicate by check mark whether the company’s shell status has changed since the previous reporting period: Yes: ? No: ?
Change in Control
Indicate by check mark whether a Change in Control5 of the company has occurred over this reporting period: Yes: ? No: ?
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 1 of 11
1) Name and address(es) of the issuer and its predecessors (if any)
In answering this item, provide the current name of the issuer any names used by predecessor entities, along with the dates of the name changes.
Seven Arts Entertainment Inc. as of 02/15/2018
Wireless Connect Inc. from 10/15/2014 to 02/15/2018
Seven Arts Entertainment Inc. from 06/11/2010 to 10/15/2014
The state of incorporation or registration of the issuer and of each of its predecessors (if any) during the past five years; Please also include the issuer’s current standing in its state of incorporation (e.g. active, default, inactive):
The issuer’s state of incorporation is Wyoming as of 10/15/2014 The issuer’s standing is Active in the state of Wyoming
Describe any trading suspension orders issued by the SEC concerning the issuer or its predecessors since inception: None
List any stock split, stock dividend, recapitalization, merger, acquisition, spin-off, or reorganization either currently anticipated or that occurred within the past 12 months:
None
The address(es) of the issuer’s principal executive office:
3440 Oakcliff Road, Suite 104, Atlanta, GA 30340
The address(es) of the issuer’s principal place of business:
?x Check if principal executive office and principal place of business are the same address:
Has the issuer or any of its predecessors been in bankruptcy, receivership, or any similar proceeding in the past five years?
No: ? Yes: ? If Yes, provide additional details below:
2) Security Information
Transfer Agent
Name: Transfer Online, Inc.
Phone: 503-227-2950
Email: info@transferonline.com
Address: 512 SE Salmon St, Portland, OR 97214
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023)
Page 2 of 11
Publicly Quoted or Traded Securities:
The goal of this section is to provide a clear understanding of the share information for its publicly quoted or traded equity securities. Use the fields below to provide the information, as applicable, for all outstanding classes of securities that are publicly traded/quoted.
Trading symbol:
Exact title and class of securities outstanding: CUSIP:
Par or stated value:
Total shares authorized:
Total shares outstanding:
Total number of shareholders of record:
SAPX Common 81783N508 .0001 3,000,000,000 2,038,444,252 442
as of date: 02/01/2023 as of date: 06/30/2023 as of date: 06/30/2023
All additional class(es) of publicly quoted or traded securities (if any): None
Other classes of authorized or outstanding equity securities:
The goal of this section is to provide a clear understanding of the share information for its other classes of authorized or outstanding equity securities (e.g. preferred shares). Use the fields below to provide the information, as applicable, for all other authorized or outstanding equity securities.
Trading symbol:
Exact title and class of securities outstanding: CUSIP:
Par or stated value:
Total shares authorized:
Total shares outstanding:
Total number of shareholders of record:
Trading symbol:
Exact title and class of securities outstanding: CUSIP:
Par or stated value:
Total shares authorized:
Total shares outstanding:
Total number of shareholders of record:
SAPX
Series D Preferred
None
100.00
30,000 as of date:
30,000 as of date: 06/30/2023
1 as of date:
SAPX
Series A Preferred None
.01
10,000,000 6,000,000 1
as of date: 07/15/2021 as of date: 06/30/2023 as of date: 06/30/2023
08/27/2014 06/30/2023
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023)
Page 3 of 11
Security Description:
The goal of this section is to provide a clear understanding of the material rights and privileges of the securities issued by the company. Please provide the below information for each class of the company’s equity securities, as applicable:
3)
1. For common equity, describe any dividend, voting and preemption rights. 1 vote for every common share issued.
2. For preferred stock, describe the dividend, voting, conversion, and liquidation rights as well as redemption or sinking fund provisions.
Series D Preferred allow 1 vote for every share issued. Series D Preferred are convertible into common stock at 100 times the average trading price for the previous 10 days at the time of conversion.
Series A Preferred allow 1000 common share votes for every Series A share issued. Series A Preferred carry no additional rights or provisions.
3. Describe any other material rights of common or preferred stockholders. None
4. Describe any material modifications to rights of holders of the company’s securities that have occurred over the reporting period covered by this report.
None
Issuance History
The goal of this section is to provide disclosure with respect to each event that resulted in any changes to the total shares outstanding of any class of the issuer’s securities in the past two completed fiscal years and any subsequent interim period.
A. Changes to the Number of Outstanding Shares
Indicate by check mark whether there were any changes to the number of outstanding shares within the past two completed fiscal years:
No: ? Yes: ?x (If yes, you must complete the table below)
Shares Outstanding as of Second Most Recent Fiscal Year End:
Opening Balance
Date 07/01/2020 Common: 4,003,444,252 Preferred D: 30,000
*Right-click the rows below and select “Insert” to add rows as needed.
Date of Transaction
Transaction type (e.g., new issuance, cancellation, shares returned to treasury)
Number of Shares Issued (or cancelled)
Class of Securities
Value of shares issued ($/per share) at Issuance
Were the shares issued at a discount to market price at the time of issuance? (Yes/No)
Individual/ Entity Shares were issued to.
*You must disclose the control person(s) for any entities listed.
Reason for share issuance (e.g. for cash or debt conversion) -OR-
Nature of Services Provided
Restricted or Unrestricted as of this filing.
Exemptio n or Registrati on Type.
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 4 of 11
07/21/2021 New 6,000,000 Issuance
1/11/2022 Cancellation 2,500,000,000
Preferred A Common
.01 No .0001 No
Jason Black
Richard Bjorklund
Acquisition Salary
Restricted None Restricted None
08/17/2022
New Issuance
55,000,000
Common
.001
Yes
Capitol Capital Corp Howard Salamon
Cash
Unrestricted
144
12/28/2022
New Issuance
150,000,000
Common
.0001
Yes
Via Capital Jesus Cipriano
Cash
Unrestricted
144
02/21/2023
New Issuance
150,000,000
Common
.0001
Yes
Via Capital Jesus Cipriano
Cash
Unrestricted
144
03/06/2023
New Issuance
180,000,000
Common
.0001
Yes
Via Capital Jesus Cipriano
Cash
Unrestricted
144
Shares Outstanding on Date of This Report: Ending Balance:
Date 06/30/2023 Common: 2,038,444,252
Preferred D: 30,000 Preferred A: 6,000,000
A. Debt Securities, Including Promissory and Convertible Notes
Indicate by check mark whether there are any outstanding promissory, convertible notes, convertible debentures, or any other debt instruments that may be converted into a class of the issuer’s equity securities:
No: ? Yes: ?x (If yes, you must complete the table below)
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 5 of 11
Date of Note Issuance
Outstanding Balance ($)
Principal Amount at Issuance ($)
Interest Accrued ($)
Maturity Date
Conversion Terms (e.g. pricing mechanism for determining
Name of Noteholder.
*You must disclose the control person(s) for any entities listed.
Reason for Issuance (e.g. Loan, Services, etc.)
10/25/2021 12/17/2021 06/30/2022 12/28/2022
$48,393 $28,465 $49,215 $27,269
$37,667
$42,075 $6,318 $24,995 $3,470 $45,151 $4,064 $26,000 $3,050
$36,100 $1,567
$10,000 $0 06/01/2024 $21,500 $0 06/26/2024
10/25/2022 12/17/2022 06/30/2023 12/28/2023
9% per annum convertible at .0001
9% per annum convertible at .0001
9% per annum convertible at .0001
9% per annum convertible at .0001
9% per annum convertible at .0001
9% per annum convertible at .0001
9% per annum convertible at .0001
Capitol Capital Corp Loan Howard Salamon
Capitol Capital Corp Loan Howard Salamon
Capitol Capital Corp Loan Howard Salamon
Via Capital Loan Jesus Cipriano
Via Capital Loan Jesus Cipriano
Chestnut Hill Capital Loan Chris O'Donell
01/10/2023 06/01/2023
01/10/2024
$10,000 06/26/2023 $21,500
Chestnut Hill Capital Chris O'Donnell
Loan
Use the space below to provide any additional details, including footnotes to the table above:
1. On December 27, 2022, Via Capital acquired all of the loans held by Capitol Capital Corp. in the Company, whereby debt conversions subsequent to December 27, 2022 would result in shares issuable to Via Capital.
2. On December 28, 2022 and January 10, 2023 Via Capital made direct loans to the Company of $26,000 and $36,100 respectively.
3. On February 21, 2023 and March 06, 2023 the Company issued 150,000,000 and 180,000,000 common shares respectively to Via Capital, completing the note issued on September 24,2021.
4. Loan provisions waive interest for the first 30 days, therefore the Company has not recorded accrued interest on loans made on June 01, 2023 and June 26, 2023, during the period ending June 30, 2023.
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 6 of 11
4)
Issuer’s Business, Products and Services
A. B. C.
5)
Summarize the issuer’s business operations (If the issuer does not have current operations, state “no operations”) Film and music production
List any subsidiaries, parent company, or affiliated companies.
The issuer has two subsidiaries, Seven Arts Music Inc, and Muse Media LLC.
Describe the issuers’ principal products or services.
The issuer produces film and music for domestic and international release.
Issuer’s Facilities
The goal of this section is to provide a potential investor with a clear understanding of all assets, properties or facilities owned, used or leased by the issuer and the extent in which the facilities are utilized.
In responding to this item, please clearly describe the assets, properties or facilities of the issuer, give the location of the principal plants and other property of the issuer and describe the condition of the properties. If the issuer does not have complete ownership or control of the property (for example, if others also own the property or if there is a mortgage on the property), describe the limitations on the ownership.
If the issuer leases any assets, properties or facilities, clearly describe them as above and the terms of their leases.
The issuer leases approximately 3000 sq. ft. of mixed-use space, consisting of offices and production facilities, located at 3440 Oakcliff Road, Suite 104, Atlanta, GA 30340, at $3500 a month plus utilities.
6) Officers, Directors, and Control Persons
Using the table below, please provide information, as of the period end date of this report, regarding any officers, or directors of the company, individuals or entities controlling more that 5% of any class of the issuers securities, or any person that performs a similar function, regardless of the number of shares they own. If any insiders listed are corporate shareholders or entities, provide the name and address of the person(s) beneficially owning or controlling such corporate shareholders, or the name and contact information (City, State) of an individual representing the corporation or entity in the note section.
Include Company Insiders who own any outstanding units or shares of any class of any equity security of the issuer.
The goal of this section is to provide an investor with a clear understanding of the identity of all the persons or entities that are involved in managing, controlling or advising the operations, business development and disclosure of the issuer, as well as the identity of any significant or beneficial shareholders.
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 7 of 11
Name of Officer/Director or Control Person
Affiliation with Company (e.g. Officer Title /Director/Owner of more than 5%)
Residential Address (City / State Only)
Number of shares owned
Share type/class
Ownership Percentage of Class Outstanding
Note
Jason Black Thom Hazaert
CEO/Director Owner of more than 5%
Director
Marietta Georgia
Green Bay Wisconsin
6,000,000 N/A
Preferred A 60% N/A N/A
CEO as of 06/04/2021
Director as of 08/22/2022
7)
A.
Legal/Disciplinary History
Please identify whether any of the persons or entities listed above have, in the past 10 years, been the subject of:
1. A conviction in a criminal proceeding or named as a defendant in a pending criminal proceeding (excluding traffic violations and other minor offenses);
None
2. The entry of an order, judgment, or decree, not subsequently reversed, suspended or vacated, by a court of competent jurisdiction that permanently or temporarily enjoined, barred, suspended or otherwise limited such person’s involvement in any type of business, securities, commodities, or banking activities;
None
3. A finding or judgment by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission, the Commodity Futures Trading Commission, or a state securities regulator of a violation of federal or state securities or commodities law, which finding or judgment has not been reversed, suspended, or vacated; or
None
4. The entry of an order by a self-regulatory organization that permanently or temporarily barred, suspended, or otherwise limited such person’s involvement in any type of business or securities activities.
None
B. Describe briefly any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the issuer or any of its subsidiaries is a party or of which any of their property is the subject. Include the name of the court or agency in which the proceedings are pending, the date instituted, the principal parties thereto, a description of the factual basis alleged to underlie the proceeding and the relief sought. Include similar information as to any such proceedings known to be contemplated by governmental authorities.
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 8 of 11
In 2016 Arrowhead Capital Finance Ltd sued the issuer in the US District Court of New York for loans due in 2009 from Seven Arts Pictures Ltd, the issuer's predecessor. On June 5, 2018 the court found the issuer liable and awarded Arrowhead $2,496,160, plus 9% per annum, until paid.
In July of 2021, following a series of online slanders made against the issuer, George Sharp, an OTC CEO, described in social media as a "failed stock promoter" and a "litigious penny stock gadfly", with an extensive history of filing civil claims against public companies, initiated a lawsuit against the issuer in San Diego Superior Court. The matter remains pending and the issuer will continue to vigorously defend against Mr. Sharp's actions.
8) Third Party Service Providers
Provide the name, address, telephone number and email address of each of the following outside providers. You may add additional space as needed.
Securities Counsel (must include Counsel preparing Attorney Letters).
Name: Firm: Address 1: Address 2: Phone: Email:
Accountant or Auditor None
Investor Relations None
Anthony Newton
The Law Offices of Anthony F. Newton PO Box 16877
Sugar Land TX, 77496
832-452-0269 tony.newton@yahoo.com
All other means of Investor Communication:
Twitter: Discord: LinkedIn Facebook: [Other ]
@SAPX_7arts N/A
N/A
N/A
Public Press Releases via Accesswire
Other Service Providers
Provide the name of any other service provider(s) that that assisted, advised, prepared, or provided information with respect to this disclosure statement. This includes counsel, broker-dealer(s), advisor(s), consultant(s) or any entity/individual that provided assistance or services to the issuer during the reporting period.
None
9) Financial Statements
A. The following financial statements were prepared in accordance with: ? IFRS
? U.S. GAAP
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023)
Page 9 of 11
B. The following financial statements were prepared by (name of individual)6:
Name:
Title:
Relationship to Issuer:
Describe the qualifications of the person or persons who prepared the financial statements: The financial statements are prepared in accordance with U.S. GAAP by Jason Black, who is the principal financial officer of the Issuer. Mr. Black has over 10 years of experience managing businesses and preparing financial statements. Since 2019 Mr. Black has prepared financial statements, as the principal financial officer, for several OTC Markets alternative reporting companies and is thus well-qualified from this experience to prepare the Issuer’s financial statements.
Provide the following financial statements for the most recent fiscal year or quarter. For the initial disclosure statement (qualifying for Pink Current Information for the first time) please provide reports for the two previous fiscal
Jason Black CEO President
years
and any subsequent interim periods.
a. Audit letter, if audited;
b. Balance Sheet;
c. Statement of Income;
d. Statement of Cash Flows;
e. Statement of Retained Earnings (Statement of Changes in Stockholders’ Equity)
f. Financial Notes
10) Issuer Certification
Principal Executive Officer:
The issuer shall include certifications by the chief executive officer and chief financial officer of the issuer (or any other persons with different titles but having the same responsibilities) in each Quarterly Report or Annual Report.
The certifications shall follow the format below: I, Jason Black certify that:
1. I have reviewed this Disclosure Statement for Seven Arts Entertainment Inc.;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
08/24/2023
/s/ Jason Black
(Digital Signatures should appear as “/s/ [OFFICER NAME]”)
6 The financial statements requested pursuant to this item must be prepared in accordance with US GAAP or IFRS and by persons with sufficient financial skills.
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 10 of 11
Principal Financial Officer:
I, Jason Black certify that:
1. I have reviewed this Disclosure Statement for Seven Arts entertainment Inc.;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
08/24/2023
/s/ Jason Black
(Digital Signatures should appear as “/s/ [OFFICER NAME]”)
OTC Markets Group Inc.
OTC Pink Basic Disclosure Guidelines (v4.0 January 1, 2023) Page 11 of 11
3440 Oakcliff Road, Suite 104 Atlanta
GA 30340
SEVEN ARTS ENTERTAINMENT, INC. (SAPX)
ANNUAL REPORT
FOR THE YEAR ENDING JUNE 30, 2023
August 24, 2023
SEVEN ARTS ENTERTAINMENT, INC. QUARTERLY REPORT
FOR THE YEAR ENDED JUNE 30, 2023 (Unaudited)
Condensed Consolidated Unaudited Financial Statements
Condensed Consolidated Unaudited Balance Sheet as at June 30, 2023 and June 3I0n,d2e0x22
Condensed Consolidated Unaudited Statement of Operations for the Year Ending June 30, 2023 and June 30, 2022
Condensed Consolidated Unaudited Statement of Cash Flow for the Year Ending June 30, 2023 and June 30, 2022 5 Condensed Unaudited Statement of Changes in Stockholders' Equity for the Year Ending June 30, 2023 and June 30, 2022 6 Notes to the Condensed Consolidated Unaudited Financial Statements
Page F-2
7
ASSETS
Current assets
Cash and cash equivalents
2 3,892
$ 20,583
Other current assets
5 3,000 8,000
Total current assets
10,392 28,583
Fixed assets
Accumulated depreciation
6 (420)
(140)
Goodwill
7 60,000
60,000
Accumulated amortization
7-
-
TOTAL ASSETS
___$______7_1_,3_7_2_______$_________8_9_,_8_4_3___
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities
Accrued expenses
$ 11,193
$ 2,250
Related party loans & notes payable, short-term or current 12 28,175 22,970
Other liabilities 13 3,241,507 3,241,507
Derivative liability 10 2,488,991 2,691,436
TOTAL LIABILITIES $ 5,934,481
$ 6,136,924
STOCKHOLDERS' DEFICIT
Preferred stock:
Preferred stock Series A: par value $0.01, 10,000,000 authorized and 6,000,000 issued and
outstanding at June 30, 2023 and June 30, 2022 9 60,000
60,000
Preferred stock Series D: par value $100.00, 30,000 authorized and 30,000 issued and outstanding at June 30, 2023 and June 30, 2022
9 3,000,000 3,000,000
Common stock: par value $0.0001, 3,000,000,000 and 1,800,000,000 authorized and 2,038,444,252 and 1,503,444,252 issued and outstanding at June 30, 2023 and June 30, 2022 respectively
Additional paid-in capital
Accumulated Deficit Accumulated deficit
9
775,018 721,518
36,621,015 36,571,515
TOTAL STOCKHOLDERS' DEFICIT
(46,319,142) (46,400,114)
(5,863,109)
(6,047,081)
89,843
71,372 $
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $
Deposits
SEVEN ARTS ENTERTAINMENT, INC. Condensed Consolidated Unaudited Financial Statements Balance Sheet
Notes
As at June 30,
2023
3,500
1,400
164,615
As at June 30, 2022
-
1,400
178,761
Property, plant & equipment 6
Loans & notes payable, short-term or current, net of unamortized debt discount of $57,894 8
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
$ ___________________________________ 71,372
$
89,843
See accompanying notes to these condensed consolidated unaudited financial statements.
Page F-3
SEVEN ARTS ENTERTAINMENT, INC. Condensed Consolidated Unaudited Financial Statements Statement of Operations
Year Ended June 30,
Revenues
Selling, general & administrative expenses
Net operating loss
Non-cash interest, convertible loan
$
2023
-
122,037
(122,317)
(806,548)
$
2022
20,000
171,811
(151,951)
(6,351,609)
Cost of goods sold
--
Gross profit
- 20,000
Operating expenses
Depreciation & amortization
280 140
Total operating expenses
122,317 171,951
Other income (expenses)
Bank charges
(113) (205)
Bank/loan interest accrued
(16,871) (67,939)
Amortization of debt discount
(44,292) (150,972)
Gain (loss) on revaluation of derivative liability
1,071,093 3,867,986
Other income (expenditure) net
-
3,950
Net income (loss) before income taxes
$ 80,952 (2,850,740)
Provision for income taxes
--
Net income (loss)
$ 80,952 $ (2,850,740)
Net income (loss) per share
0.00 _________________________________________________
See accompanying notes to these condensed consolidated unaudited financial statements.
Page F-4
1,873,444,252 2,128,444,252 ________________________________________________
0.00
Weighted average shares outstanding
SEVEN ARTS ENTERTAINMENT, INC. Condensed Consolidated Unaudited Financial Statements Statement of Cash Flow
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Depreciation and amortization
Amortization of debt discount
(Gain) loss on revaluation of derivative liability
Non-cash interest, convertible loan
Other current assets
Sale (purchase) of intangible assets
Proceeds from (repayment of) debt instruments
NET CASH PROVIDED BY FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH
Cash, end of period
Year Ended June 30,
2023
280
44,292
(1,071,093)
806,548
-
81,665
73,846
2022
140
82,021
(2,109,224)
5,595,585
(8,000)
(60,000)
219,588
234,415
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 80,952 $ (2,850,740)
Financing costs 13,024 63,748
Changes in operating assets and liabilities:
Accounts payable and other current liabilities 31,500 3,429
NET CASH (USED IN) OPERATING ACTIVITIES (94,497) (121,870)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale (purchase) of tangible assets - (1,400)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES - (61,400)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of equity - 60,000
Related party loans 5,205 22,971
Financing costs (13,024) (68,144)
Conversion of debt to common or preferred stock
See accompanying notes to these condensed consolidated unaudited financial statements.
103,000 $ -
Page F-5
$
(16.691)
20,583
____________________________
Cash, beginning of period 20,583 - ____________________________
3,892 20,583
___________________________
SUPPLEMENTAL DISCLOSURES
Supplemental schedules of non-cash investing and financing activities
SEVEN ARTS ENTERTAINMENT, INC. Condensed Consolidated Unaudited Financial Statements Statement of Changes in Stockholders' Equity
Additional Preferred Stock Common Stock Paid-in Number Value Number Value Capital
Accumulated Surplus (Deficit)
Total
Balance b/f as at July 1,
2021 30,000 $ 3,000,000 4,003,444,252 $ 721,518 $ 36,571,515 $ (43,533,361) $ (3,240,328)
Preferred stock issued
for acquisition 6,000,000 60,000 - - - - 60,000
Common stock
cancelled - - (2,500,000,000) - - - -
Net loss, year ending
June 30, 2022 - - - - - (2,866,753) (2,866,753)
Balance b/f July 1,
2022 6,030,000 $ 3,060,000 1,503,444,252 $ 721,518 $ 36,571,515 $ (46,400,114) $ (6,047,081)
Common stock issued
to repay debt - - 535,000,000 53,500 49,500 - 103,000
Net income, year ending June 30, 2023
- - - - - 80,952 80,952
Balance c/f as at June
30, 2023 6,030,000 $ 3,060,000 2,038,444,252 $ 775,018 $ 36,621,015 $ (46,319,142) $ (5,863,109)
See accompanying notes to these condensed consolidated unaudited financial statements.
Page F-6
SEVEN ARTS ENTERTAINMENT, INC. Condensed Consolidated Unaudited Financial Statements Notes For the Year Ended June 30, 2023
NOTE 1. NATURE AND BACKGROUND OF BUSINESS
The accompanying consolidated financial statements include Seven Arts Entertainment, Inc. (the 'Company', 'we' or 'us'), a Wyoming corporation, its wholly-owned subsidiaries and any majority controlled interests.
The Company is the continuation of certain business of Seven Arts Pictures PLC ('PLC'), which was founded in 2002 by Peter Hoffman as an independent motion picture production and distribution business, engaged in the development, acquisition, production, and licensing of theatrical motion pictures for exhibition in domestic (ie. the US and Canada) and foreign theatrical markets, and for subsequent worldwide release in other forms of media, including home video/dvd and pay and free television.
Following approval by shareholders at a meeting held on June 10, 2010, the Company was formed on June 11, 2010 and became a wholly-owned subsidiary of PLC. On this date, the Company entered into an Asset Transfer Agreement, as amended on January 27, 2011 and again on August 31, 2011, transferring all assets from 'PLC' to the Company in exchange for assumption by the Company of all liabilities, as well as one share of Common Stock in the Company for every Ordinary Share of PLC previously distributed to shareholders. This share exchange was approved by NASDAQ Capital Markets on August 31, 2011 for the Company's NASDAQ listingtobeeffectiveasofSeptember1,2011.OnNovember8,2011,PLCwasplacedintovoluntarycreditors'liquidationunderEnglishlaw.Certain indebtednessof PLC remained with PLC and will be subject to administration or payment in those administration proceedings.
On January 1, 2012, Seven Arts Film Entertainment Limited sold all of its film assets to the Company in return for assumption of indebtedness. Seven Arts Film Entertainment Ltd ceased operations on May 31, 2013, on the closing of its office in London, England, and placed into voluntary liquidation on October 9, 2013.
On June 30, 2012, Seven Arts Film Entertainment Louisiana LLC ('SAFELA') was transferred to the Company. SAFELA had a 30-year lease to operate a film production and post-production facility at 807 Esplanade, New Orleans, Louisiana. The post-production facility commenced operations on July 1, 2012.
Seven Arts Pictures Louisiana LLC ('SAPLA') had entered into a credit agreement with Advantage Capital Community Development Fund LLC, dated October 11, 2007, for the acquisition and improvement of the production and post-production facility located at 807 Esplanade, New Orleans, Louisiana for aggregate principal advances of up to $3,700,000. This agreement was guaranteed by the Company's predecessor. Approximately $3,700,000 plus interest had been drawn down under the terms of this credit agreement by June 30, 2012. The Company assumed the liability in return for $1,000,000, plus a contingent sum of $750,000 (contingent on receipt of at least $5,000,000 in cash proceeds from the tax credits to be earned by SAPLA) due to an agreement with the now mortgagor Palm Finance Corp. ('Palm'). A construction loan of $1,950,000 previously guaranteed by the Company has now also been assumed by the Company, SAFELA. On August 28, 2014, the Company satisfied the obligations to Palm as discussed below.
Seven Arts Music. Inc. ('SAM') became a wholly-owned subsidiary of the Company on February 23, 2012, although transaction costs had been incurred as early as September 2011. The first of the DMX albums acquired from David Michery was released on September 11, 2012. The first of the Bones Thugs-N-Harmony albums was fully delivered to the Company as of June 30, 2013 and scheduled for release in November 2013. The agreements under which SAM acquired its music assets were effective as of September 29, 2011 (Big Jake Music or 'BJM') and December 19, 2011 (Michery Assets, 'Michery'), publicly announced and commenced business activities on those dates, though definitive agreements were not executed, nor control gained, until February 23, 2012.
On February 13, 2014, May 2, 2013 and August 31, 2012, the Company affected one-for-one hundred, one-for-fifty and one-for-seventy reverse stock splits, respectively, collectively referred to as the Stock Splits. Unless otherwise noted, all impacted amounts included in the consolidated finan cial statements and notes thereto have been retroactively adjusted for the Stock Splits. Unless otherwise noted, impacted amounts include shares of common stock authorized and outstanding, share issuances and cancellations, shares underlying preferred stock, convertible notes, warrants and stock options, shares reserved conversion prices of convertible securities, exercise prices of warrants and options, and loss per share.
On September 14, 2012, trading of the Company's common stock on NASDAQ was suspended due to the stock price not meeting or exceeding the minimum $1.00 bid price per share for a minimum of ten trading days prior to September 20, 2012, the extended deadline given to the Company to meet this performance requirement. The Company's common stock commenced trading on OTC Market Group's OTCQB tier under the symbol 'SAPX'. On February 25, 2014, the Company's common stock was transferred by the OTC Markets Group, Inc. to the OTCPink tier under the same symbol.
On February 7, 2014, Peter Hoffman resigned as CEO, with Katrina Hoffman, his wife, appointed as replacement CEO.
On August 22, 2014, the Company closed the acquisition of 100% of the capital stock of iPTerra Technologies, Inc. and 100% of the membership interests in Aeronetworks LLC from Sanwire Corporation by issuance of 30,000 shares of Preferred Stock Series D ($100 par value, $3,000,000 total price) convertible into shares of Common Stock at 100% of the volume-weighted average price of the Company's Common Stock for the ten (10) trading days prior to conversion. The closing was subject to a condition subsequent requiring the execution of a Loan Workout Agreement inter alia Palm Finance Corp ('Palm') and the Company, which was not executed until August 29, 2014. On Closing, the entire board, except Antony Hickox, resigned and Mr. Richard Bjorklund ('Chairman and CEO', replacing Katrina Hoffman) and Robert Riggs were appointed to the board. Ms. Candace Wernick resigned as CFO and was replaced by Mr. Robert Lasalle.
On October 15, 2014, the Company changed its name to 'Wireless Connect, Inc.' and redomiciled to Wyoming. The Company changed its name back to Seven Arts Entertainment, Inc. on October 15, 2015, but this was not filed with the February 15, 2018.
Page F-8
Mr. Robert Lasalle resigned as CFO on October 21, 2014, with the Company appointing Rachel Boulds as CFO on December 1, 2014. Mr. Robert Riggs resigned from the board on November 7, 2014, and was replaced by Mr. Bradley Holmes.
On October 15, 2015, Richard Bjorkland and Rachel Boulds resigned as CEO and CFO respectively, with Peter Hoffman re-appointed as CEO.
As of June 4, 2021, Peter Hoffman resigned as CEO and Jason Black was appointed as a director and CEO of the Company.
On July 21, 2021, the Company acquired a fully-owned subsidiary, Muse Media LLC ('Muse'), an Atlanta-based multimedia and entertainment company offering label services and producing compelling original content for streaming distribution. The business has an innovative approach to producing music, videos, and movies, as well as redefining distribution, promotion and access to content. Muse will operate in several capacities, including (i) a s the Atlanta satellite of the Seven Arts, (ii) as alowertierdevelopmentarmfor'indie'styleproductionconcepts,music'A&R'andtestmarketing,withfilmandmusicproductionsthatshowmost promiseadvanced for further investment under Seven Arts; and (iii) spearheading all social media initiatives, hosting music videos, film promotions, and podcasts through platforms such as YouTube, TikTok, Twitter, Instagram, Facebook and others.
OnAugust16,2021,theCompanyre-establisheditsprofilewithOTCMarketstostartreportingagaintoitsshareholders,subsequentlyachievingPinkCurrent reporting status with OTC Markets on September 3, 2021.
On September 23, 2021, the Company secured a $1.5 million credit line to be made available in tranches on request over a six month period. The funding is non- dilutive and designed to be repaid through partial revenues and royalties from upcoming projects funded with the proceeds.
On January 31, 2022, the Company announced a new film project under development, a biopic revolving around a Grammy nominated Los Angeles music icon who rose to prominence in the 1990s. In July 2022, the Company announced that it had completed principal photography and that it will also launch NFTs and an album in conjunction with the release of the documentary.
On July 20, 2022, the Company announced that it had established a new partnership with Ascended Entertainment. Operating in the Atlanta market, Ascended will oversee all post-production work for the Company's productions. In addition, the Company hired an experienced Pro Tools engineer, who will oversee all audio mixing and production needs.
On August 24, 2022, the Company announced that it had added to its board of directors Thom Hazaert, an entertainment industry icon who has participated in deals valued over US$300 million within the music and film industries, to take a more active position in the Company's growth strategy as Chief Revenue Director and Director of A&R.
On November 15, 2022, the Company announced that its Board of Directors had approved a stock repurchase plan. Under the terms of this plan, the Company may repurchase $2,000,000-worth of outstanding shares over 12 months, with all stock buybacks conducted according to market conditions and in accordance with all legal and SEC requirements.
On December 1, 2022, the Company announced that it had entered into an affiliate relationship with 4D FUN, whose volumetric modeling generates a 3D representation of a live recorded sequence, producing a fully immersive experience akin to a live performance.
Throughout the period since the formation of the Company, it has had continued operations in the areas of film and music production. Between June 11, 2010, when the Company was formed through a merger with Seven Arts Pictures PLC and August 10, 2016, the business operated in film production. Through the acquisition of different music businesses in late 2011, the Company operated its Seven Arts Music subsidiary, producing and distributing recorded music productions, an activity which continues today.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared for Seven Arts Entertainment, Inc. in accordance with accounting pri nciples generally accepted in the United States of America (US GAAP), with all numbers shown in US Dollars.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation o f the financial statements have been included. The financial statements include acquired subsidiaries, as discussed below, and include all consolidation entries required to include those subsidiaries.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the Balance Sheet and Statement of Cash Flows, all highly liquid investments with maturity of three months or less are considered to be cash equivalents. The Company had no cash equivalents for the year ending June 30, 2023 or June 30, 2022.
Page F-9
Income Taxes
Income taxes are provided in accordance with the FASB Accounting Standards (ASC 740), Accounting for Income Tax. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Any deferred tax expense (benefit) resulting from the net change during the year is shown as deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it was more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabil ities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Basic and Diluted Net Income (Loss) Per Share
Net income (loss) per unit is calculated in accordance with Codification topic 260, “Earnings per Share” for the periods presented. Basic net loss per share is computed usingtheweightedaveragenumberofcommonsharesoutstanding.Dilutedlosspersharehasnotbeenpresentedbecausethesharesofcommonstock equivalentshave not been included in the per share calculations as such inclusion would be anti-dilutive. Diluted earnings per share is based on the assumption that all dilutive stock options, warrants and convertible debt are converted or exercised applying the treasury stock method. Under this method, options, warrants and convertible debt are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase shares of common stock at the average market price during the period. Options, warrants and/or convertible debt will have a dilutive effect during periods of net profit only when the average market price of the units during the period exceeds the exercise or conversion price of the items.
Stock Based Compensation
Codification topic 718 “Stock Compensation” requires that the cost resulting from all share-based transactions be recorded in the financial statements and establishes fair value as the measurement objective for share-based payment transactions with employees and acquired goods or services from non-employees. The codification also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. The Company adopted the codification upon creation of the Company and will expense share-based costs in the period incurred. The Company has not yet adopted a stock option plan and all share-based transactions and share based compensation has been expensed in accordance with the codification guidance.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities”. Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instruments are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument”.
The Company accounts for convertible instruments when it has determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying shares of common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded inpreferredsharesofcommonstockbaseduponthedifferencesbetweenthefairvalueoftheunderlyingsharesatthecommitmentdateofthenote transactionandthe effective conversion price embedded in the note.
ASC 815-40 provides that, among other things, generally, if an event not within the entity’s control could require net cash settlement, then the contract shall be classified as an asset or a liability.
Fair Value of Financial Instruments
We adopted the guidance of ASC-820 for fair value instruments, which clarifies the definition of fair value, prescribes methods for determining fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value, as follows:
Level 1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 Inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
The carrying amounts for cash, accounts receivable, accounts payable and accrued expenses, and loans payable approximate their fair value based on the short-term maturity of these instruments. We identified assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with the accounting guidance as at June 30, 2023, as detailed in Note 11, Derivative Liabilities.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair valueoptionmaybeelectedonaninstrument-by-instrumentbasisandisirrevocable,unlessanewelectiondateoccurs.Ifthefairvalueoptioniselectedforan instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. We elected to apply the fair value option to outstanding instruments.
Page F-10
Derivative Liabilities
Derivative financial instruments consist of convertible instruments and rights to shares of the Company's common stock. The Company assessed that it had derivative liabilities as at June 30, 2023, as detailed in Note 11, Derivative Liabilities.
ASC 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirement of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be conventional, as described.
Impact of New Accounting Standards
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow.
NOTE 3. GOING CONCERN
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities shouldtheCompanybeunabletocontinueasagoingconcern.Currently,theCompanydoesnothavesignificantcashorothermaterialassets,nordoesithave operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern.
The Company has a limited operating history and had a cumulative net loss from inception to June 30, 2023 of $46,319,142. The Company has a working capital deficit of $5,863,109 as at June 30, 2023.
These financial statements for the year ending June 30, 2023 have been prepared assuming the Company will continue as a going concern, which is dependent upon the Company’s ability to generate future profits and/or obtain necessary financing to meet its obligations as they come due.
The management has committed to an aggressive growth plan for the Company. The Company’s future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives including anticipated cash needs for working capital, for a reasonable period of time. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operation, or if obtained, upon terms favorable to the Company.
NOTE 4. ACQUISITIONS AND DISPOSALS
The Company has made the following acquisitions:
Muse Media LLC
On July 21, 2021, the Company acquired Muse Media LLC ('Muse'), an Atlanta based production company, with the consideration for this acquisition being the issuance of 6,000,000 shares of Preferred Stock Series A. The purchase price was allocated as follows:
Cash on hand
Current assets
The assets and liabilities acquired totaled nil, with the balance of the purchase price of $60,000 allocated to Goodwill.
Picture Pro LLC
Allocation
$ -
-
Fixed assets -
Current liabilities -
Goodwill 60,000
Total $ 60,000
On June 16, 2022, the Company announced it had purchased a 7.5% interest in Picture Pro LLC, a Los Angeles based production company, who raise capital for film productions. There was no cash outlay associated with this transaction at this stage, as it is based on an ongoing partnership between the Company and Picture Pro.
NOTE 5. OTHER CURRENT ASSETS
The Company had the following current assets as at June 30, 2023 and June 30, 2022.
Page F-11
June 30, 2023
Lease prepaid 3,500
Totals $ 6,500 $
June 30, 2022
-
8,000
Deposit on lease
$ 3,000 $ 8,000
Effective from January 1, 2022, the Company leased an office and production facility at 3440 Oakcliff Road, Suite 104, Atlanta, GA 30340, for $3,500 per month plus utilities, necessitating the deposit shown above.
NOTE 6. FIXED ASSETS
The Company holds fixed assets with values at June 30, 2023 and June 30, 2022 as follows:
Asset
Accumulated depreciation
Total
Useful Life (years)
June 30, 2023
(420)
980
Based on the acquisition and disposal activity detailed in Note 4, the Company retained the following intangible assets as at June 30, 2023 and June 30, 2022:
$
$
(140)
1,260
June 30, 2022
Plant and equipment 5
$ 1,400 $ 1,400
During the year ended June 30, 2023, a total of $280 was charged to the Statement of Operations for depreciation.
NOTE 7. INTANGIBLE ASSETS
Asset Description
Total
The Company, through its Seven Arts Music subsidiary, made the following music releases:
- the DMX and Machine Gun Kelly single release on August 7, 2012, titled 'I Don't Dance'; - the DMX album release on September 12, 2012, titled 'Undisputed';
- the Bone Thugs-N-Harmony album release on December 13, 2013, titled 'Art of War';
- the DMX compilation album release on January 13, 2015, titled 'Redemption of the Beast'; - the soundtrack album release on October 19, 2018 for the film 'London Fields'.
$
June 30, 2023
60,000 $
June 30, 2022
60,000
Intangible assets
Various music properties acquired by the Company from Big Jake Music and David Michery, $ - $ - now owned by Seven Arts Music ('SAM'), plus any music properties released since the formation
of SAM
Goodwill
Muse Media LLC 60,000 60,000
Due to the uncertainty of collecting royalties due on the various film and music properties included in the Company's assets, including lack of information on where, if at all, any royalties have been paid, the assets have been written down on the Company's balance sheet to zero.
Goodwill is not amortized but is reviewed on an annual basis for impairment to the carrying value. As at June 30, 2022, the Company has determined that there is no impairment to the carrying value of its current goodwill balance.
NOTE 8. LOANS AND NOTES PAYABLE
The Company had loans and notes payable as at June 30, 2023 and June 30, 2022 totaling $222,509 and $218,847 respectively, as follows:
Page F-12
Description
Principal Amount
Date of Loan Maturity Note Date
June 30, 2023
June 30, 2022
Convertible loan from Capitol Capital Corp, 12 months at interest rate of 9%, convertible at $0.001
$ 51,135 8/1/2021 8/1/2022
$ - $ 55,334
Convertible loan from Capitol Capital Corp, 12 months at interest rate of 9%, convertible at $.0001
44,457
9/24/2021
9/24/2022
-
47,517
Convertible loan from Capitol Capital Corp, 12 months at interest rate of 9%, convertible at $.0001
42,075
10/25/2021
10/25/2022
48,393
44,648
Convertible loan from Capitol Capital Corp, 12 months at interest rate of 9%, convertible at $.0001
24,995
12/17/2021
12/17/2022
28,465
26,197
Convertible loan from Capitol Capital Corp, 12 months at interest rate of 9%, convertible at $.0001
45,151
6/30/2022
6/30/2023
49,215
45,151
Convertible loan from Via Capital, 12 months at interest rate of 9%, convertible at $.0001
26,000
12/15/2022
12/15/2023
27,269
Convertible loan from Via Capital, 12 months at interest rate of 9%, convertible at $.0001
Convertible loan from Chestnut Hill Capital, 12 months at interest rate of 9%, convertible at $.0001
Convertible loan from Chestnut Hill Capital, 12 months at interest rate of 9%, convertible at $.0001
Loans and Notes Amortization
Due within 12 months
Due within 24 months
Due within 36 months
Due within 48 months
Due after 48 months
Total
10,000
21,500
6/01/2023 6/01/2024
6/26/2023 6/26/2024
10.000
21,500
Amount Due
222,509
-
-
-
- 222,509
36,100
1/10/2023
1/10/2024
37,667
Total
$ 222,509 $ 218,847
Long-term total
$-$-
Short-term total
$ 222,509 $ 218,847
$
$
Notes
1. On December 27, 2022, Via Capital acquired all of the loans held by Capitol Capital Corp. in the Company, whereby debt conversions subsequent to December 27, 2022 would result in shares issuable to Via Capital.
2. On December 28, 2022 and January 10, 2023 Via Capital made direct loans to the Company of $26,000 and $36,100 respectively.
3. On February 21, 2023 and March 06, 2023 the Company issued 150,000,000 and 180,000,000 common shares respectively to Via Capi tal, completing the note issued on September 24, 2021
4. Loan provisions waive interest for the first 30 days, therefore the Company has not recorded accrued interest on loans made on June 01, 2023 and June 26, 2023, during the period ending June 30, 2023
NOTE 9. CAPITAL STOCK
As at June 30, 2023 and June 30, 2022, the Company was authorized to issue Preferred Stock and Common Stock as detailed below.
Preferred Stock
At June 30, 2023 the Company had authorized Preferred Stock in two designations totaling 10,030,000 shares:
Preferred Stock Series A The Company is authorized to issue 10,000,000 shares of Series A, with a par value of $0.01 per share. As at July 1, 2020, the Company had no shares of Series A preferred stock issued and outstanding.
Page F-13
Preferred Stock Series D
On July 21, 2021, 6,000,000 shares of Preferred Stock Series A were issued as part of the acquisition of a new subsidiary, Muse Media LLC.
At June 30, 2023 the Company had 6,000,000 shares of Preferred Stock Series A issued and outstanding.
The Company is authorized to issue 30,000 shares of Series D, with a par value of $100.00 per share. As at July 1, 2020, the Company had 30,000 shares of Series D Preferred Stock issued and outstanding.
No shares of Series D Preferred Stock have been issued or canceled since. As at June 30, 2023, the Company had a total of 6,030,000 shares of Preferred Stock issued and outstanding.
Common Stock
On February 13, 2014, May 2, 2013 and August 31, 2012, the Company affected one-for-one hundred, one-for-fifty and one-for-seventy reverse stock splits, respectively, collectively referred to as the Stock Splits. Unless otherwise noted, all impacted amounts included in the consolidated financial statements and notes thereto have been retroactively adjusted for the Stock Splits. Unless otherwise noted, impacted amounts include shares of common stock authorized and outstanding, share issuances and cancellations, shares underlying preferred stock, convertible notes, warrants and stock options, shares reserved conversion prices of convertible securities, exercise prices of warrants and options, and loss per share.
As at July 1, 2021, the Company was authorized to issue up to 4,500,000,000 shares of Common Stock with a par value of $0.0001 per share. On March 14, 2022, the Company reduced the authorized common stock share capital by 2,700,000,000 to 1,800,000,000. On February 1, 2023, the authorized share capital was increased to 3,000,000,000.
As at June 30, 2023, the Company is authorized to issue up to 3,000,000,000 shares of Common Stock with par value of $0.0001 per share.
As at July 1, 2021, the Company had 4,003,444,252 shares of Common Stock issued and outstanding.
On January 11, 2022 the Company bought back and canceled 2,500,000,000 shares of Common Stock from various shareholders.
On August 2, 2022 the Company issued 55,000,000 shares of Common Stock to a debt holder for debt conversion of $55,000, or $.001 per share.
On November 28, 2022 the Company issued 150,000,000 shares of Common Stock to a debt holder for debt conversion of $15,000, o r $.0001 per share. On February 21, 2023 the Company issued 150,000,000 shares of Common Stock to a debt holder for debt conversion of $15,000, or $.0001 per share. On March 6, 2023 the Company issued 180,000,000 shares of Common Stock to a debt holder for debt conversion of $18,000, or $.0001 per share.
As at June 30, 2023, there were 2,038,444,252 shares of Common Stock issued and outstanding.
NOTE 10. DERIVATIVE LIABILITIES
The Company applies the provisions of ASC Topic 815-40, Contracts in Entity’s Own Equity (“ASC Topic 815-40”), under which convertible instruments, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt from derivative accounting treatment. As a result, embedded conversion options in convertible debt are recorded as a liability and are revalued at fair value at each reporting date. If the fair value of the note exceeds the face value of the related debt, the excess is recorded as change in fair value in operations on the issuance date.
The Company identified embedded derivatives related to the Convertible Loan Notes issued on August 1, 2021, September 14, 2021 and September 24, 2021 totaling $95,592. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Notes and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Notes, the Company determined a fair value for the embedded derivative using the Black Scholes Model based on the following assumptions, and applied during the period ended September 30, 2021:
Dividend yield 0.00%
Volatility 122.66-196.14%
Risk-free rate 0.65-0.93%
The initial fair value of the embedded debt derivative was $3,840,375. The proceeds of the note of $95,592 were allocated as a debt discount. The amount in excess of the proceeds of the loan notes of $3,744,783 was charged as interest to the Statement of Operations for the period.
The Company identified embedded derivatives related to the Convertible Loan Notes issued on October 12, 2021, October 26, 2021, November 18, 2021 and December 17, 2021, totaling $67,070. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Notes and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Notes, the Company determined a fair value for the embedded derivative using the Black Scholes Model based on the following assumptions, and applied during the period ended December 31, 2021:
Page F-14
Dividend yield 0.00%
Volatility
165.23-349.53%
Risk-free rate 1.06-1.24%
The initial fair value of the embedded debt derivatives was $1,917,872. The proceeds of the notes of $67,070 were allocated as a debt discount. The amount in excess of the proceeds of the loan notes of $1,850,802 was charged as interest to the Statement of Operations for the period.
The Company identified embedded derivatives related to the Convertible Loan Notes issued on April 1, 2022 and June 30, 2022, totaling $45,151. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Notes and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Notes, the Company determined a fair value for the embedded derivative using the Black Scholes Model based on the following assumptions, and applied during the period ended June 30, 2022:
The initial fair value of the embedded debt derivatives was $801,175. The proceeds of the notes of $45,151 were allocated as a debt discount. The amount in excess of the proceeds of the loan notes of $756,024 was charged as interest to the Statement of Operations for the period.
The Company identified embedded derivatives related to the Convertible Loan Notes issued on or around December 15, 2022, totaling $26,000. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Notes and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Notes, the Company determined a fair value for the embedded derivative using the Black Scholes Model based on the following assumptions, and applied during the period ended December 31, 2022:
The initial fair value of the embedded debt derivatives was $363,659. The proceeds of the notes of $26,000 were allocated as a debt discount. The amount in excess of the proceeds of the loan notes of $337,659 was charged as interest to the Statement of Operations for the period.
The Company identified embedded derivatives related to the Convertible Loan Notes issued on or around January 9, 2023, totali ng $36,100. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Notes and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Notes, the Company determined a fair value for the embedded derivative using the Black Scholes Model based on the following assumptions, and applied during the period ended March 31, 2032:
The initial fair value of the embedded debt derivatives was $504,989. The proceeds of the notes of $36,100 were allocated as a debt discount. The amount in excess of the proceeds of the loan notes of $468,889 was charged as interest to the Statement of Operations for the period.
The fair value of the embedded debt derivative was reviewed at March 31, 2023, using the following inputs:
The fair value of the embedded debt derivative at March 31, 2023 was $2,488,991, a decrease in the valuation of the embedded debt derivative of $1,071,093 for the period.
Dividend yield 0.00%
Volatility 88.15-104.91%
Risk-free rate 2.42-3.15%
Dividend yield 0.00%
Volatility 162.28%
Risk-free rate 3.65%
Dividend yield 0.00%
Volatility 165.17%
Risk-free rate 3.65%
Dividend yield
0.00%
Volatility
165.66%
Risk-free rate
3.66%
The following table provides a summary of changes in fair value of the Company’s Level 3 derivative liabilities as at June 30, 2023:
Balance, beginning of period $ 2,691,436
Additions 868,648
Mark-to-market at modification date (1,071,093)
Reclassified to additional paid-in capital upon modification of term -
Balance, June 30, 2023 $ 2,488,991
Net gain due to change in fair value for the period included in statement of operations $ 1,071,093
June 30, 2023,
June 30, 2022,
6,559,422
(3,867,986)
-
2,691,436
3,867,986
$
$
$
-
Page F-15
This mark-to-market decrease of $1,071,093 for the year ending June 30, 2023 was charged to the statement of operations as a gain on change in value of derivative liabilities.
NOTE 11. INCOME TAXES
The Company uses the assets and liability method of accounting for income taxes pursuant to SFAS No. 109 “Accounting for Income Taxes”. Under the assets and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements 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 re covered or settled.
In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” Specifically, the pronouncement prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken from year ended December 31, 2015 tax return onwards. The interpretation also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. The Company adopted this interpretation effective on inception.
For the year ended June 30, 2023, the Company had available for US federal income tax purposes net operating loss carryovers of $46,290,967, all of which will expire by 2042.
The Company has provided a full valuation allowance against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the earnings history of the Company, it is more likely than not that the benefits will not be realized.
June 30, 2023
Statutory state income tax rate 0.00% Effective tax rate 0.00%
June 30, 2022
0.00%
0.00%
Statutory federal income tax rate
21.00% 21.00%
Valuation allowance
(21.00%) (21.00%)
Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax assets result principally from the following:
Deferred Tax Assets (Gross Values)
Net operating loss carry forward
Less valuation allowance Net deferred tax asset
NOTE 12. RELATED PARTY TRANSACTIONS
There were multiple related party transactions during the year ending June 30, 2023 and year ending June 30, 2022. During both years, the Company's CEO paid various expenses and the balance is noted in related party loans.
NOTE 13. COMMITMENTS AND CONTINGENCIES
June 30, June 30, 2023 2022
$ (43,830,151) $ (43,708,678)
43,830,151 43,708,678 $ - $ -
Owing to the various activities and multiple changes to the Company over the past several years, there are significant contingent assets and liabilities as at June 30, 2023 and June 30, 2022.
Contingent Assets
Numerous music releases have been made by the Company's subsidiary, Seven Arts Music ('SAM'), from which royalties due to the Company have been generated. However, these royalties have not been received by the Company and the Company's management has instigated an investigation to determine where these royalties have been directed. In consequence, the Company has not been able to recognize these royalties as revenues and the royalties, as yet unquantified, remain a contingent asset until their whereabouts can be determined. The following releases are such assets of the Company:
- the DMX and Machine Gun Kelly single release on August 7, 2012, titled 'I Don't Dance'; - the DMX album release on September 12, 2012, titled 'Undisputed';
- the Bone Thugs-N-Harmony album release on December 13, 2013, titled 'Art of War';
- the DMX compilation album release on January 13, 2015, titled 'Redemption of the Beast'; - the DMX compilation album release on January 13, 2015, titled 'Redemption of the Beast'; - the soundtrack album release on October 19, 2018 for the film 'London Fields'.
Page F-16
Legal Action
From time to time, the Company is subject to legal action that may be taken by third parties against the Company, or that may involve the Company in some way. Many such actions are insignificant and considered to be a part of the Company's daily activities; however, there are two actions that are of a significance to be disclosed:
US -v- Peter Hoffman
In February 2014, the Company's former CEO, Peter Hoffman, was indicted by Federal prosecutors on charges of mail and wire fraud for a tax scheme regarding the Louisiana Motion Picture Incentive Act. Following his conviction in April 2015, and a subsequent series of appeals, Mr. Hoffman ultimately had his sentence reduced to 20 months, which also continues to be subject to appeal. It is believed that there is no related liability to be borne by the Company in connection with this matter.
Arrowhead Capital Finance Ltd -v- the Company
In 2016, Arrowhead Capital Finance Ltd ('Arrowhead') sued the Company in the US District Court of New York (the 'Court') for loans due in 2009 from Seven Arts Pictures Ltd, the Company's predecessor. On January 3, 2020, the Court found the Company liable and awarded Arrowhead a judgement of $2,496,160, plus interest at a rate of 9% per annum on the outstanding principal balance, until paid and accruing since June 5, 2018. The Company recognized a liability of $2,496,160 on its balance sheet as of June 5, 2018, with interest applied on the principal at 9% since that date, and recognized as a cost in the Company's Statement of Operations.
George Sharp -v- the Company
In July of 2021, following a series of online slanders made against the issuer, George Sharp, an OTC CEO, described in social media as a "failed stock promoter" and a "litigious penny stock gadfly", with an extensive history of filing civil claims against public companies, initiated a lawsuit against the issuer in San Diego Superior Court. The matter remains pending and the issuer will continue to vigorously defend against Mr. Sharp's actions.
NOTE 14. SUBSEQUENT EVENTS
On July 22, 2023, the Company entered into a joint venture agreement with THC Music & Films, an entity controlled by the Company's director, Thom Hazaert, to develop various media assets.
Page F-17
Great to know. Will be watching.
Thanks!
ATLANTA, GA / ACCESSWIRE / August 1, 2023 / Seven Arts Entertainment Inc. (OTC PINK:SAPX), the "Company", a film and music production company, is pleased to provide the following shareholder update.
Our previous fiscal year has endured a very turbulent time in the entertainment and media content industries, primarily due to the Covid -19 pandemic, but the overall outlook for the Company remains strong.
The Company has continued to develop its Dolby Atmos facility in Atlanta at an incremental pace. Due to ongoing microchip shortages, launch of the facility has been longer than expected, but the Company continues to procure vital equipment as it becomes available. Seven Arts remains on track to have the only Dolby Atmos studio dedicated to film production in the Atlanta market.
The Company's various film assets remain under development as well. In conjunction with the 2-to-3-year averages that are generally required to bring films to market, the industry has recently seen several industry strikes, some of which are ongoing. These activities impact film and television industry operations from Los Angeles to Atlanta. Seven Arts has determined that it would not be in the long-term best interest of the Company or its shareholders to break ranks and appear to be not in solidarity with these initiatives. The Company believes its ability to remain viable must adhere to however long these negotiations take to be resolved.
Fortunately, the Company had the foresight to anticipate the aforementioned obstacles and to additionally revitalize its focus on its music and multi-media content investments through the appointment of A&R expert, Thom Hazaert, as a director of the Company.
Mr. Hazaert was tasked early on to utilize his music industry expertise to identify viable investments for the Company to develop under its Seven Arts Music subsidiary. After considerable due diligence, the Company has identified several investments that it believes can generate considerate revenue to the Company.
In the coming days and weeks, the Company expects to make several new announcements. One of which is a podcast acquisition deal with a strong following on Spotify, the other being an album launch for a multi-million song selling recording act that will be releasing their first new album in nearly a decade.
These investments will be primarily spearheaded by Mr. Hazaert, who will be taking a more active role in the direction of the Company, going forward.
Stated Seven Arts CEO, Jason Black: "After an extended period of silence due to a series of unforeseen obstacles, I look forward to pivoting toward allowing Mr. Hazaert to drive much our operations and direction into our new fiscal year. I strongly believe our recent shift in Company direction will produce a strong phase of prosperity for Seven Arts and its shareholders."
Forward-Looking Statements:
This press release contains forward-looking statements. The words 'believe,' 'may,' 'estimate,' 'continue,' 'anticipate,' 'intend,' 'should,' 'plan,' 'could,' 'target,' 'potential,' 'is likely,' 'will,' 'expect' and similar expressions, as they relate to us, are intended to identify forward-looking statements. The Company has based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Some or all of the results anticipated by these forward-looking statements may not be achieved. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
Contact:
info@sevenartsentertainment.com
Is this a PR? Please direct us to the link.
News out!!
THE SUSTAINABLE GREEN TEAM, LTD.
A Delaware corporation
24200 County RD 561 Astatula, FL 34705
(407) 886-8733 www.thesustainablegreenteam.com
info@nationalarborcare.com
SIC Code: 0783
“We previously were a shell company, therefore the exemption offered pursuant to Rule 144 is not available. Anyone who purchased securities directly or indirectly from us or any of our affiliates in a transaction or chain of transactions not involving a public offering cannot sell such securities in an open market transaction.”
Quarterly Report
For the period ending June 30, 2023 (the “Reporting Period”)
The number of shares outstanding of Common Stock is 84,360,893 as of June 30, 2023;
The number of shares outstanding of Common Stock is 75,129,436 as of March 31, 2023 (end of previous reporting period);
The number of shares outstanding of Common Stock was 74,631,743 as of December 31, 2022 (end of the last fiscal year end).
Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933 and Rule 12b-2 of the Exchange Act of 1934):
Yes: No X
Indicate by check mark whether the company’s shell status has changed since the previous reporting period: Yes: No: X
Indicate by check mark whether a Change in Control4 of the company has occurred over this reporting period: 4 “Change in Control” shall mean any events resulting in:
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 1 of 96
(i)Any“person”(assuchtermisusedinSections13(d)and14(d)oftheExchangeAct)becomingthe“beneficialowner”(asdefinedinRule13d-3ofthe Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities;
(ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (iii)AchangeinthecompositionoftheBoardoccurringwithinatwo(2)-yearperiod,asaresultofwhichfewerthanamajorityofthedirectorsaredirectors immediately
prior to such change; or
(iv) The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the survivingentityoritsparent)atleastfiftypercent(50%)ofthetotalvotingpowerrepresentedbythevotingsecuritiesoftheCompanyor suchsurvivingentityoritsparent outstanding immediately after such merger or consolidation.
Yes: No: X
Part A General Company Information
Item 1 The exact name of the issuer and its predecessor (if any).
The immediate predecessor of The Sustainable Green Team, Ltd., a Delaware corporation (the “Company”, “we”, “us”, “our”, the “issuer” or “SGTM”) was National Storm Recovery, Inc. (“NSRI”), a Wyoming corporation, which held all of the membership interests in National Storm Recovery, LLC (“NSR LLC”), a Florida limited liability company. The management team of NSRI determined that it was in the best interest of the Company and its shareholders to change domiciles for both NSRI and NSR LLC to the State of Delaware for the purpose of reorganizing the Company and its operations into a holding company structure, pursuant to Delaware General Corporation Law (“DGCL”) §251(g). In December 2019, NSRI and NSR LLC were re-domiciled to the State of Delaware. After the domicile changes, NSRI incorporated SGTM as a wholly owned subsidiary and NSR LLC issued membership interests to SGTM. SGTM then incorporated Sierra Gold Merger Corp. (“SGMC”) as its wholly owned subsidiary. With each of the new corporations formed, NSRI merged down into SGMC, with SGMC surviving as a wholly owned subsidiary of SGTM. The assets and liabilities of NSRI were succeeded to by SGMC. As part of the merger agreement, the issued and outstanding shares of NSRI were exchangeable into shares of SGTM on a one for one basis. Similarly, the equity securities held by NSRI in SGTM and NSR LLC were canceled under the terms of themergeragreementleavingSGTMasthesoleshareholderandmemberofSGMCandNSRLLC,respectively. The Company obtained Financial Industry Regulatory Authority (“FINRA”) approval and published a press release announcing the forgoing and allowing the Company to trade under the name “The Sustainable Green Team, Ltd.” and new trading symbol, SGTM.
Currently, the Company is incorporated and in good standing in the State of Delaware under the name The Sustainable Green Team, Ltd., the Company’s original predecessor was incorporated in the State of Nevada on January 22, 1997, under the name Alpha Diamond Corporation. The Company changed its name to African Resources on June 28, 1998, to Viking Exploration, Inc. on April 9, 1999, and then to Sierra Gold Corporation on July 12, 2006. Then on February 15, 2011, Sierra Gold Corporation changed its domicile to the State of Wyoming by filing Articles of Continuance with the Wyoming Secretary of State. On July 22, 2019, the Company changed its name to National Storm Recovery, Inc. by filing a Certificate of Amendment with the Wyoming Secretary of State’s office. The Company then notified the Financial Industry Regulatory Authority (“FINRA”) of its name change, as well as the resolution it had passed to affect a 1:10,000 reverse stock split and, as part of its name change, effected a voluntary change in its trading symbol, all of which were approved for announcement by FINRA on or about August 22, 2019. Finally, the Company changed domiciles to the State of Delaware by filing a Certificate of Conversion and Certificate of Incorporation with the Delaware Division of Corporations, Secretary of State’s office on December 30, 2019 as part of its plan to reorganize into a holding company pursuant to DGCL§251(g). The Company has now changed its name to The Sustainable Green Team, Ltd. and trading symbol to SGTM after obtaining FINRA approval on July 21, 2020.
Item 2 The address of the issuer’s principal executive offices and address(es) of the issuer’s principal place of business:
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Our principal executive offices are located at 24200 CR-561, Astatula, Florida 34705, and our telephone number is (407) 886-8733. Our website address is www.sustainablegreenteam.com. The information contained on our website is not incorporated by reference into this registration statement, and you should not consider any information contained on, or that can be accessed through, our website as part of this registration statement or in deciding whether to purchase our common shares.
Check box if principal executive office and principal place of business are the same address: ?
Item 3 The jurisdiction(s) and date of the issuer’s incorporation or organization.
Currently, the Company is incorporated and in good standing in the State of Delaware under the name The Sustainable Green Team, Ltd., the Company’s original predecessor was incorporated in the State of Nevada on January 22, 1997, under the name Alpha Diamond Corporation. The Company changed its name to African Resources on June 28, 1998, to Viking Exploration, Inc. on April 9, 1999, and then to Sierra Gold Corporation on July 12, 2006. Then on February 15, 2011, Sierra Gold Corporation changed its domicile to the State of Wyoming by filing Articles of Continuance with the Wyoming Secretary of State. On July 22, 2019, the Company changed its name to National Storm Recovery, Inc. by filing a Certificate of Amendment with the Wyoming Secretary of State’s office. The Company then notified the Financial Industry Regulatory Authority (“FINRA”) of its name change, as well as the resolution it had passed to affect a 1:10,000 reverse stock split and, as part of its name change, effected a voluntary change in its trading symbol, all of which were approved for announcement by FINRA on or about August 22, 2019. Finally, the Company changed domiciles to the State of Delaware by filing a Certificate of Conversion and Certificate of Incorporation with the Delaware Division of Corporations, Secretary of State’s office on December 30, 2019, as part of its plan to reorganize into a holding company pursuant to DGCL§251(g). The Company has now changed its name to The Sustainable Green Team, Ltd. and trading symbol to SGTM after obtaining FINRA approval on July 21, 2020.
Part B Share Structure
Item 4 The exact title and class of securities outstanding.
The Company trades under the ticker symbol SGTM.
As of June 30, 2023, the Company had 84,360,893 shares of its Common Stock issued and outstanding under CUSIP 86934B.
As of June 30, 2023, the Company had 90 shares of its Preferred Series A Stock issued and outstanding.
Item 5
A. B.
Par or stated value and description of the security.
The Company’s Common and Preferred Series A Stock are par valued at $0.0001 per share. Common or Preferred Stock.
1. For common equity, describe any dividend, voting and preemption rights.
Voting
The holders of our common stock are entitled to one vote for each share held on all matters to be voted on by the Company’s stockholders. There shall be no cumulative voting. The holders of our
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Item 6
•
•
•
• •
•
The number of shares or total amount of the securities outstanding for each class of securities authorized.
As of June 30, 2023, the Company had 245,000,000 shares of its Common Stock and 100 shares of its Preferred Series A Class Stock authorized in its treasury.
As of June 30, 2023, the Company had 84,360,893 shares of its Common Stock and 90 shares of its Preferred Series A Class Stock issued and outstanding.
As of June 30, 2023, the Company had 8,462,881 shares of its Common Stock and 0 of its Preferred Series A Class Stock free trading.
As of June 30, 2023, the Company had 0 beneficial shareholders and 192 of shareholders of record.
As of December 31, 2022, the Company had 245,000,000 shares of its Common Stock and 100 shares of its Preferred Series A Class Stock authorized in its treasury.
As of December 31, 2022, the Company had 74,631,743 shares of its Common Stock and 90 shares of its
2.
3. 4.
common stock have the exclusive right to vote for election and removal of directors and for all other purposes.
Dividends
The holders of shares of our common stock are entitled to dividends when and as declared by the Board from funds legally available therefor if, as and when determined by the Board of Directors of the Company in their sole discretion, subject to provisions of law, and any provision of the Company’s Certificate of Incorporation, as amended from time to time. There are no preemptive, conversion or redemption privileges, nor sinking fund provisions with respect to the common stock.
Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of or provision for all of our debts and other liabilities.
For preferred stock, describe the dividend, voting, conversion and liquidation rights as well as redemption or sinking fund provisions.
Each one share of Series A Preferred Stock has voting rights equal to the quotient of the sum of all outstanding shares of common stock together with any and all other securities of the Company that provide for voting on an “as converted” basis, divided by 0.99.
Any other material rights of common or preferred stockholders.
None
Describe any provision in the issuer’s charter or by-laws that would delay, defer or prevent a Change in Control of the issuer.
None
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•
• •
•
•
•
Item 7
Preferred Series A Class Stock issued and outstanding.
As of December 31, 2022, the Company had 8,412,881 shares of its Common Stock and 0 of it Preferred Series A Class Stock free trading.
As of December 31, 2022, the Company had 0 beneficial shareholders and 185 of shareholders of record.
As of January 1, 2022, the Company had 245,000,000 shares of its Common Stock and 100 shares of its Preferred Series A Class Stock authorized in its treasury.
As of January 1, 2022, the Company had 90,460,425 shares of its Common Stock and 90 shares of its Preferred Series A Class Stock issued and outstanding.
As of January 1, 2022, the Company had 626,836 shares of its Common Stock and 0 of its Preferred Series A Class Stock free trading.
As of January 1, 2022, the Company had 0 beneficial shareholders and 169 of shareholders of record.
The name and address of the transfer agent*.
The transfer agent and registrar for our Common Stock is: Pacific Stock Transfer Company. The transfer agent and registrar’s address is 6725 Via Austi Parkway, Suite 300, Las Vegas, Nevada 89119, and its telephone number is (800) 401-1957.
Part C Business Information
Item 8 The nature of the issuer’s business.
In describing the issuer’s business, please provide the following information:
A. Business Development. Describe the development of the issuer and material events during the last three years so that a potential investor can clearly understand the history and development of the business. If the issuer has not been in business for three years, provide this information for any predecessor company. This business development description must also include:
1. the form of organization of the issuer (e.g., corporation, partnership, limited liability company, etc.)
Corporation
2. the year that the issuer (or any predecessor) was organized;
1997
3. the issuer’s fiscal year end date;
December 31
4. whether the issuer (or any predecessor) has been in bankruptcy, receivership or any similar proceeding;
None
5. any material reclassification, merger, consolidation, or purchase or sale of a
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significant amount of assets;
Effective January 31, 2020, the Company entered into a Business Combination Agreement (the “Mulch Acquisition”) pursuant to which Mulch Manufacturing, Inc. (“MM”) became our wholly- owned subsidiary. Under the Mulch Acquisition, all issued and outstanding common stock in MM were converted into an aggregate of 40,000,000 shares of the Company’s common stock.
The Company closed on the acquisition of 100% of the membership interests in Day Dreamer Productions LLC (“DDP”) on December 30, 2021. DDP is in the business of producing informational and promotional videography.
On August 9, 2022, the Company entered into a restricted sublicense agreement (collectively with the VRM Sublicense Amendment defined below, the “VRM Sublicense”) with a soil technology company, VRM Global Holdings Pty Ltd (“VRM Global”), and its wholly owned subsidiary VRM International PTY LTD (“VRM International,” together with VRM Global, collectively referred to herein together as the “Licensor”). The VRM Sublicense was amended on October 12, 2022 (the “VRM Sublicense Amendment”), to expand collaboration between the Company and Licensor and add the Licensor’s wholly-owned subsidiary VRM Biologik Inc. (the “VRM Biologik”), among other things.
Pursuant to the VRM Sublicense, the Licensor granted the Company a restricted sub-license, pursuant to which the Licensor will allow the Company to use certain rights and entitlements and provide the Company with certain catalyst ingredients which will allow the Company to manufacture Humisoil® and XLR8® Bio (the “VRM Products”). These products are made using wood materials provided by the Company and the Licensor’s technology and catalyst ingredients to be acquired by the Company from the Licensor or produced by the Company pursuant to the VRM Sublicense. In addition, the VRM Sublicense grants the Company the non-exclusive right to distribute the VRM Products throughout the U.S., the exclusive right to market and distribute these products in packaging of less than one cubic yard in addition to the right to exclusively manufacture the Licensor’s catalyst ingredients in Florida, Washington State and the Caribbean (the “Exclusive Territory”).
The Company agreed to sell to Licensor the VRM Products manufactured by the Company in amounts determined in the sole discretion of the Company at an agreed-on price. In addition, Licensor has agreed to assign to the Company rights held by the Licensor to repurchase the VRM Products manufactured by others within the Exclusive Territory and an option to acquire such rights outside such territory.
In addition, pursuant to the VRM Sublicense Amendment, the Company acquired from Licensor 10% of VRM Biologik, certain catalyst ingredients for future delivery to be used in the Company’s production of Humisoil®, XLR8® Bio and other products, co-location of Licensor’s production facilities with the Company’s facilities in Florida and the state of Washington and development of an agreed plan to complete licensed manufacture of soil amendment catalysts in other strategic locations across the U.S. The catalyst ingredients to be acquired by the Company from the Licensor are expected to be sufficient to produce a minimum of 4,000,000 cubic yards of Humisoil® and its companion products that, along with other inputs, has the potential to generate retail revenues in excess of $987,000,000. The total inventory value as provided for the VRM Sublicense Amendment is equivalent to the Company’s potential revenue from the sale of these products.
The Term of the VRM Sublicense is for a period of ten years from October 12, 2022 with the option to renew it for a five-year period. The VRM Sublicense may be terminated by written agreement of the parties, or immediately by the Licensor if the Company amends or alters any of the inputs, outputs, products, marks, materials, media, recipes, or any of the processes as described in any of the manuals provided by Licensor to the Company except as permitted by the VRM
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Sublicense or appointment of a liquidator, administrator, receiver, receiver and manager, mortgagee in possession or other external controller appointed by virtue of the laws of insolvency or appointed by a creditor, by VRM Global or by the holder of security over the assets of VRM Global or an assignment of VRM Global’s rights pursuant to the VRM Sublicense without the approval of VRM Global. VRM Global may terminate the VRM Sublicense if at any time the Company is in breach of any of the terms or conditions of the VRM Sublicense and it fails to remedy such breach within 30 days of notice from Licensor. In consideration of the grant of the VRM Sublicense, the Company initially issued to the Licensor, 500,000 shares of the Company’s common stock upon execution of the VRM Sublicense and an additional 6,000,000 shares upon execution of the VRM Sublicense Amendment. Additionally, the Company agreed to pay the Licensor an aggregate of $1,000,000 in cash in two installments, with the first installment of $500,000 payable within 10 days of the Company’s completing an initial public offering of its common stock (the “IPO”) and the second payment due on the one-year anniversary of the date of the IPO. In addition, pursuant to the VRM Sublicense Amendment, the Company agreed to pay VRM Global an aggregate of $7,200,000 payable in tranches of $3,600,000 by December 31, 2022 and two payments of $1,800,000 on each of May 31, 2023 and October 31, 2023. If the Company does not complete the IPO by February 4, 2023 or make the $500,000 payment within 10 days of such date, VRM Global may terminate the VRM Sublicense and, the Company will be obligated to pay the Licensor its then market rates for all inputs utilized by the Company in the production of Humisoil®, XLR8® Bio and other products produced using these inputs during the term of the VRM Sublicense. Due to the delay in the Company’s fund raising in 2022 and VRM Global’s delay in completing the shipment of the catalyst ingredient that was expected in January 2023, the Company and VRM Global have orally agreed to discuss a payment plan in 2023.
The Company, Day Dreamer Productions, LLC (“DDP”) and ACCEL Media International LLC, FMW Media Works LLC (collectively, “ACCEL”) entered into a Corporate Communications Services Agreement dated as of October 4, 2022 (the “ACCEL Agreement”). Pursuant to the terms of the ACCEL Agreement, ACCEL agreed to provide the Company with a variety of television, production, promotional media, media analysis, and media procurement to assist the Company in generating positive media awareness about its business. The term of the ACCEL Agreement is for a period of five years and any breach of the agreement may be remedied by injunctive or other equitable relief and specific performance. Neither party has a right to terminate the agreement prior to its expiration. The promotional media services provided by ACCEL are expected to have a market value of no less than $30,700,000. In addition, the ACCEL Agreement requires ACCEL to exclusively rely on and use DDP to offer, create and distribute any custom 30 minute or longer program for all ACCEL in-house video production and marketing content that is tendered to ACCEL customers.
In consideration for the services to be provided by ACCEL, the Company issued to ACCEL 3,500,000 shares of unregistered Common Stock, an option to acquire 5,000,000 shares of unregistered Common Stock at an exercise price of $2.00 per share (the “ACCEL Stock Option”) and a warrant to purchase up to 2,000,000 shares of Common Stock at an exercise price of $1.00 per share (the “ACCEL Warrant”). The ACCEL Option expires three years after the date of issuance and the ACCEL Warrant expires 90 days after the date of issuance. In the event the ACCEL Warrant is exercised in whole or in part, then upon each exercise thereof, if any, the Company agreed to issue to ACCEL a three year option to acquire a number of shares of Common Stock equal to the number of shares of Common Stock acquired by ACCEL upon exercise of the ACCEL Warrant, at an option exercise price of $2.00 per share. The exercise price of the ACCEL Stock Options and the ACCEL Warrants is subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events.
ACCEL agreed that it will not, directly or indirectly, for a period of one year after October 4, 2022, lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to
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purchase, or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of), directly or indirectly, any of the shares of Common Stock issued to ACCEL pursuant to the ACCEL Agreement, the ACCEL Stock Option or the ACCEL Warrant.
The ACCEL Agreement, ACCEL Stock Option and ACCEL Warrant also contains additional customary covenants, representations and warranties.
6. any default of the terms of any note, loan, lease, or other indebtedness or financing arrangement requiring the issuer to make payments;
None
7. any change of control;
None
8. any increase of 10% or more of the same class of outstanding equity securities;
None
9. any past, pending or anticipated stock split, stock dividend, recapitalization, merger, acquisition, spin-off, or reorganization;
None
10. any delisting of the issuer’s securities by any securities exchange; and
None
11. any current, past, pending or threatened legal proceedings or administrative actions either by or against the issuer that could have a material effect on the issuer’s business, financial condition, or operations and any current, past or pending trading suspensions by a securities regulator. State the names of the principal parties, the nature and current status of the matters, and the amounts involved.
From time to time and in the course of business, we may become involved in various legal proceedings seeking monetary damages and other relief. The amount of the ultimate liability, if any, from such claims cannot be determined. As of the date hereof, there are no legal claims currently pending or, to our knowledge, threatened against us or any of our officers or directors in their capacity as such or against any of our properties that, in the opinion of our management, would be likely to have a material adverse effect on our financial position, results of operations or cash flows.
B. Business of Issuer. Describe the issuer’s business so a potential investor can clearly understand it. To the extent material to an understanding of the issuer, please also include the following:
1. the issuer’s primary and secondary SIC Codes; 0783
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2. if the issuer has never conducted operations, is in the development stage, or is currently conducting operations;
(“
The Sustainable Green Team, Ltd. is a provider of environmentally conscious solutions in the arbor care, disposal, and recycling industries. The Company is a collector of tree debris
feedstock”), throughout the southeast region of the United States. The Company beneficially-
reuses feedstock to manufacture wood-based mulch and lumber products that are sold nationwide. The Company has a division that manufactures and sells proprietary mulch colorants and coloring equipment. The Company has installed the appropriate equipment to commence production of its new soil products in February 2023 and expects to start selling these products by the end of 2023.
Historically, the harvest and processing of wood has resulted in timber waste and feedstock being sent to landfills and disposal sites, essentially collecting and disposing of useful products. The
Sustainable Green Team’
s mission is to address this traditional
“
collect-and-dispose” wasteful
model, partly by partnering with a large waste management company, thereby turning feedstock
that would otherwise be thrown away into reusable products such as mulch and soil.
The Sustainable Green Team operates as a holding company with two operating subsidiaries:
National Storm Recovery, LLC., a Delaware LLC, operating as
provides arbor care, tree trimming, and storm debris clean-up and disposal services, primarily in
the southeastern United States with nationwide capabilities; and
Mulch Manufacturing, Inc. (
3. whether the issuer has at any time been a “shell company”;6 Yes
“
MMI”), an Ohio corporation, manufactures mulch, lumber and soil
“
products in the United States Midwest and southeast regions, and the Ohio Valley. MMI has
nationwide distribution channels.
6 For the purpose of this section a “shell company” means an issuer, other than a business combination related shell company, as defined by Securities Act Rule 405, or an asset-backed issuer, as defined by Item 1101(b) of Regulation AB, that has:
(1) No or nominal operations; and (2) Either:
(A) No or nominal assets;
(B) Assets consisting solely of cash and cash equivalents; or
(C) Assets consisting of any amount of cash and cash equivalents and nominal other assets.
Instruction to paragraph B.3 of Item 8:
The issuer must attest that it is not currently a shell company. If the issuer discloses that it was formerly a shell company, it must also include the following disclosure on the front page of its disclosure statement in boldface, 12 point type:
“We previously were a shell company, therefore the exemption offered pursuant to Rule 144 is not available. Anyone who purchased securities directly or indirectly from us or any of our affiliates in a transaction or chain of transactions not involving a public offering cannot sell such securities in an open market transaction.”
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Central Florida Arborcare”,
4. the names and contact information of any parent, subsidiary, or affiliate of the issuer, and its business purpose, its method of operation, its ownership, and whether it is included in the financial statements attached to this disclosure statement;
• John Spencer, MM manager can be contacted by telephone, (407) 886-7833;
• John Schultz, NSR manager can be contacted by telephone, (614) 552-3111 Ext. 111;
and,
• Victor Spangler, DDP manager can be contacted by telephone, (904) 434-6761.
5. the effect of existing or probable governmental regulations on the business;
We are subject to governmental regulation at the federal, state, and local levels in many areas of our business, such as employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, transportation laws, environmental laws, false claims or whistleblower statutes, disadvantaged business enterprise statutes, tax codes, antitrust and competition laws, intellectual property laws, governmentally funded entitlement programs and cost and accounting principles, the Foreign Corrupt Practices Act, other anti-corruption laws, lobbying laws, motor carrier safety laws and data privacy and security laws. We may be subject to review, audit or inquiry by applicable regulators from time to time.
While we attempt to comply with all applicable laws and regulations, there can be no assurance that we are always in full compliance with all applicable laws and regulations or interpretations of these laws and regulations or that we will be able to comply with any future laws, regulations or interpretations of these laws and regulations. If we fail to comply with applicable laws and regulations, including those referred to above, we may be subject to investigations, criminal sanctions, or civil remedies, including fines, penalties, damages, reimbursement, injunctions, seizures or disgorgements of the ability to operate our motor vehicles. The cost of compliance or the consequences of non-compliance, could have a material adverse effect on our business and results of operations. In addition, government agencies may make changes in the regulatory frameworks within which we operate that may require either the corporation as a whole or individual businesses to incur substantial increases in costs to comply with such laws and regulations.
6. an estimate of the amount spent during each of the last two fiscal years on research and development activities, and, if applicable, the extent to which the cost of such activities were borne directly by customers;
None
7. costs and effects of compliance with environmental laws (federal, state and local); and
The Company is performing leasehold improvements in the Beaver Washington facility, whereby, the Company has secured permits in alignment with federal, state and local requirements.
8. the number of total employees and number of full-time employees.
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Item 9
In 2022, during the busiest times of the year for our business, we employed over 200 workers, none of whom are presently represented by a labor union. As of June 2023, we have employed approximately 221 full time employees, 18 of them being seasonal.
For issuers engaged in mining, oil and gas production and real estate activities, substantial additional disclosure of the issuer’s business is required. Contact OTC Markets Group for more information.
The nature of products or services offered.
In responding to this item, please describe the following so that a potential investor can clearly understand the products and services of the issuer:
A. principal products or services, and their markets;
The Company operates primarily through its wholly owned operating subsidiaries. The principal products
of each of the Company’s operating subsidiaries is described below.
National Storm Recovery, LLC
National Storm Recovery, LLC (DBA Central Florida ArborCare) was initially founded to provide tree maintenance, disaster recovery, debris hauling, removal, and disposal services. Each of these services is provided to residential, commercial and governmental customers and was structured to drive revenue for the company. Examples include the company’s multi-year contract with the Town of Oakland, Florida, (an area known for its large old oak trees), for emergency debris hauling and tree removal; and its multi-year contract with the Orange County Florida School District, (covering 267 properties, that includes schools, administrative sites, and maintenance facilities) for tree removal, trimming and maintenance services. In each case, these contracts are renewable following their initial multi-year terms with aggregate terms of five years.
During its first year in operation, National Storm Recovery, LLC continued to build positive momentum under its CEO, Anthony J. Raynor’s leadership, when it entered into an agreement for the acquisition of certain complementary assets owned by Central Florida Arbor Care. Building this earlier success, in 2019, the company began to expand its business plan to include the complementary vertical market of mulch manufacturing. In order to expedite this plan of building a completely vertically integrated company and having identified a substantial number of advantages with being publicly traded, the company decided to bring its business to the public markets; and in the 2019, executed a share purchase and equity exchange agreement as part of the series of transactions related to the “reverse takeover.”
One of the Company’s over-arching strengths, in addition to management’s scores of years of industry experience, is management’s ability to build and manage teams. The importance of its relationships with employees, independent contractors, customers, vendors and anyone else with whom they interact, cannot be overstated. Although management believes its industry expertise, competence and reliability are each important factors, ultimately its commitment to its employees, independent contractors and the belief that they are all important members of its “Sustainable Green Team” have been significant contributing factors to being provided opportunities in every market entered. Each of the opportunities received and the ways in which they have been managed, have also contributed to the Company’s positive momentum, helping shape management’s ultimate vision for the Company as a fully integrated mulch manufacturing and sales company, with operations that make sound business sense and create a positive environmental impact.
Again, National Storm Recovery, LLC was established as a company to provide tree maintenance, disaster recovery, debris hauling, removal, and disposal services – services that provide it with access to a large amount of wood or tree debris. Thought of from a different perspective, the Company has access to a large
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amount of “feedstock” that is required to manufacture wood-based mulch products. But, unlike traditional wood-based mulch manufacturers who purchase their feedstock, the Company is paid to cut it, paid to haul it and paid to dispose of it. Its cost, in that limited equation, was its own disposal cost. However, by processing the tree material into mulch and selling it, the Company:
i. eliminates its disposal costs,
ii. receives the feedstock it would need as a mulch manufacturer, for free,
iii. does not have to police its suppliers to ensure responsible tree harvesting, because the trees and material the company handles are either from trees and branches downed in storms or cut as part of the care and maintenance of the trees it is paid to care for, and
iv. has a “cost structure” for its feedstock that is even better that a competitor that secures feedstock using unscrupulous or irresponsible harvesting methods and/or sources.
So, by grinding, screening and packaging the tree material that it is already receiving (and is paid to receive), the Company is able to leverage its existing activities, create additional value, and position itself to substantially increase its overall revenue and earnings prospects; and decrease the burden that this material would otherwise place on the local landfills or collection sites.
Sierra Gold Merger Corp.
There are no operations under The Sustainable Green Team, Ltd.’s subsidiary Sierra Gold Merger Corp. Notwithstanding the fact that the applicable statutes of limitations have expired for any foreseeable claims that could have been made based on the assets and liabilities last disclosed many years ago by Sierra Gold Corporation, Sierra Gold Merger Corp. was formed as part of the Company’s corporate organizational shift into a parent-subsidiary structure with discrete operations contained in separate subsidiaries. This parent subsidiary structure was affected pursuant to DGCL §251(g) and has the additional benefit of allowing any legacy issues (such as contingent liabilities, unrecorded liabilities and any other issues involving the prior business or activities of Sierra Gold Corporation) to remain isolated in the wholly owned subsidiary, Sierra Gold Merger Corp., so that they do not affect assets or the operations of any other entity.
Mulch Manufacturing, Inc.
Mulch Manufacturing, Inc. (“MM”) is a large producers of packaged mulch products in the United States. It harvests the raw materials, processes the mulch at several locations, packages it and ships it when required in its own fleet of trucks or by contract carriers. MM’s products are distributed through the largest of mass merchandisers as well as small independent retailers. MM provides customer service and sales support to the retailer as well as the end user.
Day Dreamer Productions, LLC
Day Dreamer Productions, LLC provides videography services for clients producing documentary and promotional services. Much of its work has been for the Company and its subsidiaries.
B. distribution methods of the products or services;
We have also diversified our distribution channels for our products. We have grown our distribution, which now include many retail stores, including Lowe’s Home Improvement, Menard’s, 7-Eleven, Circle-K, ACE Hardware and other retail chains.
C. status of any publicly announced new product or service;
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The Company has installed the appropriate equipment to commence production of its new HumiSoil® in
February 2023 and expects to start selling these products by the end of 2023.
D. competitive business, the issuer’s competitive position in the industry, and methods of competition;
Our wholesale customers work with us due to our ability to provide a broad array of products for landscaping needs. Our products include over two dozen varieties of mulches in different textures and colors, and various soils for different uses such as potting, garden and blends that enhances the organic matter at the applied location. We operate with a high level of expertise and a focus on customer retention through responsiveness and reliability. We have grown our workforce and now have over 200 employees in season.
We view ourselves as a “one-stop-shop” solutions provider for superior quality mulch products. This ability to provide more than one style of mulch product is in direct response to the landscape industry tastes and preferences to have various wood fiber sources, such as pine or cypress, color, texture, and an environmentally friendly product line. We devote substantial resources to research and development, having developed proprietary products in the mulch, colorant and colorant machine manufacturing segments of our business.
We believe our vertically integrated business model sets us apart from our competitors because we provide the services and facilities necessary to collect our own feedstock. We have expanded our operations and we now collect feedstock in three regions. We have established relationships with four big box retail customers — Lowe’s Home Improvement, Menard’s, 7-Eleven, and Circle-K — and more than 400 other customers.
We have consistently expanded our product lines in innovative ways. We hold over 20 trademarks and a patent on our innovative Nature’s ReflectionsTM Softscape®.
We have also focused on cost containment and entered into direct rail contracts with CSX and Norfolk Southern to transport our manufactured products.
E. sources and availability of raw materials and the names of principal suppliers;
We competitively source our feedstock effectively in a fragmented tree care industry, primarily from small businesses, because we provide arbor care and landscape contractor businesses opportunities to unload and profit from feedstock that they would consider to be waste. We believe we are the largest customer for many arborists across the southeastern region of the United States. Sourcing feedstock competitively and broadly allows us to keep the cost of our products highly competitive.
Our strategic relationship with Waste Management, Inc. pursuant to the Contractor Agreement provides us with cost savings that has saved us years of time it would have taken for acquiring permits and developing the valuable relationships they have developed. We utilize their site for collection of tree debris as well as ability to set up a production facility with coloring and bagging of mulch. In addition, in February 2023, we began production of HumiSoil® on a portion of the land we occupy pursuant to the Contractor Agreement. In addition to the material we process for Waste Management pursuant to this agreement, we are paid to collect the tree debris from other sources and use it as inventory for production of mulch products sold in bulk and bagged, unlike some competitors that have to purchase their feedstock.
F. dependence on one or a few major customers;
Our customers include governmental, residential, and commercial customers. We have a diversified customer base consisting of more than 450 customers as of December 31, 2022. Our top 10 customers accounted for approximately 38% of our product sales for the twelve months ended December 31, 2022, with the largest five customers at 17%, 7%, 3%, 2% and 2%, respectively, of our product sales for the twelve months ended December 31, 2022, and the other five customers each 2% or less of our product sales for the
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twelve months ended December 31, 2022. Therefore, our sales are not concentrated in any single or a few customers. Our typical customer is a large, national retail chain that sells landscaping products.
G. patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts, including their duration; and
We, primarily through our subsidiaries, hold or have rights to use various service marks, trademarks and trade names we use in the operation of our businesses that we deem particularly important to each of our businesses. As of June 30, 2023, we had over twenty trademarks for bag labels.
Mulch Manufacturing, Inc. was assigned a patent on our latest product line, Softscape®, which is lighter in weight and has a more uniform appearance than other mulches. The patent was issued by the U.S. Patent and Trademark Office on March 8, 2011 and expires on March 8, 2031, the 20 year initial standard patent protection period, at which time we may seek to renew it. The Softscape® patent covers the manufacturing process and the attributes making the mulch lighter in weight and more uniform in appearance other mulches. Although Softscape® is patent protected, we do not seek patent protection for the formulas of the colorants we manufacture.
H. the need for any government approval of principal products or services and the status of any requested government approvals.
We are subject to various federal, state and local laws and regulations, compliance with which increases our operating costs, limits or restricts the services and products provided by our operating segments or the methods by which our operating segments offer, sell and fulfill those services or products or conduct their respective businesses, or subjects us to the possibility of regulatory actions or proceedings. Noncompliance with these laws and regulations can subject us to fines or various forms of civil or criminal prosecution, any of which could have a material adverse effect on our reputation, business, financial position, results of operations and cash flows.
These federal, state and local laws and regulations include laws relating to wage and hour, immigration, permitting and licensing, workers’ safety, tax, healthcare reforms, collective bargaining and other labor matters, environmental, federal motor carrier safety, employee benefits and privacy and customer data security. We must also meet certain requirements of federal and state transportation agencies, including requirements of the U.S. Department of Transportation and Federal Motor Carrier Safety Administration, with respect to certain types of vehicles in our fleets. We are also regulated by federal, state and local laws, ordinances and regulations which are enforced by Departments of Agriculture, the Environmental Protection Agency and similar government entities.
Employee and Immigration Matters
We are subject to various federal, state and local laws and regulations governing our relationship with and other matters pertaining to our employees, including regulations relating to wage and hour, health insurance, working conditions, safety, citizenship or work authorization and related requirements, insurance and workers’ compensation, anti-discrimination, collective bargaining and other labor matters.
We are also subject to the regulations of U.S. Immigration and Customs Enforcement (“ICE”), and we are audited from time to time by ICE for compliance with work authorization requirements. In addition, some states in which we operate have adopted immigration employment protection laws. Even if we operate in strict compliance with ICE and state requirements, some of our employees may not meet federal work eligibility or residency requirements, despite our efforts and without our knowledge, which could lead to a disruption in our work force.
Environmental Matters
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Our businesses and sites on which we operate are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters, including the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Emergency Planning and Community Right-to-Know Act, the Oil Pollution Act and the Clean Water Act, each as amended. Among other things, these laws and regulations regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal, handling and management of hazardous substances and wastes, and protect the health and safety of our employees. These laws also impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by us or prior owners or operators, at sites we currently own, lease or operate, customer sites or third-party sites to which we sent wastes. During fiscal year 2022, we did not incur any material capital expenditures for liabilities arising from the enforcement of any applicable environmental regulations.
State and Municipal Regulation; Permitting and Licensing
Each state in which we now operate or may operate in the future has laws and regulations governing (1) water and air pollution, and the generation, storage, treatment, handling, processing, transportation, incineration and disposal of storm debris; (2) in most cases, the siting, design, operation, maintenance, closure and post-closure maintenance of certain types of storm debris collection sites; and (3) in some cases, vehicle emissions limits or fuel types, which impact our collection operations. Such standards typically are as stringent as and may be more stringent and broader in scope than, federal regulations. Most of the federal statutes noted above authorize states to enact and enforce laws with standards that are more protective of the environment than the federal analog. These laws and regulations may impact our operations directly and indirectly from the obligations and restrictions they impose on our business partners, including Waste Management, Inc., which owns two of the sites we use.
Many municipalities in which we currently operate or may operate in the future also have ordinances, laws and regulations affecting our operations. These include zoning and health measures that limit our activities to specified sites or conduct, flow control provisions that direct the delivery of wastes to specific facilities or to facilities in specific areas, or other restrictions on the movement of wastes into a municipality.
Some states have enacted laws that allow agencies with jurisdiction over waste management facilities to deny or revoke permits based on the applicant’s or permit holder’s compliance status. Some states also consider the compliance history of the corporate parent, subsidiaries and affiliates of the applicant or permit holder.
Certain permits and approvals issued under state or local law may limit the types of waste that may be accepted at a solid waste management facility or the quantity of waste that may be accepted at a solid waste management facility during a specific time period. In addition, certain permits and approvals, as well as certain state and local regulations, may limit a solid waste management facility to accepting waste that originates from specified geographic areas or seek to restrict the importation of out-of-state waste or otherwise discriminate against out-of-state waste. Generally, restrictions on importing out-of-state waste have not withstood judicial challenge. However, from time-to-time federal legislation is proposed which would allow individual states to prohibit the disposal of out-of-state waste or to limit the amount of out-of- state waste that could be imported for disposal and would require states, under certain circumstances, to reduce the amounts of waste exported to other states. Although such legislation has not been passed by Congress, if similar legislation is enacted, states in which we operate solid waste management facilities could limit or prohibit the importation of out-of-state waste. Such actions could materially and adversely affect the business, financial condition and results of operations of any of our landfills within those states that receive a significant portion of waste originating from out-of-state.
Certain states and localities may restrict the export of waste from their jurisdiction or require that a specified amount of waste be disposed of at facilities within their jurisdiction. Some proposed federal legislation would
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Item 10
allow states and localities to impose flow restrictions. Those restrictions could reduce the volume of waste going to solid waste management facilities in certain areas, which may materially adversely affect our ability to operate our facilities. Those restrictions also may result in higher disposal costs for our collection operations. Flow control restrictions could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
The nature and extent of the issuer’s facilities.
For purposes of this section, unless otherwise noted, references to the “Company” refer to The Sustainable Green Team, LTD and its wholly owned subsidiaries on a consolidated basis.
Principal Executive Offices
Currently the Company’s principal executive offices are located at 24-200 County Road 561, Astatula, FL 34705. The Company owns these premises, which are approximately 5,000 square feet. The premises are described more fully below (under “Astatula, Florida Site”). and are described below.
Astatula, Florida Site
The Astatula, Florida site is a 100-acre parcel of property located in Lake County, Astatula, Florida at 24200 CR 561. The Company initially entered into a purchase option on it that was contingent on receiving zoning approval for use as a storm debris and collection site. After a series of successful hearings without opposition, the City Council granted final zoning approval in January 2019. Most efforts of this nature are extremely time consuming because of significant opposition from the community. In this case however, there was a complete lack of opposition and the Company received quick approval from the City Council. Management of the Company saw this approval both as: i) an endorsement of its vision for the environmental solutions the Company offered to the community and ii) evidence of City Council’s enthusiastic acceptance of the Company’s plan of operations. After receiving approval from the City Council, the Company exercised its purchase option in December 2020, and now owns the property. With its prime location and 5,000 square foot building containing warehouse and office space, the 100-acre site is ideal for the Company’s purposes.
The Company has been using the site as its corporate headquarters since February 2021, after preparing the site to serve as its flagship tree debris collection site, mulch manufacturing facility, soil composting and production bagging site. In addition, the Company is using the property (which can accommodate millions of cubic yards of organic storm debris) for collection and storage of storm debris during hurricanes and other storms and for tree waste generated from the Company’s tree services operations. The site provides an opportunity for the Company to increase its revenues and earnings from disposal fees the Company collects from new Lake County customers and other tree service companies who pay for disposal. It also is another source of feedstock for the Company’s mulch operations.
Two Landfills of a National Waste Disposal Company
Prior to the addition to its 100 acre Astatula site, as management began expanding the Company’s business model, the Company entered into a collaborative agreement with a large, national waste disposal company that allows the Company to use two of its sites located at 242 West Keene Road, Apopka FL and 5400 Rex Drive, Winter Garden, Florida for collection and storage of tree debris collected in connection with its disaster recovery services as well as collection sites for its tree maintenance, hauling and disposal. In addition, the Company has been given the right to install and operate its mulch manufacturing and bagging equipment at these sites under very favorable lease terms. Logistically, the Company benefits from these locations which are optimally positioned for use in connection with its tree services operations. Further, the agreement allows the Company to execute on its mulch manufacturing, bagging and sales plans under a significantly expedited timeline with pre-approved zoning and at significantly lower costs. Both parties have expressed satisfaction with these arrangements. Management believes that this is in part due to the fact that, although both receive entirely different benefits, the benefits to each are quite important. For example, the Company is given the right to use tree debris that is generated from other parties as feedstock in its mulch manufacturing operations. The waste disposal company also benefits significantly. Although it is a common misconception that because wood is biodegradable it is also compostable. But in
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reality, wood and particularly large logs take many years to decompose. As such, by repurposing and removing the materials from these sites, the Company is solving a significant problem for its partner. Yard waste, and in particular, the large volume of tree waste brought to landfills around the country each year is a real problem with which those managing them must contend and the Company’s use of this material presents an ideal solution. In many ways, this is an ideal solution because not only does it decrease the burden on the landfills where they operate, it provides a sustainable alternative to other feedstock sourcing methods.
Beaver, Washington Sawmill
We expect to begin producing pine bark and marketable lumber at the Beaver mill in 2024.
Jasper, FL Sawmill
We expect to begin producing pine bark and marketable lumber at the Jasper mill in Q3 2023.
Mulch Manufacturing, Inc. Facilities
The below Apopka, FL, and Reynoldsburg, OH facilities are leased under customary industry terms and conditions. The rest of the facilities are owned. Of these owned facilities, all but Astatula are mortgaged.
Callahan, Florida
? 6 Bagging lines
? 100 Acres of storage
? Cypress, Pine, Colored & A-Grade, Softscape
Homerville, Georgia
? Cypress Sawmill & mulch production
? 3 Bagging lines
? 40 Acres of storage
? Cypress A & B grade, Chips, Softscape
Jacksonville, Florida (Bagging Facility)
? Production & Bagging
? Mulch production, bagging & prepack
? Wood recycling collection site
? Retail sales
Apopka, Florida
? Full line of bagged and bulk mulch products
? Wood recycling collection site
? Retail sales
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Jacksonville, Florida (Colorant Plant)
? Production of mulch colorants
? Sale of mulch coloring machinery ? R & D division for new products
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Astatula, Florida (same as Company’s Corporate Headquarters)
? Full line of bagged and bulk mulch products
? 100 Acres of storage
? Wood recycling collection site
? Retail sales
? Central Florida Arborcare Reynoldsburg, Ohio
? Sales and administrative offices
Equipment:
The Company uses a variety of heavy equipment from Boom (Cranes), Pickup and Bucket Trucks to Grinders, Front-end and Skid Steer Loaders and Bagging and Coloring Machines in its operations. The majority of the equipment used by the Company (and its operating subsidiaries) is owned outright by the Company, but the Company does lease or pledge as collateral certain equipment. The leases and secured promissory notes for such equipment contain terms that are customary in the industry(ies) that the Company and its subsidiaries operate in for such equipment.
Part D Management Structure and Financial Information
Item 11 Company Insiders (Officers, Directors, and Control Persons).
Please give a clear understanding of the identity of all the persons or entities that are involved in managing, controlling or advising the operations, business development and disclosure of the issuer, as well as the identity of any significant shareholders.
A. Officers and Directors. In responding to this item, please provide the following information for each of the issuer’s executive officers, directors, general partners, as of the date of this information statement:
All listed officers and director’s business address is 24200 County RD 561, Astatula, FL 34705.
Anthony J Raynor
Mr. Raynor is the Founder of the Company and has been the President and CEO of the Company since April 2019. Since September 2017, he organized and founded National Storm Recovery, LLC. d/b/a Central Florida Arborcare, a wholly-owned subsidiary of the Company. Prior to September 2017, Mr. Raynor founded multiple successful tree and green waste recycling/processing facilities and services. From 2013 through 2017, Mr. Raynor served as partner of RSR. Mr. Raynor has over 25 years of entrepreneurship in the tree, green waste, storm recovery, and mulch industry. He has personally been responsible for 25 national storm recovery projects and managed over 100 million cubic yards of debris. Following its first year of operations of National Storm Recovery, LLC. d/b/a Central Florida Arborcare, Mr. Raynor
continued to build the company’
s team of employees to manage the growing demand for the company
tree maintenance services. Since then, the company has seen major growth through strategic acquisitions such as the purchase of Mulch Manufacturing, Inc. in 2020. Mr. Raynor is known for dedication not only to the company but the employees and sustainable products. He is always looking for new ways to handle
debris with the focus on sustainable solutions.
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’s
Mr. Raynor is compensated a year salary of two hundred and eleven thousand three hundred and fifty one
dollars. Furthermore, Mr. Raynor beneficially owns
and 90 shares of Preferred Series A Stock.
38,424,500 shares of the Company’s Common Stock
Joshua R. Wethington
Mr. Wethington was appointed as our Chief Financial Officer in January 2023. He has over twenty-five years of financial, operational, and executive management experience. Mr. Wethington, served as Vice President of Finance, CFO and Treasurer of Hair Club for Men, a hair restoration provider from December 2019 through July, 2022. Mr. Wethington previously served as Vice President and Chief Financial Officer for the North America division of Elizabeth Arden/Revlon Inc., an international skin care and fragrance company between March 2018 and September 2019 and in various financial roles of increasing responsibility with that company between March 2000 and September 2019. Mr. Wethington received a Master of Business Administration from the University of Miami and a Bachelor of Science Degree in
Finance from Florida State University.
Mr. Wethington is compensated a year salary of two hundred and- fifty thousand dollars. Furthermore, Mr.
Wethington beneficially owns
Brian Meier
63,181 shares of the Company’s Common Stock.
Mr. Meier became the Company’
s Chief Operating Officer in December 2021 and has served Mulch
Manufacturing as the manager of its sawmill in Homerville, GA since November 2009. During this time, he managed sales, production and raw material procurement. He was instrumental in designing and implementing upgrades to the facility, resulting in increased sales and profit margins. Mr. Meier also managed the Kempfer Sawmill in St Cloud, FL, from 1993 to 1999 where he was responsible for its sales, procurement, accounting, human resources and safety programs. He was essential in the design and construction of a new sawmill for Kempfer in 2005. From 1989 to 1993, Mr. Meier handled purchasing at Universal Forest Products in Moultrie, GA. From 1987 to 1989, he represented Georgia Pacific in the sale
of its products out of their Claxton, GA sawmill. Mr. Meier’
s diverse background in all facets of the wood
products industry enables him to integrate operations, sales, and finance. He has demonstrated his ability to
enhance a company’
s performance by motivating personnel while providing effective solutions resulting in
maximized profits. Mr. Meier graduated from Georgia Southern University with a BA in finance in 1987. He has been a functioning member of the Southern Cypress Manufacturers Association since 2000 and
served as its President in 2016. He has also served as an Elder in his local church for over 10 years.
Mr. Meier is compensated a year salary of one hundred and- fifty thousand dollars. Furthermore, Mr. Meier
beneficially owns 500
Bradford B. Baker
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shares of the Company’s Common Stock.
Mr. Baker was appointed to our board of directors in December 2022. From 1997 to 2000 and from 2008 to present, he has been a member of the board of directors of Odyssey Marine Exploration Inc., a deep- ocean mineral resource exploration company where he has served as the Chairman of the Board since January 2012 and Chairman of the Audit Committee from 2009 to the present. He also serves on its Governance Committee and Compensation Committee. Since 1996, Mr. Baker has been the Chief Executive Officer of Myakka Crossings, Inc., a developer of affordable single-family homes in Kansas City, Kansas. From 2018 to 2019, Mr. Baker was the Deputy Secretary of the Kansas Department of Commerce where he was responsible for economic development in opportunity zones in the state of Kansas. From 2004 to 2012, Mr. Baker served as Chief Executive Officer of Nexus Biometrics, Inc., a fingerprint biometric company he founded in 2004. He is also President of Bramar Developers, Inc., a real estate development company that he founded in 1998. He was appointed a White House Fellow by President Ronald Reagan in 1988, was past Secretary of the Resolution Trust Corporation Oversight Board in 1989 and served as Executive
Director of the Florida Housing Finance Corporation from 1999 to 2000. He previously held senior executive positions with Comcast Cable from 1994 to 1997 and Sterling Financial, Inc. from 2000 to 2002, and served as a Director and as Chairman of the Audit Committee of Dobi Medical International, Inc. from 2003 through 2007 when it was a U.S. publicly reporting company. He holds a B.S. degree in Business
Administration from Nova University.
The Board recognizes that Mr. Baker, as past chief executive officer of a public company, has extensive experience as a senior executive with emphasis in management, operations and finance. His financial
expertise and extensive not-for-profit board experience qualifies him as our
expert.” Prior to 2003, Mr. Baker served three public companies as a director and as chairman of both Audit and Compensation Committees. He received a presidential appointment, and through his work at the White House, he developed an extensive understanding of government processes and international relations. Mr.
“
audit committee financial
s executive leadership roles, board experience and government background provide the Board with
insight into best practices of public companies and well-qualifies him as a member of the board of directors
and chairman of our audit committee.
Baker’
Mr. Baker is compensated a cash fee of sixty thousand dollars. Furthermore, Mr. Baker beneficially owns
28,669 shares of the Company’s Common Stock.
Colleen McAleer
Ms. McAleer was appointed to our board of directors in December 2022. She has over 30 years of broad executive experience, ranging from military service to commercial real estate, non-profits and governance. Currently Ms. McAleer leads the Executive Director of the Clallam County Economic Development Council and serves as a Commissioner at the Port of Port Angeles. Colleen brings a unique range of skills, knowledge and talent to a diverse set of responsibilities. Colleen is an acknowledged expert at team leadership and brings a wealth of knowledge and determination to every endeavor that she undertakes. Since May 2019, Ms. McAleer has served as the Executive Director of the Clallam County Economic Development Council which is responsible for defining strategies and programs to improve the economic conditions of Clallam County, Washington. From August 2015 to April 2019, she ran the Washington Business Alliance in Seattle where she led the organization and was involved in securing funding to support vocational training needs for kids in the classroom. Since 2014, Ms. McAleer has been a commissioner at the Port of Port Angeles. From 2003 until 2013, Ms. McAleer owned and operated a commercial real estate brokerage firm in Clallam County Washington. From 1989 to 1998, she served in the U.S. Army as a helicopter and fixed wing pilot and as a military intelligence officer and is a decorated combat veteran of Desert Storm. Ms. McAleer holds a B. S. degree in Computer Science from Florida Institute of Technology, has received training at the U.S. Army Aviation Flight School and is a graduate of the U.S. Military
Intelligence Advance Course.
The Board recognizes that Ms. McAleer has extensive experience as a senior executive with emphasis in
management, operations, and finance. Ms. McAleer’
s executive leadership roles, experience as
Commissioner at the Port of Port Angeles, business experience and government background provide the Board with insight into operational best practices and well-qualifies her as a member of the board of
directors and our audit committee.
Ms. McAleer is compensated a cash fee of sixty thousand dollars. Furthermore, Ms. McAleer beneficially
shares of the Company’s Common Stock.
B. Other Control Persons. In responding to this item, please provide the following information for all persons beneficially owning more than five percent (5%) of any class of the issuer’s equity securities as of the date of this information statement. Do not include Officers or Directors previously listed.
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owns 28,669
Anthony J Raynor
Mr. Raynor is located in Clermont, FL and beneficially owns 38,524,500 shares of the Company’s Common Stock and 90 shares of the Company’s Preferred A Stock.
VRM Global Holdings PTY, Ltd. (“VRM”)
VRM is located in Australia and beneficially owns 6,500,000 shares of the Company’s Common Stock with Kenneth Michael Bellamy having the sole dispositive power over the shares.
John Spencer
Mr. Spencer is located in Columbus, OH and beneficially owns 13,500,000 shares of the Company’s Common Stock.
Leslie Schultz
Mr. Schultz is located in Rancho Sante Fr, CA and beneficially owns 5,000,000 shares of the Company’s Common Stock.
B. Legal/Disciplinary History. Please identify whether any of the foregoing persons have, in the last five years, been the subject of:
1. A conviction in a criminal proceeding or named as a defendant in a pending criminal proceeding (excluding traffic violations and other minor offenses);
None
2. The entry of an order, judgment, or decree, not subsequently reversed, suspended or vacated, by a court of competent jurisdiction that permanently or temporarily enjoined, barred, suspended or otherwise limited such person’s involvement in any type of business, securities, commodities, or banking activities;
None
3. A finding or judgment by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission, the Commodity Futures Trading Commission, or a state securities regulator of a violation of federal or state securities or commodities law, which finding or judgment has not been reversed, suspended, or vacated; or
None
4. The entry of an order by a self-regulatory organization that permanently or temporarily barred, suspended or otherwise limited such person’s involvement in any type of business or securities activities.
None
C. Disclosure of Family Relationships. Describe any family relationships7 among and between the issuer’s directors, officers, persons nominated or chosen by the issuer to become directors or
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officers, or beneficial owners of more than five percent (5%) of the any class of the issuer’s equity securities.
N/A
D. Disclosure of Related Party Transactions. Describe any transaction during the issuer’s last two full fiscal years and the current fiscal year or any currently proposed transaction, involving the issuer, in which (i) the amount involved exceeds the lesser of $120,000 or one percent of the average of the issuer’s total assets at year-end for its last three fiscal years and (ii) any related person had or will have a direct or indirect material interest. Disclose the following information regarding the transaction:
1. The name of the related person and the basis on which the person is related to the issuer;
John Spencer, former owner of Mulch Manufacturing “MM” from the Mulch Acquisition, currently the manager of the acquired entity now wholly owned subsidiary.
Victor Spangler, owner of DDP acquired on December 30, 2021, currently the manager of the acquired entity now wholly owned subsidiary.
Kenneth Michael Bellamy, owner of VRM Global from the VRM Sublicence Amendment.
2. The related person’s interest in the transaction;
John Spencer beneficially owns 6,000,000 shares of the Company’s Common Stock and is manages MM.
Victor Spangler beneficially owns 200,000 shares of the Company’s Common Stock and manages DDP.
Kenneth Michael Bellamy has the sole dispositive power over the 13,500,000 share of Common Stock VRM Global beneficially owns. Mr. Bellamy assists and supplies the Company on manufacturing Humisoil®.
3. The approximate dollar value involved in the transaction (in the case of indebtedness, disclose the largest aggregate amount of principal outstanding during the time period for which disclosure is required, the amount thereof outstanding as of the latest practicable date, the amount of principal and interest paid during the time period for which disclosure is required, and the rate or amount of interest payable on the indebtedness);
Mulch Acquisition, see NOTE 4 – ACQUISITIONS under “Mulch Manufacturing, Inc. Acquisition” in the Company’s Consolidated Financial Statements and Notes section.
DDP, see Note 4 – ACQUISITION under “Day Dreamer Productions LLC Acquisition” in the Company’s Consolidated Financial Statements and Notes section.
VRM Sublicense Amendment, see Intangible Assets in the Company’s Consolidated Financial Statements and Notes section.
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4. The approximate dollar value of the related person’s interest in the transaction; and
Mulch Acquisition, see NOTE 4 – ACQUISITIONS under “Mulch Manufacturing, Inc. Acquisition” in the Company’s Consolidated Financial Statements and Notes section.
DDP, see Note 4 – ACQUISITION under “Day Dreamer Productions LLC Acquisition” in the Company’s Consolidated Financial Statements and Notes section.
VRM Sublicense Amendment, see Intangible Assets in the Company’s Consolidated Financial Statements and Notes section.
5. Any other information regarding the transaction or the related person in the context of the transaction that is material to investors in light of the circumstances of the particular transaction.
N/A
Instruction to paragraph D of Item 11:
1. For the purposes of paragraph D of this Item 11, the term “related person” means any director, executive officer, nominee for director, or beneficial owner of more than five percent (5%) of any class of the issuer’s equity securities, immediate family members8 of any such person, and any person (other than a tenant or employee) sharing the household of any such person.
N/A
2. For the purposes of paragraph D of this Item 11, a “transaction” includes, but is not limited to, any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships.
N/A
7 The term “family relationship” means any relationship by blood, marriage or adoption, not more remote than first cousin.
8 “Immediate family members” means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in- law, daughter-in-law, brother-in-law, or sister-in-law.
3. The “amount involved in the transaction” shall be computed by determining the dollar value of the amount involved in the transaction in question, which shall include:
a. In the case of any lease or other transaction providing for periodic payments or installments, the aggregate amount of all periodic payments or installments due on or after the beginning of the issuer’s last fiscal year, including any required or optional payments due during or at the conclusion of the lease or other transaction providing for periodic payments or installments; and
See NOTE 3 – FINANCIAL STATEMENTS, “Sale/Leaseback” in the Company’s Consolidated Financial Statements and Notes section.
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OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 23 of 96
b. In the case of indebtedness, the largest aggregate amount of all indebtedness outstanding at any time since the beginning of the issuer’s last fiscal year and all amounts of interest payable on it during the last fiscal year.
See NOTE 3 – FINANCIAL STATEMENTS, “Notes Payable” in the Company’s Consolidated Financial Statements and Notes section.
4. In the case of a transaction involving indebtedness:
a. The following items of indebtedness may be excluded from the calculation of the amount of indebtedness and need not be disclosed: amounts due from the related person for purchases of goods and services subject to usual trade terms, for ordinary business travel and expense payments and for other transactions in the ordinary course of business; and
N/A
b. Disclosure need not be provided of any indebtedness transaction for beneficial owners of more than five percent (5%) of any class of the issuer’s equity securities or such person’s family members.
N/A
5. Disclosure of an employment relationship or transaction involving an executive officer and any related compensation solely resulting from that employment relationship or transaction need not be provided. Disclosure of compensation to a director also need not be provided.
N/A
6. A person who has a position or relationship with a firm, corporation, or other entity that engages in a transaction with the issuer shall not be deemed to have an indirect material interest for purposes of paragraph D of this Item 11 where:
a. The interest arises only:
i. From such person’s position as a director of another corporation or
organization that is a party to the transaction; or
N/A
ii. Fromthedirectorindirectownershipbysuchpersonandallotherrelatedpersons, in the aggregate, of less than a ten percent (10%) equity interest in another entity (other than a partnership) which is a party to the transaction; or
N/A
iii. From both such position and ownership; or
N/A
OTC Markets Group Inc.
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Page 24 of 96
8.
E.
Item 12
7.
b. The interest arises only from such person’s position as a limited partner in a partnership in which the person and all other related persons have an interest of less than ten percent (10%), and the person is not a general partner of and does not hold another position in the partnership.
N/A
Disclosure need not be provided pursuant to paragraph D of this Item 11 if:
a. The transaction is one where the rates or charges involved in the transaction are determined by competitive bids, or the transaction involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority;
N/A
b. The transaction involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services; or
N/A
c. The interest of the related person arises solely from the ownership of a class of equity securities of the issuer and all holders of that class of equity securities of the issuer received the same benefit on a pro rata basis.
N/A
Include information for any material underwriting discounts and commissions upon the sale of securities by the issuer where any of the specified persons was or is to be a principal underwriter or is a controlling person or member of a firm that was or is to be a principal underwriter.
N/A
Disclosure of Conflicts of Interest. Describe any conflicts of interest. Describe the circumstances, parties involved and mitigating factors for any executive officer or director with competing professional or personal interests.
N/A
Financial information for the issuer’s most recent fiscal period.
Instruction to Item 12: The issuer shall post the financial statements required by this Item 12 through www.OTCIQ.com under the appropriate report name for the applicable period end. (If the financial statements relate to a fiscal year end, publish it as an “Annual Report,” or if the financial statements relate to a quarter end, publish it as a “Quarterly Report” or “Interim Financial Report”) The issuer must state in its disclosure statement that such financial statements are incorporated by reference. The issuer must also (i) provide a
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 25 of 96
list in the disclosure statement describing the financial statements that are incorporated by reference, (ii) clearly explain where the incorporated documents can be found, and (iii) provide a clear cross-reference to the specific location where the information requested by this Item 12 can be found in the incorporated documents.
The issuer shall provide the following financial statements for the most recent fiscal period (whether fiscal quarter or fiscal year).
1) balance sheet;
See the Company’s Consolidated Financial Statements and Notes section, attached to the bottom of this disclosure.
2) statement of income;
See the Company’s Consolidated Financial Statements and Notes section, attached to the bottom of this disclosure.
3) statement of cash flows;
See the Company’s Consolidated Financial Statements and Notes section, attached to the bottom of this disclosure.
4) statement of changes in stockholders’ equity (for Annual Reports only); N/A
5) financial notes; and,
See the Company’s Consolidated Financial Statements and Notes section, attached to the bottom of this disclosure.
6) audit letter, if period ending is fiscal year N/A
The financial statements requested pursuant to this item shall be prepared in accordance with generally accepted accounting principles (U.S. GAAP or IFRS, as applicable) by persons with sufficient financial skills.
Information contained in annual financial statements will not be considered current more than 90 days after the end of the issuer’s fiscal year immediately following the fiscal year for which such statements are provided, or with respect to quarterly financial statements, more than 45 days after the end of the quarter immediately following the quarter for which such statements are provided.
Additionally, if the issuer is an insurance company, the issuer shall also post its most recent
“Insurance Company Annual Regulatory Statement” required to be filed with the
Commissioner of Insurance (or other officer or agency performing a similar function) of its domiciliary state, per section 12(g)(2)(G)(i) of the Securities Exchange Act of 1934. This
statement shall be posted through www.OTCIQ.com.
Item 13 Similar financial information for such part of the two preceding fiscal years as the issuer or its predecessor has been in existence.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 26 of 96
Please provide the financial statements described in Item 12 above for the issuer’s two preceding fiscal years.
Instruction to Item 13: The issuer shall either (i) attach the financial statements required by this Item 13 to its initial disclosure or (ii) post such financial statements through www.OTCIQ.com as a separate report under the name of “Annual Report” for the applicable fiscal year end. The issuer must state in its disclosure statement that such financial statements are incorporated by reference. The issuer must also (x) provide a list in the disclosure statement describing the financial statements that are incorporated by reference, (y) clearly explain where the incorporated documents can be found, and (z) provide a clear cross-reference to the specific location where the information requested by this Item 13 can be found in the incorporated documents.
Our fiscal year ended December 31, 2022 can be found on the Company’s OTC Markets’ website under the Disclosure tab, uploaded April 17, 2023 under, “Annual Report - Fiscal Year 2022”.
Our fiscal year ended January 1, 2022 can be found on the Company’s OTC Markets’ website under the Disclosure tab, uploaded March 31, 2022 under, “Annual Report - Disclosure Statement” and “Annual Report - Financial Statement”.
Item 14 The name, address, telephone number, and email address of each of the following outside providers that advise the issuer on matters relating to operations, business development and disclosure:
1. Investment Banker None
2. Promoter None
3. Securities Counsel
The Company’s securities counsel is: Jessica Haggard, Esq. The securities counsel’s address is 625 N. Flagler Drive, Set 600, West Palm Beach, FL 33401, its telephone number is (561) 514-0936 and email is jhaggard@anthonypllc.com.
4. Accountant or Auditor
The Company’s auditor is: Benjamin Borgers, CPA from BF Borgers. CPA, PC. The auditor’s address is 5400 West Cedar Avenue, Lakewood, CO 80226, its phone number is (303) 514-0936 and email is ben@bfbcpa.com.
5. Public Relations Consultant None
6. Investor Relations Consultant None
7. Any other advisor(s) that assisted, advised, prepared or provided information with respect to
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 27 of 96
this disclosure statement - the information shall include the name, address, telephone number and email address of each advisor.
None
Item 15 Management’s Discussion and Analysis or Plan of Operation.
Instructions to Item 15
Issuers that have not had revenues from operations in each of the last two fiscal years, or the last fiscal year and any interim period in the current fiscal year for which financial statements are furnished in the disclosure statement, shall provide the information in paragraphs A and C of this item. All other issuers shall provide the information in paragraphs B and C of this item.
The discussion and analysis shall focus specifically on material events and uncertainties known to management that would cause reported financial information not to be necessarily indicative of future operating results or of future financial condition.
Issuers are not required to supply forward-looking information. This is distinguished from presently known data that will impact upon future operating results, such as known future increases in costs of labor or materials. This latter data may be required to be disclosed.
A. Plan of Operation.
1. Describe the issuer’s plan of operation for the next twelve months. This
description should include such matters as:
i. a discussion of how long the issuer can satisfy its cash requirements and whether it will have to raise additional funds in the next twelve months;
See NOTE 3- FINANCIAL STATEMENTS, “Cash” in the Company’s Consolidated Financial Statements and Notes section.
ii. a summary of any product research and development that the issuer will perform for the term of the plan;
N/A
iii. any expected purchase or sale of plant and significant equipment; and
See NOTE 3- FINANCIAL STATEMENTS, “Sale/Leaseback” in the Company’s Consolidated Financial Statements and Notes section.
iv. any expected significant changes in the number of employees.
See Item 8 The nature of the issue’s business, B. Business of Issuer, number 8 in the
Company’s Disclosure section.
B. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 28 of 96
1. Full fiscal years. Discuss the issuer's financial condition, changes in financial condition and results of operations for each of the last two fiscal years. This discussion should address the past and future financial condition and results of operation of the issuer, with particular emphasis on the prospects for the future. The discussion should also address those key variable and other qualitative and quantitative factors that are necessary to an understanding and evaluation of the issuer. If material, the issuer should disclose the following:
i. Any known trends, events or uncertainties that have or are reasonably likely to have a material impact on the issuer's short-term or long-term liquidity;
See NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, “Use of Estimates” in the Company’s Consolidated Financial Statements and Notes section.
ii. Internal and external sources of liquidity;
See NOTE 3- FINANCIAL STATEMENTS, “Cash Flow and Equity Summary” in
the Company’s Consolidated Financial Statements and Notes section.
iii. Any material commitments for capital expenditures and the expected sources of funds for such expenditures;
See NOTE 3- FINANCIAL STATEMENTS, “Property and Equipment” in the Company’s Consolidated Financial Statements and Notes section.
iv. Any known trends, events or uncertainties that have had or that are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations;
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
v. Any significant elements of income or loss that do not arise from the issuer's continuing operations;
See attached Financial Statements and Notes in this period ended June 30 , 2023 report.
vi. The causes for any material changes from period to period in one or more line items of the issuer's financial statements; and
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
vii. Any seasonal aspects that had a material effect on the financial condition or results of operation.
See NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS, “Seasonality and Weather Conditions” in the Company’s Consolidated Financial Statements and Notes section.
2. Interim Periods. Provide a comparable discussion that will enable the reader to assess material changes in financial condition and results of operations since the end of the
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 29 of 96
last fiscal year and for the comparable interim period in the preceding year.
See NOTE 1 – ORGNAIZATION AND BUSINESS OPERATIONS, “Corporate History” in the Company’s Consolidated Financial Statements and Notes section.
C. Off-Balance Sheet Arrangements.
1. In a separately-captioned section, discuss the issuer’s off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the issuer's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. The disclosure shall include the items specified in paragraphs C(1)(i), (ii), (iii) and (iv) of this Item 15 to the extent necessary to an understanding of such arrangements and effect and shall also include such other information that the issuer believes is necessary for such an understanding.
i. The nature and business purpose to the issuer of such off-balance sheet arrangements;
See attached Consolidated Financial Statements and Notes.
ii. The importance to the issuer of such off-balance sheet arrangements in respect of its liquidity, capital resources, market risk support, credit risk
support or other benefits;
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
iii. The amounts of revenues, expenses and cash flows of the issuer arising from such arrangements; the nature and amounts of any interests retained, securities issued and other indebtedness incurred by the issuer in connection with such arrangements; and the nature and amounts of any other obligations or liabilities (including contingent obligations or liabilities) of the issuer arising from such arrangements that are or are reasonably likely to become material and the triggering events or circumstances that could cause them to arise; and
See NOTE 3- FINANCIAL STATEMENTS, in the Company’s Consolidated Financial Statements and Notes section.
iv. Any known event, demand, commitment, trend or uncertainty that will result in or is reasonably likely to result in the termination, or material reduction in availability to the issuer, of its off-balance sheet arrangements that provide material benefits to it, and the course of action that the issuer has taken or proposes to take in response to any such circumstances.
See NOTE 5 – COMMITMENTS AND CONTINGENCIES, in the Company’s Consolidated Financial Statements and Notes section.
2. As used in paragraph C of this Item 15, the term off-balance sheet arrangement means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the issuer is a party, under which the issuer has:
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 30 of 96
i. Any obligation under a guarantee contract that has any of the characteristics identified in Financial Accounting Standards Board(“FASB”) Accounting Standards Codification (“ASC”) Topic 460- 10, Guarantees; formerly FIN 45;
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
ii. A retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets;
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
iii. Any obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument, except that it is both indexed to the issuer's own stock and classified in stockholders' equity in the issuer's statement of financial position, and therefore excluded from the scope of FASB ASC 815, Derivatives and hedging; formerly FAS 133; or
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
iv. Any obligation, including a contingent obligation, arising out of a variable interest (as referenced in FASB ASC 810, Consolidation; formerly FIN 46R ) in an unconsolidated entity that is held by, and material to, the issuer, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with, the issuer.
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
Instructions to paragraph C of Item 15
i. No obligation to make disclosure under paragraph C of this Item 15 shall arise in respect of an off-balance sheet arrangement until a definitive agreement that is unconditionally binding or subject only to customary closing conditions exists
or, if there is no such agreement, when settlement of the transaction occurs. See attached Financial Statements and Notes in this period ended June 30, 2023 report.
ii. Issuers should aggregate off-balance sheet arrangements in groups or categories that provide material information in an efficient and understandable manner and should avoid repetition and disclosure of immaterial information. Effects that are common or similar with respect to a number of off-balance sheet arrangements must be analyzed in the aggregate to the extent the aggregation increases understanding. Distinctions in arrangements and their effects must be discussed to the extent the information is material, but the discussion should avoid repetition and disclosure of immaterial information.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 31 of 96
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
iii. For purposes of paragraph C of this Item 15 only, contingent liabilities arising out of litigation, arbitration or regulatory actions are not considered to be off- balance sheet arrangements.
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
iv. Generally, the disclosure required by paragraph C of this Item 15 shall cover the most recent fiscal year. However, the discussion should address changes from the previous year where such discussion is necessary to an understanding of the disclosure.
See attached Financial Statements and Notes in this period ended June 30, 2023 report.
In satisfying the requirements of paragraph C of this Item 15, the discussion of off-balance sheet arrangements need not repeat information provided in the footnotes to the financial statements, provided that such discussion clearly cross-references to specific information in the relevant footnotes and integrates the substance of the footnotes into such discussion in a manner designed to inform readers of the significance of the information that is not included within the body of such discussion.
Part E Issuance History
Item 16 List of securities offerings and shares issued for services in the past two years.
*Right-click the rows below and select “Insert” to add rows as needed.
Shares Outstanding as of Second Most
Recent Fiscal Year End:
Balance
Date December 31, 2021
Opening Common:
90,360,425 Preferred: 90
Date of
Transaction
1/18/2022
1/19/2022 1/21/2022 2/17/2022
Transaction type (e.g., new issuance, cancellation, shares returned to treasury)
New Issuance
Cancellation
New Issuance
Cancellation
Number of Shares Issued (or cancelled)
266,667
-1,300,092 200,000 -1,300,092
Class of Securities
Common Stock
Common Stock
Common Stock
Common Stock
Value of shares issued ($/per share) at Issuance
$0.75
$0.15 $0.75 $0.15
Were the shares issued at a discount to market price at the time of issuance? (Yes/No)
Yes
Yes Yes Yes
Individual/ Entity Shares were issued to.
*You must disclose the control person(s) for any entities listed. Todd Hoepker Revocable Trust2
Ralph Spencer
Charles & Lisa Roberts
Ralph Spencer
Reason for share issuance (e.g. for cash or debt conversion) -OR-
Nature of Services Provided
Subscription
10/11/21 Settlement Agreement
Subscription
10/11/21 Settlement Agreement
Restricted or Unrestricted as of this filing.
Restricted
Restricted Restricted Restricted
Exemption or Registration Type.
4(a)2
4(a)2 4(a)2 4(a)2
Page 32 of 96
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
3/15/2022 3/23/2022 4/15/2022
Cancellation -1,300,092
New 1,000,000 Issuance
Cancellation -1,300,092
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
$0.15 Yes $0.75 Yes $0.15 Yes
$0.75 Yes $0.15 Yes $3.00 No $2.05 No $2.05 No $2.40 No
$0.50 No
$1.00 Yes
$1.00 Yes $2.00 Yes
$2.00 Yes
$2.00 Yes
$2.00 Yes $2.00 Yes
$2.00 Yes
$2.00 Yes $2.00 Yes $2.00 Yes $2.00 Yes
Ralph Spencer
Leslie Schultz
Ralph Spencer
Todd Hoepker Revocable Trust2
Ralph Spencer
VRM Global Holdings 4 PTY LTD
Accel Media International, Inc.5
PCG Advisory, Inc.6
VRM Global Holdings 4 PTY LTD
Todd Michael Hoepker Revocable Trust2
Proacvtive Capital 7 Partners LP
Accel Media International, Inc.5
David C Newingham Louis Brinisi & Marry Anne Brindisi JT Ten
Stanton C Hawthorne & Sherri J Hawthorne
Michael Ray Spradlin Darin & LLisa Brindisi JT Ten
Roger Lee Kunau & Cindy Lynn Mackinnon
John Voss
Dean Pappas
Douglas Cernek
Thomas West
10/11/21 Settlement Agreement
Subscription
10/11/21 Settlement Agreement
Subscription
10/11/21 Settlement Agreement
Compensation for Licensing Agreement
Compensation for Marketing Services
Compensation for PR Services
Compensation for Licensing Agreement
Subscription
Warrant Option
Warrant Option
Subscription Subscription
Subscription
Subscription Subscription
Subscription
Subscription Subscription Subscription Subscription
Restricted Restricted Restricted
Restricted Restricted Restricted Restricted Restricted Restricted
Restricted
Restricted
Restricted Restricted
Restricted
Restricted
Restricted Restricted
Restricted
Restricted Restricted Restricted Restricted
4(a)2 4(a)2 4(a)2
4(a)2 4(a)2 4(a)2 4(a)2 4(a)2 4(a)2
4(a)2
4(a)2
4(a)2 4(a)2
4(a)2
4(a)2
4(a)2 4(a)2
4(a)2
4(a)2 4(a)2 4(a)2 4(a)2
Page 33 of 96
4/18/2022
5/12/2022
8/15/2022 Issuance
New 266,667 Issuance
Cancellation -1,300,092
New
500,000 3,500,000 30,000 6,000,000
200,000
100,000
100,000 25,000
25,000
25,000
100,000 50,000
25,000
50,000 50,000 25,000 50,000
New 10/5/2022 Issuance
New 10/5/2022 Issuance
New 10/12/2022 Issuance
New 10/13/2022 Issuance
New 11/7/2022 Issuance
New 11/7/2022 Issuance
11/21/2022 New Issuance
New 11/23/2022 Issuance
12/2/2022 New Issuance
12/2/2022 New Issuance
12/2/2022 New Issuance
12/13/2022 New Issuance
12/13/2022 New Issuance
12/22/2022 New Issuance
12/22/2022 New Issuance
12/22/2022 New Issuance
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
12/22/2022 12/22/2022
12/23/2022 12/27/2022
1/1/2023
1/1/2023
1/1/2023
1/4/2023 1/30/2023
3/2/2023
3/8/2023 3/8/2023
3/21/2023
3/21/2023
New 100,000 Issuance
New 35,000 Issuance
New
Issuance 50,000
Cancelation -22,101,556
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
$1.00 Yes $2.00 Yes
$1.00 Yes $0.15 Yes
$6.24 Yes
$6.24 Yes
$6.24 Yes
$1.00 Yes 0.0001 Yes
$2.02 Yes
$1.00 Yes $1.00 Yes
0.0001 Yes
0.0001 Yes
Evan Greenberg
Shari & Richard Mackinnin JT TE
Rose Petals Realty, LLC.8
Ralph Spencer
Bradford Baker Revocale Trust
Colleen M McAleer
Ned L. Siegel
Tiger Trout Capital Puerto Rico LLC.9
Joshua Wethington
Ned L Siegel
Kevin Myers & Minera Myers JT Ten
Todd Michael Hoepker Revocable Trust
Bradford Baker Revocable Trust
Colleen M McAleer
Warrant Option
Subscription
Warrant Option
12/13/22 Settlement Agreement
Compensation for Independent Board of Director Services
Compensation for Independent Board of Director Services
Compensation for Independent Board of Director Services
Subscription
CFO Employment Agreement Compensation
Compensation for Independent Board of Director Services
Subscription
Subscription
Compensation for Independent Board of Director Services
Compensation for Independent Board of Director Services
Restricted Restricted
Restricted Restricted
Restricted
Restricted
Restricted
Restricted Restricted
Restricted
Restricted Restricted
Restricted
Restricted
4(a)2 4(a)2
4(a)2 4(a)2
4(a)2
4(a)2
4(a)2
4(a)2 4(a)2
4(a)2
4(a)2 4(a)2
4(a)2
4(a)2
Page 34 of 96
New Issuance
New Issuance
New Issuance
New Issuance
New Issuance
New Issuance
New Issuance
New Issuance
New Issuance
New Issuance
1,636
1,636
1,603
250,000 13,181
4,538
75,000 100,000
33
33
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
3/21/2023 New Issuance
3/31/2023 New Issuance
5/16/2023 New Issuance
5/19/2023 New Issuance
5/23/2023 New Issuance
5/30/2023 New Issuance
5/30/2023 New Issuance
6/23/2023 New Issuance
33
50,000
127,457
7,000,000 2,000,000
27,000
27,000
50,000
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
0.0001 Yes
0.0001 Yes
0.5000 Yes
1.2600 Yes 1.3500 Yes
0.5600 Yes
0.5600 Yes
1.0000 Yes
Ned L Siegel
Joshua Wethington
CFO Systems, LLC
VRM GLOBAL HOLDINGS PTY LTD
New Earth Technologies
Brad Baker
Colleen McAleer
Benjamin &
Compensation for Independent Board of Director Services
1/30/23 Mutual Release Agreement
Compensation for Professional Services
Compensation for Inventory
Compensation for Inventory
Compensation for Independent Board of Director Services
Compensation for Independent Board of Director Services
Subscription
Restricted
Restricted
Restricted
Restricted Restricted
Restricted
Restricted
Restricted
4(a)2
4(a)2
4(a)2
4(a)2 4(a)2
4(a)2
4(a)2
4(a)2
Shares Outstanding on Date of This Report: Ending Balance Ending Balance: Date June 30, 2023 Common: 84,360,893 Preferred: 90
The Company initially adopted the period end dates conforming to the industry standards used by MM, the Company’s largest operating subsidiary. These period end dates followed a 52/53-week fiscal year which had ended on the Saturday nearest to December 31. On December 31,2022 the Company’s fiscal year ended in alignment with the calendar ending period of December 31,2022. As a result, moving forward, the Company has chosen to adopt and conform to standard calendar month end and year end reporting to simplify comparative reporting periods. The fiscal year end of the Company is now December 31. This decision has no material impact on the Company’s operating and/or financial reporting practices and procedures.
B. List below and describe any issuance of Promissory Notes, Convertible Notes, or Convertible Debentures. In responding to this item, please provide the date of execution of the Note or the Agreement, a description of the reason for the issuance, the outstanding balance and any interest accrued. Provide the maturity dates for each Note or Agreement, their conversion terms, names of beneficial owners or holders and the exact class of security such Notes or Agreement may be converted to. Also, specify if the Note is Secured or Unsecured and whether or not it is in Default.
On November 8, 2022, we issued a convertible note to Charles & Lisa Roberts in the amount of $1,100,000 bearing 10% interest at a conversion price of $0.50 per share of common stock on the maturity date of November 7, 2023.
On May 5, 2023, we issued a convertible note to Jay & Linda Lord in the amount of $1,20,000 bearing 12% interest at a conversion price of $0.50 per share of common stock. On May 12, 2023, the value of the convertible note was
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 35 of 96
Laura Arens
increased to $1,600,000 bearing the same 12% interest and $0.50 conversion price on the maturity date of May 5, 2024
Part F
The following exhibits must be either described in or attached to the disclosure statement:
Exhibits
Item 17
A.
Material Contracts.
Every material contract, not made in the ordinary course of business, that will be performed after the disclosure statement is posted through www.OTCIQ.com or was entered into not more than two years before such posting. Also include the following contracts:
1) Any contract to which directors, officers, promoters, voting trustees, security holders named in the disclosure statement, or the Designated Advisor for Disclosure are parties other than contracts involving only the purchase or sale of current assets having a determinable market price, at such market price;
All have uploaded to OTC Markets via period ended reports or supplemental information.
2) Any contract upon which the issuer’s business is substantially dependent, including but not limited to contracts with principal customers, principal suppliers, and franchise agreements;
All have uploaded to OTC Markets via period ended reports or supplemental information.
3) Any contract for the purchase or sale of any property, plant or equipment for consideration exceeding 15 percent of such assets of the issuer; or
All have uploaded to OTC Markets via period ended reports or supplemental information.
4) Any material lease under which a part of the property described in the disclosure statement is held by the issuer.
None
Any management contract or any compensatory plan, contract or arrangement, including but not limited to plans relating to options, warrants or rights, pension, retirement or deferred compensation or bonus, incentive or profit sharing (or if not set forth in any formal document, a written description thereof) in which any director or any executive officer of the issuer participates shall be deemed material and shall be included; and any other management contract or any other compensatory plan, contract, or arrangement in which any other executive officer of the issuer participates shall be filed unless immaterial in amount or significance.
B.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 36 of 96
Item 18
A.
C.
All have uploaded to OTC Markets via period ended reports or supplemental information. The following management contracts or compensatory plans need not be included:
1) Ordinary purchase and sales agency agreements; N/A
2) Agreements with managers of stores in a chain organization or similar organization;
See NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS, “Company Contracts” in the Company’s Consolidated Financial Statements and Notes section.
3) Contracts providing for labor or salesmen’s bonuses or payments to a class of security holders, as such; and
Annual Bonuses
We intend to use annual cash incentive bonuses for the executive officers to tie a portion of their compensation to financial and operational objectives achievable within the applicable fiscal year. We expect that, near the beginning of each year, the compensation committee will select the performance targets, target amounts, target award opportunities and other term and conditions of annual cash bonuses for the executive officers, subject to the terms of any employment agreement. Following the end of each year, the board of directors will determine the extent to which the performance targets were achieved and the amount of the award that is payable to the executive officers. No bonuses were awarded by the board of directors in 2022 or 2021.
Stock-Based Awards
We intend to use stock-based awards to reward long-term performance of the executive officers. We believe that providing a meaningful portion of the total compensation package in the form of stock-based awards will align the incentives of its executive officers with the interests of its stockholders and serve to motivate and retain the individual executive officers. Stock-based awards will be awarded under the Incentive Plan, which has been adopted by our Board of Directors and is being submitted to our shareholders for approval at the special meeting in lieu of an annual meeting.
4) Any compensatory plan that is available to employees, officers or directors generally and provides for the same method of allocation of benefits between management and non-management participants.
None
Articles of Incorporation and Bylaws.
A complete copy of the issuer’s articles of incorporation or in the event that the issuer is not a corporation, the issuer’s certificate of organization. Whenever amendments to the articles of incorporation or certificate of organization are filed, a complete copy of the articles of
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 37 of 96
B.
Item 19
A.
incorporation or certificate of organization as amended shall be filed. See attached in this period Quarterly Report.
A complete copy of the issuer’s bylaws. Whenever amendments to the bylaws are filed, a complete copy of the bylaws as amended shall be filed.
See attached in this Quarterly Report.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
In the following tabular format, provide the information specified in paragraph (B) of this Item 20 with respect to any purchase made by or on behalf of the issuer or any "Affiliated
Purchaser” (as defined in paragraph (C) of this Item 19) of shares or other units of any class of the issuer's equity securities.
N/A
B. The table shall include the following information for each class or series of securities for each month included in the period covered by the report:
1. The total number of shares (or units) purchased (Column (a)). Include in this column all issuer repurchases, including those made pursuant to publicly announced plans or programs and those not made pursuant to publicly announced
plans or programs. Briefly disclose, by footnote to the table, the number of shares purchased other than through a publicly announced plan or program and the nature of the transaction (e.g., whether the purchases were made in open-market transactions, tender offers, in satisfaction of the company's obligations upon exercise of outstanding put options issued by the company, or other transactions).
N/A
2. The average price paid per share (or unit) (Column (b)).
N/A
3. The total number of shares (or units) purchased as part of publicly announced repurchase plans or programs (Column (c)).
N/A
4. The maximum number (or approximate dollar value) of shares (or units) that may yet be
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 38 of 96
C. 1.
2.
purchased under the plans or programs (Column (d)).
Instructions to paragraphs (B)(3) and (B)(4) of this Item 20:
a. In the table, disclose this information in the aggregate for all plans or programs publicly announced.
N/A
b. By footnote to the table, indicate:
i. The date each plan or program was announced; N/A
ii. The dollar amount (or share or unit amount) approved; N/A
iii. The expiration date (if any) of each plan or program; N/A
iv. Each plan or program that has expired during the period covered by the table; and
N/A
v. Each plan or program the issuer has determined to terminate prior to expiration, or under which the issuer does not intend to make further purchases.
N/A
For purposes of this Item 19, “Affiliated Purchaser” means:
A person acting, directly or indirectly, in concert with the issuer for the purpose of acquiring the issuer's securities; or
N/A
An affiliate who, directly or indirectly, controls the issuer's purchases of such securities, whose purchases are controlled by the issuer, or whose purchases are under common control with those of the issuer; provided, however, that “Affiliated Purchaser” shall not include a broker, dealer, or other person solely by reason of such broker, dealer, or other person effecting purchases on behalf of the issuer or for its account, and shall not include an officer or director of the issuer solely by reason of that officer or director's participation in the decision to authorize purchases by or on behalf of the issuer.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 39 of 96
N/A
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 40 of 96
Item 20
Issuer’s Certifications.
I, Antony J. Raynor certify that:
1. I have reviewed this quarterly disclosure statement of The Sustainable Green Team, Ltd.;
2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this disclosure statement; and
3. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
Date: August 21, 2023
/s/ Anthony J. Raynor
[Signature] [CEO]
I, Joshua Wethington certify that:
4. I have reviewed this quarterly disclosure statement of The Sustainable Green Team, Ltd.;
5. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this disclosure statement; and
6. Based on my knowledge, the financial statements, and other financial information included or incorporated by reference in this disclosure statement, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.
Date: August 21, 2023
/s/ Joshua Wethington
[Signature] [CFO]
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Page 41 of 96
THE SUSTAINABLE GREEN TEAM, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL QUARTER ENDED – June 30, 2023
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 42 of 96
THE SUSTAINABLE GREEN TEAM AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
as of: as of:
(Jun 30, 2023) (Dec 31, 2022)
0
2,580,478
31,080,347
10,466,143
44,126,968
64,974,301
1,004,838
224,000
13,988,620
10,394,449
25,611,908
134,713,176
8,631,789
3,468,555
8,597,581
1,500,000
22,197,925
6,925,894
24,692,277
31,618,170
53,816,096
8,436
68,421,866
12,466,779
80,897,081
134,713,176
-
2,436,324
18,656,179
8,797,966
29,890,522
64,333,763
968,513
224,000
14,473,880
10,474,406
26,140,798
120,365,084
4,765,019
3,350,145
6,712,178
1,500,000
16,327,342
7,140,632
24,221,403
31,362,035
47,689,378
7,463
56,294,220
16,374,022
72,675,706
120,365,084
ASSETS
Current Assets
Cash & short term investments
Accounts receivable
Inventory
Prepaid expenses and other current assets
Total Current Assets
Property and equipment, net
Other Assets
Long-term investments
Goodwill
Intangibles
ROU asset
Total Other Assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses
Current portion of lease liability
Notes payable
Notes payable - related party
Total Current Liabilities
Long-term Liabilities
Lease liabilities, net of current portion
Notes payable, net of current portion
Total Long-term Liabilities
Total Liabilities
Stockholders’ Equity
Preferred Series A stock, $0.0001 par value, 5,000,000 shares authorized, 90 shares outstanding Common stock, $0.0001 par value; 245,000,000 shares authorized; 84,360,893 and 74,631,742 shares issued and outstanding, respectively
Common Stock
Additional paid-in capital
Retained earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
$$
$$
$$
$$
Accompanying footnotes are an integral part of condensed consolidated financial statements.
OTC Markets Group Inc.
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Page 43 of 96
THE SUSTAINABLE GREEN TEAM AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENT (Unaudited)
3 Months Ending 6 Months Ending
Jun 30, 2023 Jul 2, 2022 Jun 30, 2023 Jul 2, 2022
$$$$
%%%%
))))
))))
)
)) )) )) )))) ))
$)$)$)$)
$)$)$)$) $)$)$)$)
Net Revenue
Cost of Goods
Cost of Goods (excl depreciation & amortization)
Depreciation & Amortization (COGs)
Total Cost of Goods
Gross Profit
GP%
Operating Expenses
Selling, General and Administrative
Depreciation and Amortization (OpEx)
Total Operating Expenses
Income (loss) from Operations
Other Income (expense)
Interest Expense, net
Bargain Purchase Gain (loss)
Net Debt Forgiveness/Grant (ERC)
Gain on Sale of Fixed Assets
Other Income, net
Total Other Income (expense)
Income (loss) before Income Taxes
Provision for Income Taxes
Net Income (loss)
Net income (loss) per common share - basic
Net income (loss) per common share - diluted
Wt. Avg shares outstanding - basic
Wt. Avg shares outstanding - diluted
7,262,676
5,692,568
896,401
6,588,969
673,707
9.3
2,041,697
250,700
2,292,397
(1,618,690
(1,278,745
-
(346,818
(23,461
(795,569
(2,444,593
(4,063,282
(675,801
(3,387,481
(0.04
(0.04
77,117,369
84,352,369
12,224,356
11,555,815
478,628
12,034,443
189,913
1.6
1,296,221
5,640
1,301,861
(1,111,948
(498,278
-
1,219,157
16,923
57,663
795,465
(316,485
-
(316,484
(0.00
(0.00
85,723,155
91,363,159
15,027,526
11,833,248
1,802,769
13,636,017
1,391,508
9.3
4,446,381
500,330
4,946,711
(3,555,202
(2,295,302
-
1,458,448
(23,461
(785,367
(1,645,681
(5,200,884
(1,293,640
(3,907,244
(0.05
(0.05
79,227,628
86,462,628
22,553,804
19,516,147
1,725,352
21,241,500
1,312,305
5.8
2,571,628
11,280
2,582,908
(1,270,6043
(923,322
598,300
1,236,080
16,923
124,269
1,052,250
(218,354
21,968
(240,321
(0.00
(0.00
87,410,242
93,050,246
The accompanying footnotes are an integral part of these condensed consolidated financial statements.
THE SUSTAINABLE GREEN TEAM AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited)
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Page 44 of 96
Six Month Ending:
June 30, 2023 July 2, 2022
$)$)
) ) ) )
) ))
)) )
))
) ))
))
(3,907,244
2,303,099
717,500
-
-
23,461
(144,153
-
169,410
(55,993
3,866,769
2,972,849
(1,856,171
245,735
(36,326
(1,646,762
-
-
(443,557
6,814,750
(8,305,897
-
608,619
-
(1,326,086
0
-
0
(240,321
1,819,666
-
(50,667
(598,300
(16,923
(1,236,080
1,469,366
(997,558
715,611
(481,510
1,887,283
2,270,567
(3,450,109
-
26,943
(3,423,166
10,585,975
(10,032,885
(134,694
4,507,500
(3,368,495
-
1,300,000
(2,437,500
419,901
(732,698
788,242
55,544
Cash flows from operating activities:
Net Income (Loss)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Prepaid Advertising Expense
Equity increase in long term investment
Bargain purchase gain
Gain on sale of fixed assets
Paycheck Protection Program
Changes in operating assets and liabilities:
Accounts receivable, net
Due from Factor
Inventory
Prepaid expenses and other assets
Accounts payable and accrued expenses
Net cash from (used in) operating activities
Cash flows from investing activities:
Purchases of property and equipment
Proceeds from sale of property and equipment
Proceeds from long-term investments
Net cash from (used in) investing activities
Cash flows from financing activities:
Borrowing under factoring
Repayments under factoring
Principal payments on leases
Proceeds from notes payable
Payment on notes payable
Payment on notes payable, related parties
Stock subscriptions
Stock redemptions
Net cash provided by (used in) financing activities
Net increase (decrease) in cash
Cash - beginning of period
Cash - end of period
)
$$ The accompanying footnotes are an integral part of these condensed consolidated financial statements.
THE SUSTAINABLE GREEN TEAM, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS
Business Overview
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
) )
Page 45 of 96
)
The Company is a wholesale manufacturer and supplier of wood-based mulch, soil, and lumber products , selling directly to mass merchandisers, home centers, hardware stores, nurseries, garden centers, convenience stores, food stores and drug stores, in addition to wholesalers and distributors. The Company also provides arbor care and storm recovery services at the residential, commercial, and municipal levels while offering green waste solutions to large- and small-scale waste disposal and recycling companies located throughout the southeastern United States. The Company’s subsidiary, Mulch Manufacturing Inc., is the largest provider of cypress mulch in the country. In addition, in February 2023, the Company commenced production of HumiSoil® in its Florida facilities.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered negative cash flows and has a significant accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters include expanding its product line from solely mulch to include higher margin manufactured soil products it is producing under the VRM License Agreement leading to an expected increase in revenues, gross margin and profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 – GOING CONCERN
Report of Independent Registered Public Accounting Firm Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Sustainable Green Team Ltd. as of December 31, 2022 and as of January 1, 2022, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered negative cash flows and has a significant accumulated deficit. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We manage liquidity risk by reviewing, on an ongoing basis, our sources of liquidity and capital requirements. The Company had cash on hand of $0 at June 30, 2023. Although the Company intends to raise additional debt or equity capital, the Company expects to continue to incur significant losses from operations and have negative cash flows from operating activities for the near-term. These losses could be significant as operations ramp up along with continuing expenses related to compensation, professional fees, and regulatory are incurred.
The Company has incurred significant losses since its inception and has not demonstrated an ability to generate sufficient revenues to achieve profitable operations. There can be no assurance that profitable operations will ever be achieved, or if achieved, could be sustained on a continuing basis. In making this assessment we performed a comprehensive analysis of our current circumstances including: our financial position, our cash flows and cash usage forecasts for the twelve months ended June 30, 2024, and our current capital structure including equity-based instruments and our obligations and debts.
The Company has satisfied its obligations from the issuance of common stock; however, there is no assurance that such successful efforts will continue during the twelve months subsequent to the date these consolidated financial statements are issued.
If the Company does not obtain additional capital, the Company will be required to reduce the scope of its business development activities or cease operations. The Company continues to explore obtaining additional capital financing and the Company is closely monitoring its cash balances, cash needs, and expense levels.
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These factors create substantial doubt about the Company’s ability to continue as a going concern within the twelve-month period subsequent to the date that these unaudited consolidated financial statements are issued. The unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Accordingly, the unaudited consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.
Principles of Consolidation
The unaudited consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
Use of Estimates
In preparing the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to, revenue recognition, the allowance for bad debt, useful life of fixed assets, income taxes and unrecognized tax benefits, valuation allowance for deferred tax assets, and assumptions used in assessing impairment of long-lived assets. Actual results could differ from those estimates.
Critical Accounting Estimates
In order to prepare our financial statements in accordance with GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Such estimates are based upon management’s current judgments, which are normally based on knowledge and experience regarding past and current events and assumptions about future events. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations.
While there are several accounting policies affecting our financial statements, we have identified the following critical accounting estimates that require us to make the most subjective judgments in order to fairly present our consolidated financial statements.
Inventory
Summary:
Product inventories are recorded at the lower of actual cost or fair market value. The Company accounted for intercompany sales between NSR to MMI at the lower of cost or fair market value. NSR shipped 4,106 full truckloads to MMI during 2022. The fair market value of $1,095 for this material is based upon the total amount of wood purchased by MMI in 2022 divided by the total quantity of wood received. The cost value to recognize this inventory in the intercompany sale was $861 per load and the Company applied a 10% intercompany markup on this transaction bringing the value per load to $967 per load.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 47 of 96
During the year, we perform monthly periodic cycle counts and write off excess or obsolete inventory as needed for each location. During 2022, inventories related to the production of a new segment were not recorded from January through September of 2023 resulting in a reduction of operating profit. Specifically, monthly “yard inventory” was not included in cycle counts. As a result, the inventory has been understated and these understated amounts were charged directly to the Income Statement (without reconciliation). This process was identified and corrected as part of the Company’s restated financial results for the nine month period ended October 1, 2022. As part of the year end process the plant managers were directed to count “yard inventory” and include them in physical counts. This activity has resulted in a change in management’s estimate for physical inventory.
Judgments and Uncertainties:
Significant judgment is required to estimate the fair market value of our inventory as it requires assumptions and projections to be made based off labor and overheads required for manufacturing of bulk and bagged product. Additionally, timber purchases may vary by “track” of land and the output of these purchases can yield different inputs which in turn impacts quantities of mulch, lumber and soil outputs. We monitor our inventory levels and manufacturing consumption by location to ensure cycle counts align with purchases, burn rates, etc., and record adjustments to inventory levels when inventory counts are out of balance with expected results (beginning inventory + purchases – sales = ending inventory, as compared to, monthly inventory cycle counts).
Sensitivity of Estimates to Change:
As noted above, the “track” of land and output of these purchases yield different qualities which in turn impacts quantities of mulch, lumber and soil outputs and are sensitive to what is received from log vendor(s).
The accounting estimates the Company believes to be most sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from the Company’s expectations in inventory. The Company made a change in management estimate for the accounting for yard inventory in the 3rd quarter of 2022, whereby it incorporated inventory counts as disclosed in the Company’s 3rd quarter 2022 and amended financial results. Subsequently, there have been no material changes to the Company’s policies to critical accounting estimates. There have been no additional changes to this estimate in 2023.
Acquisitions
Summary:
From time to time, we enter into strategic acquisitions in an effort to better service existing customers and to attract new customers. We account for acquired businesses using the acquisition method of accounting under ASC 805, which requires the assets acquired and liabilities assumed be recorded at date of acquisition at their respective fair values. In some instances, Under ASC 805- 50-30 the gain or loss on a business combination should be recognized and measured as the difference between the fair value of the assets acquired and the fair value of the liabilities assumed, minus the fair value of any non-controlling interests in the acquired business. This gain or loss is then recognized in the financial statements of the acquiring entity and considered a bargain purchase gain as one time realization for the sale. The Company has acquired assets under distressed conditions resulting in bargain purchase gains. In accordance with ASC 805-50-30, the results of the acquisitions we have completed have valued the acquired assets at “certified appraised value” which have been reflected in our financial statements, thereafter.
Judgments and Uncertainties:
The Company performs annual impairment analysis to ensure the appraised value is aligned with the certified appraised value utilizing projected revenue and operating profit projections of these facilities. Additional leasehold improvements may be required to optimize the performance of these facilities.
Sensitivity of Estimates to Change:
On January 31, 2020, the Company completed the Mulch Acquisition. On December 30, 2021 the Company completed the acquisition of DDP. On December 31, 2021 the Company acquired equipment from the Beaver Washington facility and acquired the
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 48 of 96
accompanying land on March 18, 2022. On December 31, 2021 the Company acquired equipment for the Jasper, Florida facility. Each of these acquisitions were accounted for under ASC 805. See “Note 11 – Acquisitions.”
Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired. We believe the estimates applied to be based on reasonable assumptions, but which are inherently uncertain. As a result, actual results may differ from the assumptions and judgments used to determine the fair values of the assets acquired, which could result in impairment losses in the future. Changes in business conditions may also require future adjustments to the useful lives of assets acquired. If we determine that the useful lives of assets acquired are shorter than we had originally estimated, the rate of amortization may be accelerated.
Goodwill
Summary:
Goodwill represents the acquired fair value of a business in excess of the fair values of tangible and identified intangible assets acquired and liabilities assumed. We test goodwill on an annual basis as part of our year end processes and additionally if an event occurs or circumstances change that would indicate the carrying amount may be impaired.
The goodwill impairment test requires us to estimate and compare the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value exceeds the carrying amount, the goodwill is not considered impaired. To the extent a reporting unit’s carrying amount exceeds its fair value, the reporting unit’s goodwill is deemed impaired, and an impairment charge is recognized based on the excess of a reporting unit’s carrying amount over its fair value.
Judgments and Uncertainties:
Significant judgment is required to determine whether impairment indicators exist and to estimate the fair value of our reporting units. Estimating the fair value of reporting units using the discounted cash flow model requires us to make assumptions and projections of revenue growth rates, gross margins, SG&A, capital expenditures, working capital, depreciation, terminal values, and weighted average cost of capital, among other factors.
The assumptions used to estimate fair value consider historical trends, macroeconomic conditions, and projections consistent with our operating strategy. Changes in these estimates could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge. Adverse market or economic events could result in impairment charges in future periods.
Sensitivity of Estimates to Change:
During the fourth quarter of the 2022 Fiscal Year, we performed our annual quantitative assessment of goodwill. No goodwill impairment charge was recorded as a result of the testing and the estimated fair value of each of our reporting units substantially exceeded its carrying value.
Revenue
The Company’s revenues are derived from two major types of services to clients: landscape recovery services and the manufacturing and sale of mulch, lumber and soil products. The Company recognizes revenue when its performance obligations are satisfied. With respect to landscape recovery services, its performance obligation is satisfied upon the completion of the landscape services for its customers. With respect to the manufacturing and selling of mulch, lumber and soil products, its performance obligation is satisfied upon delivery to its customers and/or Customer pickup on site. Services are provided for cash or on credit terms. These credit terms, which are established in accordance with local and industry practices, require payment generally within 30 to 45 days day(s) of performance. The Company estimates and reserves for its bad debt exposure based on its experience with past due accounts and collectability, the aging of accounts receivable and its analysis of customer data.
Cash
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 49 of 96
The Company considers all highly liquid short-term instruments that are purchased with an original maturity of six months or less to be cash equivalents. The Company had limited cash and cash equivalents as of June 30, 2023 and December 31, 2022.
Account Receivable
The Company periodically assesses its accounts receivable for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. The Company maintained its allowance for doubtful accounts as of June 30, 2023, in the amount of $180,000 based upon aged receivables.
Inventories
Inventories are stated at the lower of cost or net realizable value, with cost determined by the weighted-average cost method using full absorption costing for manufactured goods. The Company is vertically integrated, as such, sales from NSR to MMI, are recorded at the lower of cost or net realizable value. Intercompany sales are eliminated in consolidations.
Property and Equipment
Property and equipment are recorded at cost. Expenditures that enhance the useful lives of the assets are capitalized and depreciated. Depreciation is computed using the straight-line method over the estimated useful lives of the related capitalized assets. Machinery and equipment is generally depreciated over 7 years. Vehicles are generally depreciated over 5 years. Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, its cost and accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected in operations.
While we believe that our reported disclosures comply with generally accepted accounting principles in the United States (“U.S. GAAP”), in alignment with ASC 360-10-50-1, we provide for your reference the requested information:
Asset Class
Machinery & equipment Office equipment Leasehold improvement Autos and trucks Buildings
Land CIP
Impairment of Long-Lived Assets and Right of Use Assets
Useful Life
7 years
5-7 years 10-15 years
5 years
39.5 years Infinite
until placed in service
The Company reviews long-lived assets, including finite-lived intangible assets and right of use (“ROU”) lease assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets.
Long-Term Investments and Related Accounting Policy
The Company has 0.39% ownership in an insurance group which provides annual dividends to the Company on a recurring basis. The Company performs regular impairment testing of this asset and has valued this investment on June 30, 2023, in the amount of $1,004,838.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 50 of 96
Intangible Assets
The Company records its intangible assets at cost in accordance with Accounting Standards Codification (“ASC”) 350. Finite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over the term of the agreement. During the six months ended June 30, 2023 and July 2, 2022, the Company performed valuation and impairment testing and did not record a loss on impairment. Additional information relating to the treatment of Intangible Assets is reflected in Note 6.
Goodwill
Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit. No impairment of goodwill was recorded by the Company for the six months ended June 30, 2023, and July 2, 2022.
Lease
In 2020, the Company adopted ASC Topic 842, Leases, or ASC 842, using the modified retrospective transition method with a cumulative effect adjustment to be accumulated deficit as of January 1, 2019, and accordingly, modified its policy on accounting for leases as stated below. As described under “Recently Adopted Accounting Pronouncements,” below, the primary impact of adopting ASC 842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating and financing leases with terms longer than 12 months. The Company elected to use the short-term exception and does not record assets/liabilities for short term leases as of June 30, 2023, and December 31, 2022.
The Company’s leases primarily consist of facility leases which are classified as operating leases. The Company assesses whether an arrangement contains a lease at inception. The Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that the Company will exercise such an option. The right-of-use asset is initially measured as the contractual lease liability plus any initial direct costs and prepaid lease payments made, less any lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
Leased right-of-use assets are subject to impairment testing as a long-lived asset at the asset-group level. The Company monitors its long-lived assets for indicators of impairment. As the Company’s leased right-of-use assets primarily relate to facility leases , early abandonment of all or part of facility as part of a restructuring plan is typically an indicator of impairment. If impairment indicators are present, the Company tests whether the carrying amount of the leased right-of-use asset is recoverable including consideration of sublease income, and if not recoverable, measures impairment loss for the right-of-use asset or asset group.
Advertising and Marketing Costs
The Company expenses advertising and marketing costs as they are incurred. Advertising and marketing expenses were $768,536 and $113,924 for the six months ended June 30, 2023 and July 2, 2023, respectively, and are recorded in selling, general and administrative expenses on the statement of operations. The increase in advertising expense is associated with the Company’s prepaid advertising asset associated with the new product launch of HumiSoil.
Fair Value Measurements
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 51 of 96
ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement. The Company’s has immaterial financial assets and liabilities carried at fair value as of June 30, 2023.
Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share includes the effect of Common Stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive.
period ending
June 30, 2023 Dec 31, 2022
$)$
$)$ $)$
(3,907,244
79,227,628
1,835,000
5,400,000
86,462,628
(0.05
(0.05
8,901,214
88,902,029
1,650,000
2,200,000
92,752,029
0.10
0.10
Numerator for basic and diluted earnings (loss) per share:
Net income (loss)
Denominator for basic earnings (loss) per share –
Weighted Average Shares Outstanding
Stock Warrants
Convertible notes
Denominator for diluted earnings (loss) per share –
Weighted Average and Assumed Conversion
Net income (loss) per share:
Basic net income (loss) per share
Diluted net income (loss) per share
Income Taxes
In December 2019, the FASB issued ASU 2019-12, simplifying the Accounting for Income Taxes (Topic 740) as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. This guidance is effective for interim and annual reporting periods beginning within 2021.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, 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 that includes the enactment date.
The Company utilizes ASC Topic 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized. For tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit in the consolidated financial statements.
For the six months ended June 30, 2023, the Company recorded an income tax credit of $1,293,640 and recognizes a deferred tax asset of $2,514,060 on the Company’s balances sheet. The Company’s in year tax provisions are based on a 21% effective rate for federal and state income taxes in 2023 after accounting for permanent differences between book and taxable income. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 52 of 96
The Company has received a 2020 Income Tax Audit Letter relating to unpaid insurance provisions in the amount of $745,534 which it believes is not applicable and provided appropriate support; therefore the Company believes the IRS finding does not meet the “more likely than not” accounting standard and has not accrued this expense in the Company’s year to date financial statements.
NOTE 4 – INVENTORIES
Inventories are stated at the lower of cost or net realizable value, with cost determined by the weighted-average cost method using full absorption costing for manufactured goods. The Company’s inventories are comprised of the following for the periods ended June 30, 2023 and December 31, 2022:
Jun 30, 2023 Dec 31, 2022
$$ )
$$
The Company purchases raw materials from 3rd party vendors and is also vertically integrated and purchases feed stock from National Storm Recovery as an intercompany transaction. These intercompany sales eliminated in consolidation and the company applies the lower of cost or net realizable value for these transactions. For the twelve months ending December 31, 2022 the inventory value of these intercompany transactions were $3,888,374 and $1,073,578 for the six months ended June 30, 2023. No cash was exchanged for this transaction.
On August 12, 2022, the Company issued 500,000 shares of common stock for the purchase of raw materials. The Company recorded the value of these raw materials at $1,500,000 based upon the Company’s end of day common stock close price. No cash was exchanged for this transaction.
On May 19, 2023, the Company issued 7,000,000 shares of common stock for the purchase of raw materials. The Company recorded the value of these raw materials at $8,200,000 based upon the Company’s end of day common stock close price. No cash was exchanged for this transaction.
On May 23, 2023, the Company issued 2,000,000 shares of common stock for the purchase of raw materials. The Company recorded the value of these raw materials at $2,700,000 based upon the Company’s end of day common stock close price. No cash was exchanged for this transaction.
During the six-month ending June 30, 2023, the Company applied the average cost to products to all transactions which occurred during this period. The Company also performed a cycle count for the quarter. When comparing inventory receipts and external transactions, the Company determined inventories increased by $2,876,970 without explanation. The Inventory valuation process continues to be under review. The Company believes the reserve is conservative in nature.
Raw Materials
Work in Process
Finished Goods
Inventory Reserve
Total Inventory
19,789,995
1,776,067
12,391,256
(2,876,970
31,080,347
3,432,215
11,713,338
3,510,626
-
18,656,179
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
June 30, 2023 Dec. 31, 2022
$$
Machinery and equipment
Vehicles
Land
Buildings
20,873,572
4,441,312
2,018,788
14,483,053
20,449,231
4,441,312
407,691
14,483,053
Page 53 of 96
Leasehold improvements
Construction in process
Gross Property & Equipment
Less: accumulated depreciation
Property and equipment, net
8,140,973
26,239,911
76,197,608
(11,223,308
64,974,301
8,140,973
25,692,470
73,614,729
(9,280,966
64,333,763
))
$$
Depreciation expense(s) were $1,804,455 and $1,689,768 for the six months ended June 30, 2023 and July 2, 2022, respectively. Increased depreciation expense relates to facilities placed in service in our Homerville location though the Company still reflects $26.2M in CIP primarily relating to its Jasper and Beaver facilities.
Upgrades to the Jasper facility, purchased in December of 2021, are considered “in process” as the Company plans to complete improvements once a funding source has been secured to purchase raw materials and for working capital for this facility. Capital improvements at the Jasper facility included in CIP represent leasehold improvements and equipment of $12.0M.
The Beaver facility, purchased in December of 2022, will continue to be in “in process” until such time as once a funding source has been secured to purchase raw materials, equipment, permitting costs and for working capital for this facility. Life to date improvements to the Beaver facility include leasehold improvements and equipment of $13.7M.
NOTE 6 – INTANGIBLE ASSETS
The Company records its intangible assets at cost in accordance with Accounting Standards Codification (“ASC”) 350. Finite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over the term of the agreement.
On August 9, 2022, the Company entered into a restricted sublicense agreement (collectively with the VRM Sublicense Amendment defined below, the “VRM Sublicense”) with VRM Global Holdings Pty Ltd (“VRM Global”), and its wholly owned subsidiary VRM International PTY LTD (“VRM International,” together with VRM Global, collectively referred to herein together as the “Licensor”). The VRM Sublicense was amended on October 12, 2022 (the “VRM Sublicense Amendment”), to expand collaboration between the Company and Licensor and add the Licensor’s wholly owned subsidiary VRM Biologik Inc. (the “VRM Biologik”), among other things.
Pursuant to the VRM Sublicense, the Licensor granted the Company a restricted sub-license, pursuant to which the Licensor will allow the Company to use certain rights and entitlements and provide the Company with certain catalyst ingredients which will allow the Company to manufacture Humisoil® and XLR8® Bio (the “VRM Products”). These products are made using wood materials provided by the Company and the Licensor’s technology and catalyst ingredients to be acquired by the Company from the Licensor or produced by the Company pursuant to the VRM Sublicense. In addition, the VRM Sublicense grants the Company the non-exclusive right to distribute the VRM Products throughout the U.S., the exclusive right to market and distribute these products in packaging of less than one cubic yard in addition to the right to exclusively manufacture the Licensor’s catalyst ingredients in Florida, Washington State and the Caribbean (the “Exclusive Territory”).
The Company agreed to sell to Licensor the VRM Products manufactured by the Company in amounts determined in the sole discretion of the Company at an agreed-on price. In addition, Licensor has agreed to assign to the Company rights held by the Licensor to repurchase the VRM Products manufactured by others within the Exclusive Territory and an option to acquire such rights outside such territory.
In addition, pursuant to the VRM Sublicense Amendment, the Company acquired from Licensor 10% of VRM Biologik, certain catalyst ingredients for future delivery to be used in the Company’s production of Humisoil®, XLR8® Bio and other products, co-location of Licensor’s production facilities with the Company’s facilities in Florida and the state of Washington and development of an agreed plan to complete licensed manufacture of soil amendment catalysts in other strategic locations across the U.S. The catalyst ingredients, along with other inputs to be acquired by the Company from the Licensor and other suppliers, are expected to be sufficient to produce a minimum of 4,000,000 cubic yards of Humisoil® and its companion products. The Company’s ability to produce these products is constrained by its need for additional capital.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 54 of 96
The Term of the VRM Sublicense is for a period of ten years from October 12, 2022 with the option to renew it for a five- year period. The VRM Sublicense may be terminated by written agreement of the parties, or immediately by the Licensor if the Company amends or alters any of the inputs, outputs, products, marks, materials, media, recipes, or any of the processes as described in any of the manuals provided by Licensor to the Company except as permitted by the VRM Sublicense or appointment of a liquidator, administrator, receiver, receiver and manager, mortgagee in possession or other external controller appointed by virtue of the laws of insolvency or appointed by a creditor, by VRM Global or by the holder of security over the assets of VRM Global or an assignment of VRM Global’s rights pursuant to the VRM Sublicense without the approval of VRM Global. VRM Global may terminate the VRM Sublicense if at any time the Company is in breach of any of the terms or conditions of the VRM Sublicense and it fails to remedy such breach within 30 days of notice from Licensor. In consideration of the grant of the VRM Sublicense, the Company initially issued to the Licensor, 500,000 shares of the Company’s common stock upon execution of the VRM Sublicense and an additional 6,000,000 shares upon execution of the VRM Sublicense Amendment. Additionally, the Company agreed to pay the Licensor an aggregate of $1,000,000 in cash in two installments, with the first installment of $500,000 payable within 10 days of the Company’s completing an initial public offering of its common stock in order to raise cash (the “IPO”) and the second payment due on the one-year anniversary of the date of the IPO. In addition, pursuant to the VRM Sublicense Amendment, the Company agreed to pay VRM Global an aggregate of $7,200,000 payable in tranches of $3,600,000 by December 31, 2022 and two payments of $1,800,000 on each of May 31, 2023 and October 31, 2023. If the Company does not complete the IPO by February 4, 2023 or make the $500,000 payment within 10 days of such date, VRM Global may terminate the VRM Sublicense and, the Company will be obligated to pay the Licensor its then market rates for all inputs utilized by the Company in the production of Humisoil®, XLR8® Bio and other products produced using these inputs during the term of the VRM Sublicense.
On May 15, 2023 the Company, VRM International, VRM Global and VRM Biologik entered into an amendment to the VRM Sublicense Agreement whereby the Company agreed to issue VRM Global 7,000,000 shares of its common stock in lieu of the aggregate of $7,200,000 in cash payments and the $1,000,000 cash payments previously required to be made by the Company pursuant to the VRM Sublicense.
The Company valued the issuance of 6,000,000 shares of its Common Stock to VRM Global as consideration for the VRM Sublicense at $14,400,000 or $2.40 per share based upon the close price on the date of the VRM Sublicense and the Company began amortizing this amount at the rate of $960,000 per year over the term of the VRM Sublicense using the straight-line method.
In addition, the Company has an exclusive perpetual supply contract for timber used as feedstock for the manufacturing of mulch with a third-party vendor that is amortized at the rate of $10,650 per year. The remaining balance to be amortized as of December 31, 2022, was $73,880.
Based on the above, estimated annual other intangible assets amortization expense for the succeeding five years is as follows (in thousands):
Useful Life
June 30, 2023
Gross Net
Amount Acc Dep Amount
Gross Amount
Dec 31, 2022 Acc Dep
Net Amount
VRM Licensing Agreement
Supply Contract
15 yrs
10 yrs
14,400,000
73,880
14,473,880
479,980
5,280
485,260
13,920,020
68,600
13,988,620
14,400,000
84,532
853,809
-
10,652
76,617
14,400,000
73,880
14,473,880
$$$$$$
$$$$$$ As of June 30, 2023 the remaining maturities were as follows
VRM Supply Contract $$
2023
2024
2025
479,980
959,960
959,960
5,372
10,652
10,652
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 55 of 96
2026
2027
2028 and thereafter
959,960
959,960
9,600,200
10,652
10,652
25,900
$$
Amortization expenses were $242,630 and $2,640 for the three months ended June 30, 2023 and July 2, 2022, respectively. Amortization expenses were $485,260 and $5,280 for the six months ended June 30, 2023 and July 2, 2022, respectively.
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following amounts:
June 30,
2023 Dec. 31, 2022
$$
$$
The Company’s increase in accounts payable is related to limited cash available resulting from the conclusion of litigation with the former owner in December 2022.
NOTE 8 – LEASES
Sale/Leaseback
The Company reviews long-lived assets, including finite-lived intangible assets and right of use (“ROU”) lease assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets.
The Company entered into a lease agreement (the “Lease”) with a third-party financing company (the “Lessor”) on August 8, 2022, whereby the Lessor provided the Company with $7,500,000 in financing to purchase equipment located at the Company’s facilities in Jasper, Florida, Callahan, Florida and Homerville, Georgia (the “Equipment”). The Equipment was leased back to the Company pursuant to the Lease which includes the following key financial terms: an initial lease term of 30-months from the base period commencement date which period will automatically renew for successive one-year periods unless the Company notifies the Lessor at least 150 days prior to the end of the term of its intent to terminate the lease or exercise a buyout option. The Company has the right to buyout the Renewal Period obligations for an amount to be determined by Lessor and the Company. The monthly rental payments due by the Company under the Lease are initially $262,125 plus applicable sales/use and property tax subject to increase by an amount equal to.00006776 for every five basis point increase in thirty-six (36) month U.S. Treasury Notes as of the date of the lease multiplied by $7,500,000. The thirty-six (36) month U.S. Treasury Note yield is used as the basis for the calculation of the increase is 3.56%. In addition, the Company granted the Lessor a security interest in the equipment which is the subject of the Lease. The sale/leaseback transaction was recorded as a ROU Asset and Liability in accordance with ASC 842 and the fixed assets were reduced accordingly. In June of 2023, the Company entered into a forbearance agreement on this lease and is making monthly interest payment in the amount of $75,000 through September 2023 at which point the Company will determine to either pay the outstanding amount in full of revised the lease agreement.
8,165,741
-
466,047
8,631,789
4,491,100
34,392
239,528
4,765,019
Category
Accounts Payable
Accrued Interest
Accrued Expenses
Total
Jun 30, 2023
ROU Liability 10,394,449
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Dec 31, 2022
10,490,776
Page 56 of 96
Finance Lease
Operational Lease
4,324,398
6,070,052
5,730,850
4,759,926
On July 1, 2019, NSR LLC and Vista Landfill, LLC, a Waste Management Inc. company (“Waste Management”) entered into a Contractor Agreement which was amended on December 3, 2021 (collectively, the “Contractor Agreement”). The Contractor Agreement permits the Company to use two of Waste Management’s sites, one in Apopka, Florida and the other in Winter Garden, Florida, where we collect, store, grind, screen, color, and bag our own top-quality mulches for distribution. The Contractor Agreement requires us to store and grind at our cost and expense an agreed amount of vegetative waste belonging to Waste Management at a certain fixed price Waste Management pays us. We are obligated to provide Waste Management with certain regulatory reports regarding the amounts of materials received and processed at these sites and to comply with all Federal, state and local regulations regarding vegetative waste processing and maintain liability insurance in amounts provided for in the Contractor Agreement. In addition, we pay rent for the use of the use of the sites, a fee for each ton of ground vegetative waste leaving the sites and for our use of the electricity we consume in our operations at these sites. The Contractor Agreement expires on June 30, 2025. Waste Management invoices the Company for rent and utility charges under the Contractor Agreement which are treated as expenses by the Company and NSR LLC invoices Waste Management for processing materials which the NSR LLC performs under the Contractor Agreement and treats such amounts as revenues.
As of June 30, 2023, remaining maturities of lease liabilities were as follows:
2023
2024
2025
2026
2027
2028 and thereafter
2,780,590
3,289,461
-
-
-
342,534
668,260
642,620
651,560
661,214
1,358,209
NOTE 9 –NOTES PAYABLE
Notes Payable are summarized as follows:
Finance Lease Operating Lease
$$ $
$
$
$
$
Jun 30, 2023
$$ $$ $$ $$ $$ $$
Dec 31, 2022
Summary of Outstanding Debt
Category
Real Estate
Equipment
Jasper Acquisition
Other Obligations
Related Parties
Total Debt Obligation
12,551,111
11,315,315
1,760,776
7,662,656
1,500,000
34,789,858
12,704,300
11,311,148
5,276,354
1,641,779
1,500,000
32,433,582
Below is a detailed schedule of the Company’s debt obligations:
Breakdown by Outstanding Note
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Jun 30, 2023
$$
Dec 31, 2022
Page 57 of 96
Seller note payable bearing interest at 6.0%, monthly payments of principal and interest of $82,390 beginning January 2023 with a $9,476,902 balloon due December 2028, secured by mortgaged real estate
11,496,811
11,650,000
Various third-party obligations secured by assets the Company acquired subject to this indebtedness to various third-party creditors, bearing interest at a 5% average rate. Monthly payments of $28,887
SBA Loan bearing interest 8% interest Monthly payments of principal and interest of $31,726 (note retired - June 2023)
Unsecured note payable to seller on bulk equipment purchase, bearing 4.0% interest. First $300,000 payment of principal and interest due March 2022, $200,000 payments of principal and interest due quarterly thereafter until paid in full
789,344
-
971,431
1,433,431
2,896,912
952,208
$$ $$
$$
$$ $$ $$ $$ $$ $$ $$ $$ $$ $$
$$
$$ $$
Note payable to a bank, secured by equipment, bearing interest at 2.95%. Monthly payments of principal and interest in the amount of $28,698 beginning January 2021 and due through December 2025
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $1,699 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $7,050 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $679 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $8,316 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $7,034 due August 2020 through July 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $7,392 due February 2021 through January 2026.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $5,230 due December 2020 through November 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $5,201 due November 2020 through October 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $5,201 due October 2020 through September 2025.
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $679 due August 2020 through July 2025 (note amended)
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $4,662 due August 2020 through July 2025 (note amended)
Note payable to an equipment financing company bearing interest at 3.95%. Monthly payments of principal and interest of $5,201 due August 2020 through July 2025.
882,091
43,548
205,864
18,017
224,036
261,489
235,855
157,554
152,048
142,699
18,017
125,599
147,381
989,033
48,460
201,042
19,365
237,151
275,008
256,538
167,729
162,214
152,968
132,952
0
157,599
OTC Markets Group Inc.
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Page 58 of 96
Note payable to the individual seller of the landscaping and recovery services business to NSR LLC bearing interest at 5%. Monthly payments of $5,000 are due through October 2023 with a $100,000 balloon due November 2023
113,225
140,003
$$
Non-interest bearing note payable to an equipment financing company with monthly principal payments of $5,842 due December 2021 through November 2023
Note payable to an equipment financing company bearing interest at 9%. Due to three month COVID-19 payment suspension, monthly payments of principal and interest increased from $3,933 to $3,993 and extended three months through December 2023
$ 35,970
$ 64,256
$ 34,660
$ 49,349
Note payable to an equipment financing company bearing interest at 5.94%. Monthly payments of principal and interest of $1,174 beginning January 2022 through March 2028
$ 48,178
$ 63,390
Note payable to an equipment financing company bearing interest at 8%. Due to three month COVID-19 payment suspension, monthly payments of principal and interest increased from $2,410 to $2,452 and extended three months through December 2023
Note payable to an equipment financing company bearing interest at 9%. Due to three month COVID-19 payment suspension, monthly payments of principal and interest increased from $1,861 to $1,890 and extended three months through December 2023
$ 21,380
$ 30,495
$ 16,407
$ 23,359
Note payable to an equipment financing company bearing interest at 8%. Due to three month COVID-19 payment suspension, monthly payments of principal and interest increased from $1,808 to $1,840 and extended three months through December 2023
Note payable to an equipment financing company bearing interest at 11%. Due to five
month COVID-19 payment suspension, monthly payments of principal and interest of
$1,692 due from August through July 2023 with a $10,152 balloon payment in August
2023 $
$ 16,032
$ 22,863
Note payable to an equipment financing company bearing interest at 12%. Due to five
month COVID-19 payment suspension, monthly payments of principal and interest of
$1,749 due from August 2020 through June 2023 with a $10,496 balloon payment in July 2023 $
11,640
$ 20,843
Note payable to an equipment financing company bearing interest at 8%. Monthly payments of principal and interest of $977 due through Aug-24
10,382
$ 19,886
$ 11,083
$ 18,236
Note payable to an equipment financing company bearing interest at 8%. Monthly payments of principal and interest of $932 due through Sep-24
Note payable to an equipment financing company bearing interest at 8%. Monthly payments of principal and interest of $766 due through Aug-24
Note payable to an equipment financing company bearing interest at 8%. Due to three month COVID-19 payment suspension, monthly payments of principal and interest increased from $751 to $765 and extended three months through January 2024
$ 101,450
$ 18,236
$ 8,649
$ 14,514
$ 7,367
$ 10,175
OTC Markets Group Inc.
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Page 59 of 96
Note payable to an equipment financing company bearing interest at 10.64%. Monthly payments of principal and interest of $1,060 due through Feb-27
Note payable to an individual bearing interest at 12%. Monthly payments of interest of $5,000 starting on March 17, 2022 and due through February 2023. The principal is due no later than February 17, 2023, with no penalty for prepayment
Note payable to an individual bearing interest at 12%. Monthly payments of interest of $10,000 starting on Dec 15, 2022 and due through Dec 2023. The principal is due no later than Dec 15, 2023, with no penalty for prepayment
Note payable to an equipment financing company bearing interest at 11.45%. Monthly payments of principal and interest of $18,121 due through Mar-27
Note payable to an equipment financing company bearing interest at 11.45%. Monthly payments of principal and interest of $11,312 due through Mar-27
Note payable to an equipment financing company bearing interest at 12.45%. Monthly payments of principal and interest of $7,762 due through Apr-27
Note payable to an equipment financing company bearing interest at 12.13%. Monthly payments of principal and interest of $2,610 due through Apr-27
Note payable to an equipment financing company bearing interest at 12.00%. Monthly payments of principal and interest of $812 due through Jun-28
Note payable to an equipment financing company bearing interest at 10.59%. Monthly payments of principal and interest of $7,067 due through Jun-28
Note payable to an equipment financing company bearing interest at 10.20%. Monthly payments of principal and interest of $4,359 due through Apr-27
Note payable to an equipment financing company bearing interest at 11.86%. Monthly payments of principal and interest of $2,588 due through May-25
Note payable to an equipment financing company bearing interest at 3.61%. Monthly payments of principal and interest of $7,907 due through Apr-27
Note payable to an equipment financing company bearing interest at 3.61%. Monthly payments of principal and interest of $6,937 due through Apr-27
30,208
500,000
1,000,000
672,214
419,625
282,776
95,645
36,517
328,116
165,250
55,064
339,230
297,606
42,656
500,000
1,000,000
729,954
455,668
311,037
105,273
39,129
352,562
182,586
65,101
380,264
333,606
$$ $$
$$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$
$$ $$ $$ $$
Note payable to an equipment financing company bearing interest at 3.49%. Monthly payments of principal and interest of $7,118 due through Apr-27
Note payable to an equipment financing company bearing interest at 7.70%. Monthly payments of principal and interest of $2,416 due through May-27
Note payable to an equipment financing company bearing interest at 6.99%. Monthly payments of principal and interest of $14,056 due through Jun-27
Note payable to an equipment financing company bearing interest at 6.99%. Monthly payments of principal and interest of $2,307 due through Jun-27
306,045
99,536
618,608
101,523
343,157
108,319
649,896
106,658
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Page 60 of 96
Note payable to an equipment financing company bearing interest at 6.99%. Monthly payments of principal and interest of $1,468 due through Jun-27
Note payable to an equipment financing company bearing interest at 6.99%. Monthly payments of principal and interest of $2,780 due through Jun-27
Note payable to a financing company bearing interest at 78%. Weekly payments of principal and interest of $8,719 due through 6/1/2023 (note retired)
Note payable to a financing company bearing interest at 100%. Weekly payments of principal and interest of $5,346 due through 3/1/2023 (note retired)
Note payable to a financing company bearing interest at 117%. Weekly payments of principal and interest of $3,000 due through 3/1/2023 (note retired)
Note payable to an equipment financing company bearing interest at 6.99%. Monthly payments of principal and interest of $5,064 due through Sep-27
Note payable to an equipment financing company bearing interest at 8.3%. Monthly payments of principal and interest of $6,474 due through Oct-27
Note payable to an equipment financing company bearing interest at 8.3%. Monthly payments of principal and interest of $6,474 due through Oct-27
Note payable to an equipment financing company bearing interest at 10.6%. Monthly payments of principal and interest of $3,618 due through Dec-27
Note payable to an equipment financing company bearing interest at 10.6%. Monthly payments of principal and interest of $3,836 due through 12/1/2027 (Note Retired)
64,583
122,328
-
-
-
237,125
295,408
295,408
163,655
162,126
67,848
128,513
143,257
43,777
28,927
240,827
304,244
304,244
165,809
175,831
$$ $$ $$ $$ $$ $$ $$ $$ $$ $$
$$ $$ $$ $$ $$ $$ $$
Note payable to an equipment financing company bearing interest at 3.4%. Monthly payments of principal and interest of $12,767 due through Nov-24
Note payable for real estate bearing interest at 8.0% and balloon pmt at end of term Monthly interest of $7,029 with balloon of $1,054,300 due through Aug-25
Note payable to an equipment financing company bearing interest at 7.5%. Monthly payments of principal and interest of $11,850 due through Sep-28
Note payable to an equipment financing company bearing interest at 7.5%. Monthly payments of principal and interest of $2,689 due through Sep-28
Note payable to an equipment financing company bearing interest at 7.5%. Monthly payments of principal and interest of $830 due through Sep-28
Note payable to an equipment financing company bearing interest at 8.0%. Monthly payments of principal and interest of $12,135 due through Nov-28
Note payable to an equipment financing company bearing interest at 8.0%. Monthly payments of principal and interest of $10,967 due through Nov-28
211,519
1,054,300
607,523
137,842
42,540
630,658
569,999
271,826
1,054,300
654,943
148,601
45,861
677,231
612,092
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Page 61 of 96
Note payable to an equipment financing company bearing interest at 10.0%. Monthly payments of principal and interest of $2,032 due through Sep-24
Note payable to an equipment financing company bearing interest at 10.0%. Monthly payments of principal and interest of $2,482\ due through Sep-24
Note payable to an equipment financing company bearing interest at 7.5%. Monthly payments of principal and interest of $1,220 due through Sep-27
Note payable to a 1.49 factor rate on $850,000 Weekly payments of principal and interest of $9,333 due through 6/1/2023 (note retired)
Convertible Note bearing interest only payments of 10% or $9,167
Note payable to a 1.49 factor rate on $850,000 Weekly payments of principal and interest of $14,530 due through 5/29/2023 (note retired)
Note payable to a 1.41 factor rate on $850,000 Weekly payments of principal and interest of $18,498 due through Apr-24
49,261
28,485
44,019
-
1,100,000
-
645,582.85
40,690
49,711
59,220
185,815
1,100,000
0
0
$$
$$
$$
$$ $$
$$ $$
$$ $$ $$ $$ $$ $$ $$ $$ $$ $$ $$
Note payable to a 1.49 factor rate on $500,000 Weekly payments of principal and interest of $26,250 due through Aug-23
Note payable to a 1.40 factor rate on $300,000 Weekly payments of principal and interest of $26,250 due through 6/13/2023 (note retired)
Note payable to a 1.40 factor rate on $350,000 Weekly payments of principal and interest of $30,625 due through 6/13/2023 (note retired)
Note payable to an equipment financing company bearing interest at 10.59%. Monthly payments of principal and interest of $3,835 due through Feb-28
Note payable to an equipment financing company bearing interest at 9.89%. Monthly payments of principal and interest of $7,549 due through Jan-28
Note payable to an equipment financing company bearing interest at 9.89%. Monthly payments of principal and interest of $7,549 due through Jan-28
Note payable to an equipment financing company bearing interest at 7.04%. Monthly payments of principal and interest of $92,632 due through Apr-24
Note payable to a 1.49 factor rate on $150,000 Daily payments of principal and interest of $2,502 due through Jul-23
Note payable to a 1.49 factor rate on $150,000 Daily payments of principal and interest of $2,502 due through Jul-23
Note payable to a 1.49 factor rate on $330,000 Daily payments of principal and interest of $9,893 due through 6/1/2023 (originated and repaid in same qtr)
Note payable to a 1.47 factor rate on $1,000,000 Daily payments of principal and interest of $14,790 due through Nov-23
92,593.69
-
-
173,547
346,964
346,964
926,324
1,669
1,669
-
931,592
0
0
0
0
0
0
0
0
0
0
0
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Page 62 of 96
Note payable to a 1.49 factor rate on $1,000,000 Daily payments of principal and interest of $17,845 due through Oct-23
Note payable to a 1.49 factor rate on $500,000 Daily payments of principal and interest of $10,707 due through Oct-23
Note payable to a 1.49 factor rate on $500,000 Daily payments of principal and interest of $9,369 due through Oct-23
Note payable to a 1.49 factor rate on $250,000 Daily payments of principal and interest of $5,071 due through Oct-23
Convertible Note bearing interest only payments of 12% or $192,000 annually.
Total notes payable to unrelated parties
Short-term portion of notes payable
Long-term portion of notes payable
1,000,000
500,000
500,000
250,000
1,600,000
34,789,858
10,097,581
24,692,277
0
0
0
0
0
32,433,582
8,212,178
24,221,403
The schedule of future maturities on the above notes are as follows:
Note Payable - Related Parties
Note Payable – Debt Restructure
Year
$$ $$ $$
$$
$$
$$
$$ $$
June 2023
$$
Dec 2022
2028 & after
2023
2024
2025
2026
2027
10,972,238
3,973,817
4,461,942
2,769,548
2,170,065
10,442,248
5,074,985
3,533,458
3,319,147
2,717,453
4,918,006
12,870,553
For the six months ended June 30, 2023 and July 2, 2022, the Company borrowed $1,500,000 and $500,000, respectively, from John Spencer on notes issued February 5, 2022 and December 15, 2022 bearing 12% simple interest over a one year term. The February 5, 2022 note was subsequently extended an additional 12 months on February 4, 2023. The Company made monthly interest only payments on these note(s) payable as of June 30, 2023.
The Company restructure several equipment loans during the three-month ending June 30, 2023. The restructuring did not affect the term of the loan but allowed the Company to forgo monthly payments for a period of 30 to 90 days without recourse.
Convertible Notes
On November 8, 2022, we issued to a private investor a convertible note in the amount of $1,100,000 bearing 10% interest at a conversion price of $0.50 per share of common stock. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
On May 5, 2023, we issued to a private investor a convertible note in the amount of $1,200,000 bearing 12% interest at a conversion price of $0.50 per share of common stock. On May 12, 2023 the value of the convertible note was increased to $1,600,000 bearing the same 12% interest and $0.50 conversion price. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 63 of 96
NOTE 10 - STOCKHOLDERS’ EQUITY
Preferred Stock
On December 31, 2019, the Company’s Board of Directors adopted articles of incorporation in the state of Delaware authorizing, without further vote or action by the stockholders, to create out of the unissued shares of the Company’s common stock, $0.0001 par value Preferred Stock. The Board of Directors is authorized to establish, from the authorized and unissued shares of Preferred Stock, one or more classes or series of shares, to designate each such class and series, and fix the rights and preferences of each such class of Preferred Stock; which class or series shall have such voting powers, such preferences, relative, participating, optional or other special rights, and such qualifications, limitations or restrictions as shall be stated and expressed in the resolution or resolutions providing for the issuance of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof. The articles of incorporation and designation authorizes the issuance of 5,000,000 shares of Preferred Stock, of which 100 shares have been designated as Series A Preferred Stock, of which 90 of Series A are issued and outstanding as of June 30, 2023. Each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Series A Preferred Stock held by such holder as of the record date for determining stockholders entitled to vote on such matter, with each share casting a vote equal to: the quotient of the sum of all outstanding shares of common stock together with any and all other securities of the Company that provide for voting on an “as converted” basis divided by 0.99.
Common Stock
As of June 30, 2023, and December 31, 2022, the Company had 245,000,000 shares of common stock authorized with a par value of $0.0001. There were 84,360,893 and 74,631,742 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively.
Equity Transactions During the Period
The following issuances of common stock affected the Company’s Stockholders’ Equity:
Three months ending March 31, 2023
On January 1, 2023, we issued 250,000 shares of Common Stock to a private investor based on a subscription price of $1.00 per share with an aggregate value of $250,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On January 1, 2023, we issued 1,603 shares of Common Stock to an independent Board of Director at an aggregate value of $10,003 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On January 1, 2023, we issued 1,603 shares of Common Stock to an independent Board of Director at an aggregate value of $10,003 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On January 1, 2023, we issued 1,603 shares of Common Stock to an independent Board of Director at an aggregate value of $10,003 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On January 4, 2023, we issued 250,000 shares of Common Stock to a private investor based on a subscription price of $1.00 per share with an aggregate value of $250,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act
On January 30, 2023, we issued 13,181 shares of Common Stock to the Company’s CFO based on a employment agreement with an aggregate value of $1.32. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On March 2, 2023, we issued 4,538 shares of Common Stock to an independent Board of Director at an aggregate value of $9,167 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 64 of 96
On March 8, 2023, we issued 75,000 shares of Common Stock to a private investor based on a subscription price of $1.00 per share with an aggregate value of $75,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act
On March 8, 2023, we issued 100,000 shares of Common Stock to a private investor based on a subscription price of $1.00 per share with an aggregate value of $100,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act
On March 21, 2023, we issued 33 shares of Common Stock to an independent Board of Director at an aggregate value of $0 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On March 21, 2023, we issued 33 shares of Common Stock to an independent Board of Director at an aggregate value of $0 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On March 21, 2023, we issued 33 shares of Common Stock to an independent Board of Director at an aggregate value of $0 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On March 31, 2023, we issued 50,000 shares of Common Stock to a private individual with an aggregate value of $5 based on a mutual release agreement. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
Three months ending June 30, 2023
On May 16, 2023, we issued 127,457 shares of Common Stock to a vendor at an aggregate value of $63,728.50 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On May 19, 2023, we issued 7,000,000 shares with an aggregate value of $8,820,000 in exchange for payment of raw materials. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On May 23, 2023, we issued 2,000,000 shares with an aggregate value of $2,700,000 in exchange for payment of raw materials. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On May 30, 2023, we issued 27,000 shares of Common Stock to an independent Board of Director at an aggregate value of $0 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On May 30, 2023, we issued 27,000 shares of Common Stock to an independent Board of Director at an aggregate value of $0 in exchange for services. These shares were issued in reliance on Section 4(a)(2) of the Securities Act.
On June 23, 2023, we issued 50,000 shares of Common Stock to a private investor based on a subscription price of $1.00 per share with an aggregate value of $50,000. These shares were issued in reliance on Section 4(a)(2) of the Securities Act
Convertible Notes
On November 8, 2022, we issued to a private investor a convertible note in the amount of $1,100,000 bearing 10% interest at a conversion price of $0.50 per share of common stock. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
On May 5, 2023, we issued to a private investor a convertible note in the amount of $1,200,000 bearing 12% interest at a conversion price of $0.50 per share of common stock. On May 12, 2023 the value of the convertible note was increased to $1,600,000 bearing the same 12% interest and $0.50 conversion price. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
Warrants
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 65 of 96
On October 5, 2022, we issued to a service provider a warrant to purchase up to 2,000,000 shares of Common Stock at an exercise price of $1.00 per share (the “ACCEL Warrant”); as of June 20, 2023 the outstanding shares were 1,650,000. These securities were issued in reliance on Section 4(a)(2) of the Securities Act.
On December 13, 2022, we issued to a private investor a warrant to purchase up to 25,000 shares of Common Stock in connection with the private investors common stock purchase; as of June 20, 2023 the outstanding shares were 25,000. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
On December 13, 2022, we issued to a private investor a warrant to purchase up to 50,000 shares of Common Stock in connection with the private investors common stock purchase; as of June 20, 2023 the outstanding shares were 50,000. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
On December 22, 2022, we issued to a private investor a warrant to purchase up to 50,000 shares of Common Stock in connection with the private investors common stock purchase; as of June 20, 2023 the outstanding shares were 50,000. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
On December 22, 2022, we issued to a private investor a warrant to purchase up to 35,000 shares of Common Stock in connection with the private investors common stock purchase; as of June 20, 2023 the outstanding shares were 35,000. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
On December 22, 2022, we issued to a private investor a warrant to purchase up to 25,000 shares of Common Stock in connection with the private investors common stock purchase; as of June 20, 2023 the outstanding shares were 25,000. These securities were issued in reliance on Section 4(a)(2) of the Securities Act
NOTE 11 – ACQUISITIONS
Mulch Manufacturing, Inc. Acquisition
On January 31, 2020, the Company entered into a Business Combination Agreement (the “Mulch Acquisition”) with Mulch Maufaturing, Inc (“MM”) and its sole shareholder, Ralph Spencer (“Spencer”) (collectively the “MM Parties”), pursuant to which the Company acquired all of the shares of MM. Upon closing, MM became a wholly owned subsidiary of SGTM.
Pursuant to the Mulch Acquisition, at the effective time of the acquisition:
? All of MM’s outstanding common stock was exchanged for an aggregate of 40,000,000 shares of SGTM’s common stock.
? One million shares previously issued to the MM shareholder in connection with the sale of equipment by MM to NSR LLC in November 2019 were cancelled.
? There were specific excluded assets that were retained by Spencer and treated as transferred to Spencer prior to the acquisition consisting of cash, real estate, and certain vehicles and equipment. Spencer agreed to allow the Company to use some of the real estate rent-free until January 31, 2022, at which time the Company has the option of either leasing or purchasing it at the fair market value (see Note 12). The Company has estimated the value of the rent abatement and included it as an ROU asset, as noted below, in the amount of $817,503.
? All of the existing MM notes, notes, accounts receivable, and inventory at the date of the Mulch Acquisition are included in the acquisition and the Company has immediate possession of them by its ownership of MM. However, the 40 million shares of the Company’s common stock that was issued as consideration was based on these assets being removed from MM prior to the acquisition. The value of these assets are valued separately from the share exchange and that certain demand promissory note payable to Spencer in the amount of approximately $14 million was adjusted to reflect the value of the inventory, accounts receivable, and any other sums lent by Spencer to MM.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 66 of 96
The Company accounted for these transactions in accordance with the acquisition method of accounting for business combinations. An independent appraisal, made in February 2020, determined the fair market value of MM’s property and equipment to be $17,228,295. Assets and liabilities of the acquired business were included in the audited condensed consolidated balance sheets as of December 31, 2022 and January 1, 2022, based on their respective estimated fair values on the date of acquisition. Based on a closing market price of $0.15 per share on the January 31, 2020, business combination date, the assumption of net liabilities plus a bargain purchase recognition and asset write-up.
Day Dreamer Productions LLC Acquisition
The Company entered into an agreement to acquire 100% of the membership interest of Day Dreamer Productions, LLC around January 18, 2021, in exchange for 200,000 shares of the Company’s stock. This transaction was closed on December 30, 2021, when the Company issued the shares to its sole member. This member was also retained as an employee with responsibility for managing the activities of Day Dreamer Productions, LLC.
Jasper Sawmill Acquisition
Jasper, Florida. In December 2021, we closed on an acquisition of a sawmill in Jasper, Florida. The Jasper Mill is capable of sawing southern yellow pine lumber as well as residual products, including pine bark, pine chips, pine dust, and pine shavings. The Company acquired this facility for $7.5M, assumed the sellers debt obligations under a distressed sale due to COVID-19 and recorded a bargain purchase gain of $2.2M based upon appraised value of $9.8M.
Beaver Sawmill Acquisition
Beaver, Washington. The Company purchased this facility in 2 transactions which occurred on December 31, 2021 and March 16, 2022. The building assets were transacted on December 31, 2021, through the sale of 400,000 shares of common stock @ $8.05 per share or $3,220,000. The Company recorded the value of the building assets at $9.24 due to the valuation of the Company’s common stock on the building asset closing date which adjusted the purchase price valuation for building assets from $3,220,000 to $3,696,000. The Company purchased the land assets on March 16, 2022, through cash proceeds totaling $1,025,475. The acquisition of the facility is characterized as a distressed sale resulting from global economic situations caused by COVID-19. The Company had the facility appraised and was provided a “as is” property valuation of $20,039,580, versus purchase price of $4,721,475. The Company recorded a bargain purchase gain of $15,318,105 across 2 fiscal years, ending January 2,2022 and December 31, 2022, due to the timing of the transactions. The Beaver facility is approximately 100,000 square feet and resides on 44.6 acres. The facility will be capable of producing 100+ million board feet of lumber per year once retrofitted for production. The planned operations at the Beaver Washington facility is earmarked to begin at the close of 2023 allowing the Company launch our operations on the West Coast which will increase our lumber, mulch, and soil/fertilizer distribution to the west coast of the United States. The mill is located in a federally approved Economic Opportunity Zone and it is eligible for certain tax credits. Our ownership and operation of the mill is supported by the nearby municipal and state governments.
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Inventory Purchases VRM Biologik
On August 9, 2022, the Company entered into a restricted sublicense agreement (collectively with the VRM Sublicense Amendment defined below, the “VRM Sublicense”) with a soil technology company, VRM Global Holdings Pty Ltd (“VRM Global”), and its wholly owned subsidiary VRM International PTY LTD (“VRM International,” together with VRM Global, collectively referred to herein together as the “Licensor”). The VRM Sublicense was amended on October 12, 2022 (the “VRM Sublicense Amendment”), to expand collaboration between the Company and Licensor and add the Licensor’s wholly owned subsidiary VRM Biologik Inc. (the “VRM Biologik”), among other things.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 67 of 96
Pursuant to the VRM Sublicense, the Licensor granted the Company a restricted sub-license, pursuant to which the Licensor will allow the Company to use certain rights and entitlements and provide the Company with certain catalyst ingredients which will allow the Company to manufacture Humisoil® and XLR8® Bio (the “VRM Products”). These products are made using wood materials provided by the Company and the Licensor’s technology and catalyst ingredients to be acquired by the Company from the Licensor or produced by the Company pursuant to the VRM Sublicense. In addition, the VRM Sublicense grants the Company the non-exclusive right to distribute the VRM Products throughout the U.S., the exclusive right to market and distribute these products in packaging of less than one cubic yard in addition to the right to exclusively manufacture the Licensor’s catalyst ingredients in Florida, Washington State and the Caribbean (the “Exclusive Territory”).
The Company agreed to sell to Licensor the VRM Products manufactured by the Company in amounts determined in the sole discretion of the Company at an agreed-on price. In addition, Licensor has agreed to assign to the Company rights held by the Licensor to repurchase the VRM Products manufactured by others within the Exclusive Territory and an option to acquire such rights outside such territory.
In addition, pursuant to the VRM Sublicense Amendment, the Company acquired from Licensor 10% of VRM Biologik, certain catalyst ingredients for future delivery to be used in the Company’s production of Humisoil®, XLR8® Bio and other products, co-location of Licensor’s production facilities with the Company’s facilities in Florida and the state of Washington and development of an agreed plan to complete licensed manufacture of soil amendment catalysts in other strategic locations across the U.S. The catalyst ingredients, along with other inputs to be acquired by the Company from the Licensor and other suppliers are expected to be sufficient to produce a minimum of 4,000,000 cubic yards of Humisoil® and its companion products.
The Term of the VRM Sublicense is for a period of ten years from October 12, 2022 with the option to renew it for a five- year period. The VRM Sublicense may be terminated by written agreement of the parties, or immediately by the Licensor if the Company amends or alters any of the inputs, outputs, products, marks, materials, media, recipes, or any of the processes as described in any of the manuals provided by Licensor to the Company except as permitted by the VRM Sublicense or appointment of a liquidator, administrator, receiver, receiver and manager, mortgagee in possession or other external controller appointed by virtue of the laws of insolvency or appointed by a creditor, by VRM Global or by the holder of security over the assets of VRM Global or an assignment of VRM Global’s rights pursuant to the VRM Sublicense without the approval of VRM Global. VRM Global may terminate the VRM Sublicense if at any time the Company is in breach of any of the terms or conditions of the VRM Sublicense and it fails to remedy such breach within 30 days of notice from Licensor. In consideration of the grant of the VRM Sublicense, the Company initially issued to the Licensor, 500,000 shares of the Company’s common stock upon execution of the VRM Sublicense and an additional 6,000,000 shares upon execution of the VRM Sublicense Amendment. Additionally, the Company agreed to pay the Licensor an aggregate of $1,000,000 in cash in two installments, with the first installment of $500,000 payable within 10 days of the Company’s completing an initial public offering of its common stock in order to raise cash (the “IPO”) and the second payment due on the one-year anniversary of the date of the IPO. In addition, pursuant to the VRM Sublicense Amendment, the Company agreed to pay VRM Global an aggregate of $7,200,000 payable in tranches of $3,600,000 by December 31, 2022 and two payments of $1,800,000 on each of May 31, 2023 and October 31, 2023. If the Company does not complete the IPO by February 4, 2023 or make the $500,000 payment within 10 days of such date, VRM Global may terminate the VRM Sublicense and, the Company will be obligated to pay the Licensor its then market rates for all inputs utilized by the Company in the production of Humisoil®, XLR8® Bio and other products produced using these inputs during the term of the VRM Sublicense.
On May 15, 2023 the Company, VRM International, VRM Global and VRM Biologik entered into an amendment to the VRM Sublicense Agreement whereby the Company agreed to issue VRM Global 7,000,000 shares of its common stock in lieu of the aggregate of $7,200,000 in cash payments and the $1,000,000 cash payments previously required to be made by the Company pursuant to the VRM Sublicense.
New Earth Technologies PTE, LTD
On May 17, 2023 (the “New Earth Effective Date”), the Company entered into a product purchase agreement (the “Product Purchase Agreement”) with New Earth Technologies PTE, LTD (“New Earth”), whereby the Company purchased 1,565,520 gallons of catalyst ingredients (the “Catalyst Products”) to manufacture an estimated aggregate 4 million cubic yards of Humisoil, XLR8 Bio and other products. The purchase price for the ingredients consisted of 2,000,000 shares of our unregistered common stock which we
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issued to New Earth on May 22, 2023 and a cash payment of $5,000,000 payable in 60 monthly payments of $83,333 commencing on June 17, 2023. While the Product Purchase Agreement requires delivery of the Catalyst Products on the New Earth Effective Date, we have orally agreed with New Earth]to receive shipments of the ingredients in the coming months. The Product Purchase Agreement cannot be terminated by either party and entitles either party to bring an action for specific performance if any provision of the agreement is not performed in accordance with its terms, in addition to any other remedy to which such party is entitled at law or in equity. The Agreement also contains additional covenants, representations and warranties that are customary of product purchase agreements.
Legal Claims
Ralph Spencer Litigation
First Complaint and Settlement.
On March 25, 2021, the Company filed a civil complaint (the “First Complaint”) in Florida’s Ninth Judicial Circuit Court in Orange County, Florida against Ralph Spencer (“Spencer”), the former owner and CEO of Mulch Manufacturing, Inc., alleging certain tortious interference with the Company’s business operations and dealings. On April 1, 2021, the Company was granted an Emergency Temporary Injunction by the Court enjoining Mr. Spencer from, among other things, further attempts to interfere with the Company’s business operations.
On August 16, 2021, the parties entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”), wherein, among other provisions, all outstanding debt was extinguished. The Company recognized a $17,484,728 capital contribution, credited to Additional Paid-in Capital, from the extinguishment of debt.
The Company also agreed to pay Spencer $25,650,000 plus interest as follows:
(a) Issuing Spencer a promissory note in the amount of $10,650,000 accruing interest at 6% per annum secured by four properties located in Florida and another in Georgia (the “Settlement Note”). The Settlement Note is amortized monthly over 20 years with a balloon payment of any outstanding balance on its third anniversary. The Company is current on all Settlement Note obligations as of the date of this Registration statement; and
(b) Paying Spencer a total of $15,000,000 in exchange for the redemption of Spencer’s 40,000,000 shares of common stock and any and all ownership interests in which he may have or claim (the “Redemption Payment”). The Redemption Payment is to be paid to Spencer according to the following schedule: (i) $3,300,000 on October 15, 2021 in exchange for 8,797,800 common stock shares; and (ii) twenty-four (24) payments of $487,500 on the 15th of each month, commencing November 15, 2021, each for 1,300,091.67 common stock shares. Spencer executed a letter of instruction to the Company’s transfer agent, Pacific Stock Transfer, and provided all shares to the transfer agent to allow for the immediate redemption upon each payment.
On October 11, 2021, the First Complaint was voluntarily dismissed with prejudice as provided for in the Settlement Agreement.
Second Complaint.
On April 19, 2022, the Company together with its wholly owned subsidiary Mulch Manufacturing, Inc., (referred to together as the “Plaintiffs”) filed a civil complaint in Florida’s Ninth Judicial Circuit Court in Orange County, Florida Case No. 2022-CA- 003280-O (the “Second Complaint”) against Spencer alleging that (i) Spencer breached the Settlement Agreement by disclosing confidential settlement terms to third parties and violating the non-disparagement provisions by repeatedly disparaging and defaming Anthony Raynor, Tami Raynor, and other officers, agents, and employees of the Plaintiffs, (ii) that Spencer engaged in certain tortious interference with the Company’s advantageous business relationships, and (iii) that Spencer engaged in a systematic campaign to defame, disparage and spread false statements about the Company and its employees, agents and representatives, including family members of Company employees.
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On December 13, 2022 (the “Effective Date”), the Plaintiffs, Tami Raynor and Anthony Raynor (collectively, “Raynor”), and Ralph Spencer (“Spencer”), by and through his attorney-in-fact Christie Spencer and his court-appointed attorney, Christine J. Lomas, and Christie Spencer, as Ralph Spencer’s attorney-in-fact (together with Spencer, the “Spencer Parties”) ( hereafter “the “Parties” or a “Party”), entered into a Settlement Agreement, (hereafter the “December 2022 Settlement Agreement”), in relation to the Second Complain (the “Business Court Litigation”).
As a complete settlement of the dispute that is the subject of the Business Court Litigation, the Parties agreed to the following material terms as provided for in the December 2022 Settlement Agreement:
Terms Regarding Promissory Note, Mortgage, and Deed to Secure Debt. Within five days of the Effective Date, Spencer and RJ Enterprises of Florida, LLC (“RJ Enterprises”) agreed to convey certain real estate located in Nassau County, Florida (the “RJ Parcels”) to the Company’s wholly owned subsidiary Mulch Manufacturing, Inc. (“Mulch Manufacturing”) free and clear from any and all interests, mortgages, liens, encumbrances, and clouds on the title, including a $200,000 mortgage from RJ Enterprises to Weber Holdings, Ltd. The RJ Parcels are comprised of two tracts of land, one of which is approximately 2.93 acres and the other is approximately 14.9 acres, both of which are located off of U.S. Highway 301 in Callahan, Florida 32011. The Company accounted for this transaction by recording additional fixed assets and APIC by $200,000, respectively, as the
In addition, Spencer agreed to release the real property located at 108 Copeland Street, Jacksonville, Florida 32204 (the “Copeland Parcel”) from the mortgage securing a debt in the original principal amount of $10,650,000 issued by the Company in favor of Spencer as provided for in the Settlement Agreement (the “August 2021 Mortgage”). Further, the Parties agreed to amend the August 2021 Mortgage and the underlying promissory note to increase the principal balance to $11,500,000, which amount will be amortized over twenty (20) years with any and all remaining amounts of principal and interest becoming due and payable sixty months after the date of amendment. The August 2021 Mortgage will be further modified to add the RJ Parcels as collateral security and limit the inspection rights of Spencer and certain other persons and restrict Spencer from selling, transferring, assigning, gifting, encumbering, or placing any liens on the August 2021 Mortgage for a period of two years from the date it is amended. The Company accounted for this transaction by recording additional fixed assets and Notes Payable by $850,000, respectively.
Terms Regarding Common Stock of the Company. According to the terms of the December 2022 Settlement Agreement, the Company agreed with Spencer to redeem 22,101,556 shares of the Company’s common stock he owns (the “Spencer Shares”) in exchange for the Company’s payment to Spencer of $1,000,000. The Company’s obligation to pay Spencer is conditioned on Spencer delivering: (i) a letter of instruction directing the Company’s transfer agent to rescind the issuance of the Spencer Shares, (ii) a quit claim deed to the RJ Parcels to Mulch Manufacturing and (iii) a release of the Copeland Property from the August 2021 Mortgage. In addition, Spencer has represented that he has no rights, options, or warrants to buy additional shares of common stock or any other stock or ownership interests in the Company, that Spencer has not sold, assigned, transferred, encumbered, or gifted, directly or indirectly, any stock, rights, options, warrants, or other ownership interests in the Company to any person or party and that he has no other ownership interests whatsoever in the Company or Mulch Manufacturing.
The December 2022 Settlement Agreement also provides that the Company shall pay Spencer an aggregate of $1,500,000 in installments of $500,000 on April 1, 2023, August 1, 2023 and December 1, 2023 conditioned on Spencer complying with his obligations under the December 2022 Settlement Agreement (the “Additional Amounts”). On December 27, 2022, these conditions were fulfilled and the Company completed the redemption of the 22,101,556 shares of common stock.
Finally, the December 2022 Settlement Agreement provides that the Parties will execute and file a joint stipulation in Business Court Litigation that provides in the event Ralph Spencer and Christie Spencer fail to comply with certain non-harassment obligations provided for in the December 2022 Settlement Agreement, then the unpaid balance of the Additional Amounts will be paid into the registry of the court or an agreed-upon third party as they become due to be held in escrow and released upon agreement or as directed by an order of the court.
NOTE 13 – CONCENTRATION OF CREDIT RISK
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Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of June 30, 2023, the Company did not have any deposit amounts in excess of the FDIC insured limit.
For the six months ended June 30, 2023, one customer accounted for 17% of revenue and accounts receivable.
NOTE 14 – SUBSEQUENT EVENTS
Litigation
The Company is party to certain legal proceedings from time to time incidental to the conduct of its business (including the matters described below). The Company recognizes liabilities for any contingency that is probable of occurrence and reasonably estimable. The Company continually assesses the likelihood of adverse judgments or outcomes in such matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts.
Such matters included an action against one of the Company’s subsidiaries for settlement of outstanding legal fees relating to an unsuccessful transactions. Based on available information to date, the Company estimates that a resolution of these matters would result in a probable loss of at least $391,137, and was recognized as an accrual on the consolidated balance sheet.
Given the uncertainty inherent in litigation and investigations, the Company does not believe it is possible to develop estimates of reasonably possible losses (or a range of possible losses) in excess of current accruals for such matters. The nature of legal proceedings is such that the Company cannot assure the outcome of any particular matter, and an unfavorable ruling or development could have a materially adverse effect on our consolidated financial position, results of operations and cash flows in the period in which a ruling or settlement occurs. However, based on information available to the Company’s management to date, the Company’s management does not expect that the outcome of any matter pending against the Company is likely to have a materially adverse effect on the Company’s consolidated financial position, results of operations, cash flows or liquidity.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this quarterly report, including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this annual report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the SEC.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes thereto contained elsewhere in this quarterly report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Overview
The Sustainable Green Team is a provider of environmentally focused business in the arbor care, disposal, recycling, mulch and manufactured soil amendments business. In our business, many of the ingredients and processes we use in the manufacturing process of our products minimize their impact on the environment and are compliant with all applicable environmental laws. We refer to this as an “environmentally focused” business. The Company is a collector of tree debris (“feedstock”), throughout the southeast
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
region of the United States. The Company beneficially-reuses feedstock to manufacture wood-based mulch and lumber products that are sold nationwide. The Company has a division that manufactures and sells soil and proprietary mulch colorants and coloring equipment.
Historically, the harvest and processing of wood has resulted in timber waste and feedstock being sent to landfills and disposal sites, essentially collecting and disposing of useful products. The Sustainable Green Team’s mission is to address this traditional “collect-and-dispose” wasteful model, partly by partnering with a large waste management company, thereby turning feedstock that would otherwise be thrown away into reusable products such as mulch and soil. We believe that our efforts to recycle waste into a biodegradable water conserving mulch product, use of machinery powered by electricity instead of diesel fuel and the production of manufactured soil products forms the basis of our environmentally focused business.
The Sustainable Green Team operates as a holding company with two operating subsidiaries:
? National Storm Recovery, LLC (“NSR”), a Delaware LLC, operating as “Central Florida Arborcare”, provides arbor care, tree trimming, and storm debris clean-up and disposal services, primarily in the southeastern United States with nationwide capabilities; and
? Mulch Manufacturing, Inc. (“MMI”), an Ohio corporation, manufactures mulch, lumber and soil products in the United States midwest and southeast regions, and the Ohio Valley. MMI has nationwide distribution channels.
As illustrated below, the Company’s vertically integrated business begins with the collection of feedstock through NSR. Feedstock is then beneficially reused by MMI, for recycling and manufacturing of lumber and mulch. We package our products and sell them to retailers, wholesalers, landscapers, and garden centers nationwide. The diagram also includes soil products that we expect to begin manufacturing and selling in 2023.
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We process feedstock through several processing facilities we own that are strategically located in the southeast region of the United States. The Company owns sawmills in Homerville, Georgia; Jasper, Florida; and Beaver, Washington. The Homerville sawmill produces cypress bark for our mulch product lines, as well as marketable lumber. We closed on the acquisitions of the Jasper and Beaver sawmills in December 2021. We currently purchase our pine bark from other sawmills. We expect to commence both lumber and mulch production at the Jasper mill and lumber and soil production at the Beaver mill once a funding source has been secured to purchase raw materials and for working capital for the Jasper sawmill and raw materials, equipment, permitting costs and for working capital for the Beaver sawmill. These planned expenditures are included in our disclosure regarding anticipated capital expenditures. Please see “Management’s Discussion & Analysis of Financial Condition and Results of Operations – Material Cash Requirements” and “Risk Factors – We will require additional funding for our growth plans, and such funding may result in a dilution of your investment.”
The MMI division also creates proprietary mulch dyes, colorants, and mulch processing equipment. We manufacture a range of mulch products with different textures and colors for specific landscape needs using our coloring technology. For example, MMI’s capabilities were instrumental in developing our innovative line of colored mulches that we market under our Nature’s ReflectionsTM brand, including our patented Softscape® products. The Company also sells to other companies that produce landscaping materials colorants and Cheetah brand coloring equipment that it manufactures.
The Company has begun a transition from a legacy manufacturer to a GreenTech provider resulting from the October 2022 licensing agreement with VRM Biologik. This licensing agreement allows the Company to manufacture and distribute our new product line called HumiSoil which has a net zero carbon output and accelerates the production of humus from 30-50 years, in its natural state, to 6 months based upon catalyst application. When humus is present in the soil, it improves its structure and water-holding capacity. It also enhances nutrient retention, promotes root development, and supports the growth of beneficial soil bacteria and fungi. These microorganisms contribute to nutrient cycling and availability, which:
(reduces the reliance on synthetic fertilizers.)
By using Humisoil, you can effectively replenish and maintain the humus content in your soil. This helps to improve soil fertility, increase crop yields, and promote overall plant health, all while reducing the need for chemical fertilizers. It’s a wonderful eco-friendly solution for sustainable agriculture and gardening practices. The Company has raw materials to produce in excess of 8,000,000 yards of this product which has a wholesale price ranging from $38.00 to $400 per yard based upon channel of distribution. The Company has received purchase order(s) exceeding $46M which it will begin to satisfy in the second half of 2023. Based upon purchase order receipt the company expects to expand gross profit from 11.1% for the six month period ending June 30, 2023 to a projected 19.9% by December 31, 2023; gross profit is projected to exceed 43.0% in 2024 and beyond.
Recent Developments
None.
Results of Operations
For the Three and Six Months Ended June 30, 2023 Compared to the Three and Six Months Ended June 30, 2022.
Net Revenue
Net revenue was $77,262,676 for the three months ended June 30, 2023, compared to net revenue of $12,224,356 for the three months ended July 2, 2022. The decrease of $4,961,680 was the result of decreased sales from our Mulch Manufacturing division as the Company focuses inventories on the delivery of its new high margin soil products which are expected to begin shipping in the second half of 2023.
Net revenue was $15,027,526 for the six months ended June 30, 2023, compared to net revenue of $22,553,804 for the six months ended July 2, 2022. The decrease of $7,526,279 was the result of prior years’ industry wide inventory overstock caused by a general decline in the overall Mulch Segment. The Company also optimized one of its core locations, Homerville, during the 1st half
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of 2023. This optimization is expected to significantly increase revenues of lumber, mulch and soil products with limited adjustments to current labor and overhead rates.
Cost of Goods Sold
Cost of goods sold was $6,588,969 for the three months ended June 30, 2023, compared to cost of goods sold of $12,034,443 for the three months ended July 2, 2022. The decrease of $7,605,483 was due to lower sales volume.
Cost of goods sold was $1,692,839 for the six months ended June 30, 2023, compared to cost of goods sold of $2,024,508 for the six months ended June 30, 2022. The decrease of $331,669 was due to lower sales volume.
Gross Profit
Gross profit was $673,707 for the three months ended June 30, 2023, compared to gross profit of $189,913 for the three months ended July 2, 2022. The gross profit percentage was 9.3% for the three months ended June 30, 2023, compared to 1.6% for the three months ended July 2,2022. The increase is because the company restricted sales of low and negative margin transactions as it uses this inventory for the creation of substantially high margin soil products.
Gross profit was $1,391,508 for the six months ended June 30, 2023, compared to gross profit of $1,312,305 for the six months ended July 2, 2022. The gross profit percentage was 9.3% for the six months ended June 30, 2023, compared to 5.8% for the six months ended July 2, 2022. The increase is because the company restricted sales of low and negative margin transactions as it uses this inventory for the creation of substantially high margin soil products.
Operating Expenses
Operating expenses for the three months ended June 30, 2023, were $2,292,397, compared to $1,301,862 for the three months ended July 2, 2022. The variances were due to the following: (i) increased advertising expense tied to the Company’s new soil product $329,995 (ii) amortization expense of VRM licensing agreement $239,900 (iii) annual payment of Delaware franchise tax $229,609 (iv) remaining balance associated with accounting and legal fees associated with the company’s filing of Form 10 and other administrative charges.
Operating expenses for the six months ended June 30, 2023, were $4,946,771, compared to $2,571,629 for the six months ended July 2, 2022. The variances were as follows: (i) increased advertising expense tied to the Company’s new soil product $654,612 (ii) amortization expense of VRM licensing agreement $479,980 (iii) annual payment of Delaware franchise tax $229,609 (iv) accounting legal and professional fees associated with the company’s filing of Form 10 $551,373 (v) 2022 insurance audit true up $193,513 (vi) and other administrative charges.
Other Income / (Expense)
Other income / (expense) for the three months ended June 30, 2023, were $(2,444,593), as compared to $795,465 for the three months ended July 2, 2022. Interest expense and loan origination fees represent $1.5M of the current period expense. Additional expenses include Employee Retention Credit advances expense of $0.3M, and settlement payments tied to closed litigation totaling $0.6M. The prior year’s gain resulted from debt forgiveness from the paycheck protection program totaling $1.2M which was partially offset by interest expense of $0.5M.
Other income / (expense) expenses for the six months ended June 30, 2023, were ($1,645,681), as compared to $1,052,250 for the six months ended July 2, 2022. Interest expense and loan origination fees represent $2.4M of the current period expense and settle payments tied to closed litigation represent $0.7M, and partly offsetting this expense is payment of the employee retention credit representing nonoperating income of $1.4M. The prior year gain of $1.1M was driven by the aforementioned debt forgiveness from the paycheck protection program of $1.2M and a bargain purchase gain of equipment purchased at auction of $0.6M. These gains were partially offset by prior year interest expense of $0.9M.
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Income Tax
Federal Income Tax for the three months ended June 30, 2023, were ($675,801), as compared to $0 for the three months ended July 2, 2022. The company recorded this credit as a deferred tax asset as it expects to materially expand revenues through the new soil segment launching this fall.
Federal Income Tax for the six months ended June 30, 2023, were ($1,293,640), as compared to $0 for the six months ended July 2, 2022. The company recorded this credit as a deferred tax asset as it expects to materially expand revenues through the new soil segment launching this fall.
The Company has received a 2020 Income Tax Audit Letter relating to unpaid insurance provisions in the amount of $745,534 which it believes is not applicable and provided appropriate support; therefore the Company believes the IRS finding does not meet the “more likely than not” accounting standard and has not accrued this expense in the Company’s year to date financial statements.
Net Income / (Loss)
Net Income / Loss for the three months ended June 30, 2023 was ($3,387,481), compared to ($316,485) for the three months ended June 30, 2022.
Net Income / Loss for the six months ended June 30, 2023 was ($3,907,244), compared to ($240,322) for the six months ended June 30, 2022.
Liquidity and Capital Resources
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2023, was $2,972,849 compared to $2,270,567 for the six months ended July 2, 2022. The Company recorded a loss to Net Income of ($3,907,244) which was offset by depreciation, amortization, and prepaid advertising of $3,020,599. Additional adjustment from operating activities resulted from a growth of accounts payable and accrued expenses totaling $3,868,769 due to the Company’s current liquidity position.
Investment Activities
Net cash used in investing activities for the six months ended June 30, 2023, was ($1,646,762) compared to ($3,423,166) for the six months ended June 30, 2022. The Company invested $723,094 in capital improvements to its Beaver facility, $806,765 in capital improvements to its Jasper facility and completed optimization of its Homerville facility of $276,544. Partly offsetting this spend was the sale/leaseback of equipment generating cash of $245,735 over the period.
Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2023 was ($1,326,086) compared to $419,901 for the six month period ending July 2, 2022. The Company made a balloon payment of $2.7M retiring a long term debt obligation tied to the Jasper property in return the Company entered into a number of short term merchant cash advances to satisfy the payoff obligation. The Company secured a convertible note in the amount of $1.6M and also issued common stock in the amount of $0.6M (via private placement)..
Going Concern
The Company adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements – Going Concern, which requires that management evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued.
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The accompanying unaudited consolidated financial statements have been prepared assuming that we will continue as a going concern. While the Company is attempting to generate additional revenues through the new soil segment, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues. The Company will require additional cash funding to fund operations. Therefore, the Company concluded there was substantial doubt about the Company’s ability to continue as a going concern.
To fund further operations, the Company will need to raise additional capital. The Company may obtain additional financing in the future through the issuance of its common stock, or through other equity or debt financings. The Company’s ability to continue as a going concern or meet the minimum liquidity requirements in the future is dependent on its ability to raise significant additional capital, of which there can be no assurance. If the necessary financing is not obtained or achieved, the Company will likely be required to reduce its planned expenditures, which could have an adverse impact on the results of operations, financial condition and the Company’s ability to achieve its strategic objective. There can be no assurance that financing will be available on acceptable terms, or at all. The financial statements contain no adjustments for the outcome of these uncertainties. These factors raise substantial doubt about the Company’s ability to continue as a going concern and have a material adverse effect on the Company’s future financial results, financial position and cash flows.
Convertible Promissory Notes
The Company entered into convertible promissory notes during the three month period ending June 30, 2023 totaling $1,600,000. All outstanding convertible notes as of June 30, 2023 are discussed at the related footnote. See footnote #9 and #10 in the notes to the unaudited consolidated financial statements.
Off-Balance Sheet Arrangements
As of June 30, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act reasonably likely to have a material effect on our financial condition.
Critical Accounting Policies and Estimates
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such consolidated financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity.
Principles of Consolidation
These consolidated financial statements include the accounts of the Company and wholly owned subsidiaries MMI and NSR. Intercompany accounts and transactions have been eliminated upon consolidation.
Critical Accounting Estimates
In order to prepare our financial statements in accordance with GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Such estimates are based upon management’s current judgments, which are normally based on knowledge and experience regarding past and current events and assumptions about future events. Certain
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estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations.
While there are several accounting policies affecting our financial statements, we have identified the following critical accounting estimates that require us to make the most subjective judgments in order to fairly present our consolidated financial statements.
Inventory
Summary:
Product inventories are recorded at the lower of actual cost or fair market value. The Company accounted for intercompany sales between NSR to MMI at the lower of cost or fair market value. NSR shipped 4,106 full truckloads to MMI during 2022. The fair market value of $1,095 for this material is based upon the total amount of wood purchased by MMI in 2022 divided by the total quantity of wood received. The cost value to recognize this inventory in the intercompany sale was $861 per load and the Company applied a 10% intercompany markup on this transaction bringing the value per load to $967 per load.
During the year, we perform monthly periodic cycle counts and write off excess or obsolete inventory as needed for each location. During 2022, inventories related to the production of a new segment were not recorded from January through September of 2023 resulting in a reduction of operating profit. Specifically, monthly “yard inventory” was not included in cycle counts. As a result, the inventory has been understated and these understated amounts were charged directly to the Income Statement (without reconciliation). This process was identified and corrected as part of the Company’s restated financial results for the nine month period ended October 1, 2022. As part of the year end process the plant managers were directed to count “yard inventory” and include them in physical counts. This activity has resulted in a change in management’s estimate for physical inventory.
Judgments and Uncertainties:
Significant judgment is required to estimate the fair market value of our inventory as it requires assumptions and projections to be made based off labor and overheads required for manufacturing of bulk and bagged product. Additionally, timber purchases may vary by “track” of land and the output of these purchases can yield different inputs which in turn impacts quantities of mulch, lumber and soil outputs. We monitor our inventory levels and manufacturing consumption by location to ensure cycle counts align with purchases, burn rates, etc, and record adjustments to inventory levels when inventory counts are out of balance with expected results (beginning inventory + purchases – sales = ending inventory, as compared to, monthly inventory cycle counts).
Sensitivity of Estimates to Change:
As noted above, the “track” of land and output of these purchases yield different qualities which in turn impacts quantities of mulch, lumber and soil outputs and are sensitive to what is received from log vendor(s).
The Company made a change in management estimate for the accounting for yard inventory in the 3rd quarter of 2022, whereby it incorporated inventory counts as disclosed in the Company’s 3rd quarter 2022 and amended financial results. Subsequently, there have been no material changes to the Company’s policies to critical accounting estimates. There have been no additional changes to this estimate in 2023.
Acquisitions
Summary:
From time to time, we enter into strategic acquisitions in an effort to better service existing customers and to attract new customers. We account for acquired businesses using the acquisition method of accounting under ASC 805, which requires the assets acquired and liabilities assumed be recorded at date of acquisition at their respective fair values. In some instances, Under ASC 805- 50-30 the gain or loss on a business combination should be recognized and measured as the difference between the fair value of the
OTC Markets Group Inc.
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assets acquired and the fair value of the liabilities assumed, minus the fair value of any non-controlling interests in the acquired business. This gain or loss is then recognized in the financial statements of the acquiring entity and considered a bargain purchase gain as one time realization for the sale. The Company has acquired assets under distressed conditions resulting in bargain purchase gains. In accordance with ASC 805-50-30, the results of the acquisitions we have completed have valued the acquired assets at “certified appraised value” which have been reflected in our financial statements, thereafter.
Judgments and Uncertainties:
The Company performs annual impairment analysis to ensure the appraised value is aligned with the certified appraised value utilizing projected revenue and operating profit projections of these facilities. Additional leasehold improvements may be required to optimize the performance of these facilities.
Sensitivity of Estimates to Change:
On January 31, 2020, the Company completed the Mulch Acquisition. On December 30, 2021 the Company completed the acquisition of DDP. On December 31, 2021 the Company acquired equipment from the Beaver Washington facility and acquired the accompanying land on March 18, 2022. On December 31, 2021 the Company acquired equipment for the Jasper, Florida facility. Each of these acquisitions were accounted for under ASC 805. See “Note 11 – Acquisitions”.
Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired. We believe the estimates applied to be based on reasonable assumptions, but which are inherently uncertain. As a result, actual results may differ from the assumptions and judgments used to determine the fair values of the assets acquired, which could result in impairment losses in the future. Changes in business conditions may also require future adjustments to the useful lives of assets acquired. If we determine that the useful lives of assets acquired are shorter than we had originally estimated, the rate of amortization may be accelerated.
Goodwill
Summary:
Goodwill represents the acquired fair value of a business in excess of the fair values of tangible and identified intangible assets acquired and liabilities assumed. We test goodwill on an annual basis as part of our year end processes and additionally if an event occurs or circumstances change that would indicate the carrying amount may be impaired.
The goodwill impairment test requires us to estimate and compare the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value exceeds the carrying amount, the goodwill is not considered impaired. To the extent a reporting unit’s carrying amount exceeds its fair value, the reporting unit’s goodwill is deemed impaired, and an impairment charge is recognized based on the excess of a reporting unit’s carrying amount over its fair value.
Judgments and Uncertainties:
Significant judgment is required to determine whether impairment indicators exist and to estimate the fair value of our reporting units. Estimating the fair value of reporting units using the discounted cash flow model requires us to make assumptions and projections of revenue growth rates, gross margins, SG&A, capital expenditures, working capital, depreciation, terminal values, and weighted average cost of capital, among other factors.
The assumptions used to estimate fair value consider historical trends, macroeconomic conditions, and projections consistent with our operating strategy. Changes in these estimates could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge. Adverse market or economic events could result in impairment charges in future periods.
Sensitivity of Estimates to Change:
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During the fourth quarter of the 2022 Fiscal Year, we performed our annual quantitative assessment of goodwill. No goodwill impairment charge was recorded as a result of the testing and the estimated fair value of each of our reporting units substantially exceeded its carrying value.
Revenue
The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which was adopted beginning on October 1, 2017, as the Company did not have significant revenues prior to that time. The Company did not record a retrospective adjustment but opted for full retrospective method for all contracts.
The Company recognizes revenue when our performance obligation is satisfied. Our primary performance obligation (the performance of landscape recovery services) is satisfied upon the completion of the landscape services for, or delivery of our products to, our customers. Our products and services are provided for cash or on credit terms. Our credit terms, which are established in accordance with local and industry practices, generally require payment within 30 days of performance. The Company estimates and reserves for our bad debt exposure based on our experience with past due accounts and collectability, the aging of accounts receivable and our analysis of customer data.
Practical Expedients
As part of ASC 606, the Company has adopted several practical expedients including the Company has determined that it need not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised service to the customer and when the customer pays for that service will be one year or less.
Cash
The Company considers all highly liquid short-term instruments that are purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2023 and December 31, 2022. In June, the Company had limited cash on hand due to litigation with former owner which concluded in December of 2022 resulting in the company purchasing back all shares of common stock, 28,602,014 shares, in the amount of $4,937,500 of which $3,437,500 occurred in 2022, $500,000 in the three month period ending June 30, 2023 and has a remaining $1,000,000 to be paid equal instalments in the 3rd and 4th quarters of 2023. The Company is pursuing financing activities to cure the current cash position and expects to restructure its debt through traditional lending which is expected to be completed by the end of the 3rd quarter of 2023.
Accounts Receivable
The Company periodically assesses its accounts receivable for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. The Company increased its allowance for doubtful accounts to approximately $180,000 based upon aged receivables. This is an increase of $120,000 verse June 30, 2022.
The Company’s total receivable through the period ended June 3, 2023 was $2,580,478 as compared to the period ended July 2, 2022 of $2,436,324.
Lease
In 2020, the Company adopted ASC Topic 842, Leases, or ASC 842, using the modified retrospective transition method with a cumulative effect adjustment to be accumulated deficit as of January 1, 2019, and accordingly, modified its policy on accounting for leases as stated below. As described under “Recently Adopted Accounting Pronouncements,” below, the primary impact of adopting ASC 842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating and financing leases with terms longer than 12 months. The Company elected to use the short-term exception and does not record assets/liabilities for short term leases as of June 30, 2023, and December 31, 2022.
OTC Markets Group Inc.
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The Company’s leases primarily consist of facility leases which are classified as operating leases. The Company assesses whether an arrangement contains a lease at inception. The Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that the Company will exercise such an option. The right-of-use asset is initially measured as the contractual lease liability plus any initial direct costs and prepaid lease payments made, less any lease incentives. Lease expense is recognized on a straight-line basis over the lease term.
Leased right-of-use assets are subject to impairment testing as a long-lived asset at the asset-group level. The Company monitors its long-lived assets for indicators of impairment. As the Company’s leased right-of-use assets primarily relate to facility leases, early abandonment of all or part of facility as part of a restructuring plan is typically an indicator of impairment. If impairment indicators are present, the Company tests whether the carrying amount of the leased right-of-use asset is recoverable including consideration of sublease income, and if not recoverable, measures impairment loss for the right-of-use asset or asset group.
Property and Equipment
Property and equipment are recorded at cost. Expenditures that enhance the useful lives of the assets are capitalized and depreciated. Machinery, equipment and vehicles are generally depreciated on a straight-line basis over 5 to 10 years.
Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in other income.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets.
The Company records Its intangible assets at cost in accordance with Accounting Standards Codification (“ASC”) 350, Intangibles – Goodwill and Other. Finite lived intangible assets are amortized over their estimated useful life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized but is tested for impairment at least annually at year end, at the reporting unit level or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested for impairment at the reporting level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. The discounted cash flow approach uses expected future operating results. Failure to achieve these expected results may cause a future impairment of goodwill at the reporting unit. During the three months ended June 30, 2023 and July 2, 2022, the Company did not record a loss on impairment. For the twelve months ended December 31, 2022 and January 1, 2022, the Company did not record a loss on impairment.
Fair Value Measurements
As defined in ASC 820, “Fair Value Measurements and Disclosures,” fair value is 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 (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions
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about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.
Fair Value of Financial Instruments
The carrying value of cash, accounts receivable, other receivables, accounts payable and accrued expenses, payroll liabilities, and advances approximate their fair values based on the short-term maturity of these instruments. The carrying number of notes and convertible promissory notes approximates the estimated fair value for these financial instruments as management believes that such notes constitute substantially all of the Company’s debt and interest payable on the notes approximates the Company’s incremental borrowing rate.
Net Income (Loss) per Common Share
Basic net loss per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share includes the effect of Common Stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive.
Inventory
Inventories are stated at the lower of cost or net realizable value, with cost determined by the weighted-average cost method using full absorption costing for manufactured goods.
Stock-Based Compensation
The Company applies the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options and warrants, in the statements of operations.
For stock options and warrants issued to employees and members of the board of directors for their services, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.
Pursuant to ASU 2018-07 Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, the Company accounts for stock options and warrants issued to non-employees for their services in accordance ASC 718. The Company uses valuation methods and assumptions to value the stock options that are in line with the process for valuing employee stock options noted above.
Income Taxes
Income Taxes
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In December 2019, the FASB issued ASU 2019-12, simplifying the Accounting for Income Taxes (Topic 740) as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. This guidance is effective for interim and annual reporting periods beginning within 2021.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, 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 that includes the enactment date.
The Company utilizes ASC Topic 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized. For tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit in the consolidated financial statements.
For the six months ended June 30, 2023, the Company recognized approximately $0 tax expense and recognizes a deferred tax asset of $2,514,060 on the Company’s balances sheet. The Company’s in year tax provisions are based on a 21% effective rate for federal and state income taxes in 2023 after accounting for permanent differences between book and taxable income. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations.
The Company has received a 2020 Income Tax Audit Letter relating to unpaid insurance provisions in the amount of $745,534 which it believes is not applicable and provided appropriate support; therefore the Company believes the IRS finding does not meet the “more likely than not” accounting standard and has not accrued this expense in the Company’s year to date financial statements.
a. affiliates of the Company;
b. entities for which investments in their equity securities would be required, absent the election of the FV option under the
FV Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity;
c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management;
d. principal owners of the Company;
e. management of the Company;
f. other parties with which the Company may deal if one party controls or can significantly influence the management or
operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its
own separate interests; and
g. other parties that can significantly influence the management or operating policies of the transacting parties or that have
an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
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Related Parties
The Company follows subtopic 850-10 of the FASB ASC for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20 related parties include:
The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial statements is not required in those statements.
The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard was effective for the Company’s interim and annual periods beginning January 1, 2019, and was applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The adoption of ASU 2016–- 02 had a material impact on the Company’s consolidated financial statements and related disclosures.
On August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments”. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for the Company beginning in the first quarter of 2020. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The adoption of ASU 2016-15 did not have any impact on the Company’s consolidated financial statements and related disclosures.
On January 2017, FASB issued Accounting Standards Update (ASU) 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminated the calculation of implied goodwill fair value. Instead, companies will record an impairment charge based on the excess of a reporting unit’s carrying amount of goodwill over its fair value. This guidance simplifies the accounting as compared to prior GAAP. The guidance is effective for fiscal years beginning after December 15, 2019. The Company does not expect the implementation of this new pronouncement to have a material impact on its consolidated financial statements.
On May 10, 2017, the FASB issued ASU 2017-09 “Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting”, which provides guidance to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The guidance is effective prospectively for all companies for annual periods beginning on or after December 15, 2017. Early adoption is permitted. The adoption of ASU 2017-09 did not have any impact on the Company’s consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, simplifying the Accounting for Income Taxes (Topic 740) as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. This guidance is effective for interim and annual reporting periods beginning within 2021.
All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. Risks Related to Our Business
OTC Markets Group Inc.
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We are a holding company and depend upon our subsidiaries for our cash flows.
We are a holding company. All of our operations are conducted, and almost all of our assets are owned, by our subsidiaries. Consequently, our cash flows and our ability to meet our obligations depend upon the cash flows of our subsidiaries and the payment of funds by these subsidiaries to us in the form of dividends, distributions or otherwise. The ability of our subsidiaries to make any payments to us depends on their earnings, the terms of their indebtedness, including the terms of any credit facilities and legal restrictions. Any failure to receive dividends or distributions from our subsidiaries when needed could have a material adverse effect on our business, results of operations or financial condition.
We will require additional funding for our current working capital needs and growth plans, and such funding may result in a dilution of your investment.
We attempted to estimate our funding requirements to implement our current working capital needs and growth plans, including our need for at least $18 million to complete our planned production of pine bark and marketable lumber at the Jasper mill, lumber production at our Beaver sawmill, and the purchase and installation of equipment for our Arborcare, mulch and soil operations and other working capital requirements related to our operations and contractual obligations related to the VRM Sublicense. See “Management’s Discussion & Analysis of Financial Condition and Results of Operations - Material Cash Requirements.” If our growth exceeds those plans or the costs or cash requirements of implementing such plans should exceed these estimates significantly or if we come across opportunities to grow through expansion plans either internally or through acquisitions which cannot be predicted at this time, and our funds generated from our operations prove insufficient for such purposes, we will need to raise additional funds to meet these funding requirements.
These additional funds may be raised by issuing equity or debt securities or by borrowing from banks or other sources. We cannot assure you that we will be able to obtain any additional financing on terms that are acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us, we will not be able to implement such plans fully if at all. Such financing even if obtained, may be accompanied by conditions that limit our ability to pay dividends or require us to seek lenders’ consent for payment of dividends, or restrict our freedom to operate our business by requiring lender’s consent for certain corporate actions.
Further, if we raise additional funds by way of a rights offering or through the issuance of new shares, any shareholders who are unable or unwilling to participate in such an additional round of fund raising may suffer dilution in their investment.
If the voting power of our capital stock continues to be highly concentrated, it may prevent you and other minority stockholders from influencing significant corporate decisions and may result in conflicts of interest.
Anthony Raynor, our Chief Executive Officer, and sole director controls approximately 99% of the voting power of our outstanding capital stock. As a result, Mr. Raynor will have majority voting power over all matters requiring stockholder votes, including: the election of directors; mergers, consolidations, and acquisitions; the sale of all or substantially all of our assets and other decisions affecting our capital structure; amendments to our certificate of incorporation or our bylaws; and our winding up and dissolution.
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This concentration of voting power may delay, deter, or prevent acts that would be favored by our other stockholders. The interests of Mr. Raynor may not always coincide with our interests or the interests of our other stockholders. This concentration of voting power may also have the effect of delaying, preventing, or deterring a change in control of us. Also, Mr. Raynor may seek to cause us to take courses of action that, in his judgment, could enhance his investment in us, but which might involve risks to our other stockholders or adversely affect us or our other stockholders, including investors in this offering. As a result, the market price of our common stock could decline, or our other stockholders might not receive a premium over the then-current market price of our common stock upon a change in control. In addition, this concentration of voting power may adversely affect the trading price of our common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders. See “Description of Capital Stock.”
OTC Markets Group Inc.
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Our industry and the markets in which we operate are highly competitive and increased competitive pressures could reduce our share of the markets we serve and adversely affect our business, financial position, results of operations and cash flows.
We operate in the tree care, debris removal and storm/disaster recovery services, the mulch and soil products business and mulch colorants and coloring equipment business where barriers to entry generally low, which has led to highly competitive markets consisting of entities ranging from small or local operators to large regional and national businesses, as well as potential customers that choose not to outsource their landscape maintenance services. Any of our competitors may foresee the course of market development more accurately than we do, provide superior service or products, have the ability to deliver similar services or products at a lower cost, develop stronger relationships with our customers and other consumers in the mulch and soil industries and in the tree care, debris removal and storm/disaster recovery services business and lumber production and mulch colorants and coloring equipment business, adapt more quickly to evolving customer requirements, devote greater resources to the promotion and sale of their services and products, access financing on more favorable terms than we can obtain, may have more experienced management or may be more mature as a business than us. In addition, while some regional competitors may be smaller than we are, some of these businesses may have a greater presence than we do in a particular market. As a result of any of these factors, we may not be able to compete successfully with our competitors, which could have an adverse effect on our business, financial position, results of operations and cash flows.
Our customers consider the quality and differentiation of the products and services we provide, our customer service, and price, when deciding whether to buy our products and use our services. As we have strived to establish ourselves as leading, high- quality providers of mulch and soil product, tree care, debris removal and storm/disaster recovery services, lumber production and mulch colorants and coloring equipment, we compete predominantly on the basis of high levels of service and strong relationships. In addition, we seek to enhance our profit margins on mulch sales by using feedstock we obtain from our tree care business and lumber production in our mulch and soil products production. We may not be able to, or may choose not to, compete with certain competitors on the basis of price and accordingly, some of our customers may switch to lower cost suppliers and services providers or perform such services themselves. If we are unable to compete effectively with our existing competitors or new competitors enter the markets in which we operate, or our current customers stop outsourcing their tree care and debris removal maintenance services and storm/disaster recovery services, our financial position, results of operations and cash flows may be materially and adversely affected.
In addition, former employees may start tree care, debris removal and storm/disaster recovery services businesses similar to ours and compete directly with us. While we customarily sign non-competition agreements, which typically continue for one year following the termination of employment, with certain of our employees, such agreements do not fully protect us against competition from former employees and may not be enforceable depending on local law and the surrounding circumstances. Consequently, we cannot predict with certainty whether, if challenged, a court will enforce any non-competition agreement. Any increased competition from businesses started by former employees may reduce our market share and adversely affect our business, financial position, results of operations and cash flows.
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Our business success depends on our ability to preserve long-term customer relationships.
Our success depends on our ability to retain our current customers, renew our existing customer contracts, and obtain new business. Our ability to do so generally depends on a variety of factors, including the quality, price, and responsiveness of our products and services, as well as our ability to market these products and services effectively and differentiate ourselves from our competitors. We largely seek to differentiate ourselves from our competitors based on high levels of service, breadth of service offerings and strong relationships and may not be able to, or may choose not to, compete with certain competitors based on price. There can be no assurance that we will be able to obtain new business, renew existing customer contracts at the same or higher levels of pricing or that our current customers will not cease operations, elect to self-operate or terminate contracts with us. In our services segment, we primarily provide services pursuant to agreements that are cancelable by either party upon 30-days’ notice. Consequently, our customers can unilaterally terminate all services pursuant to the terms of our service agreements, without penalty.
Our growth projections assume efficiencies, cost savings and other benefits of our vertically integrated business model that might not be achieved.
OTC Markets Group Inc.
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Our business model is vertically integrated. Although we believe that vertical integration benefits our business, these benefits are difficult to quantify and might not be realized. Our growth projections are based on a variety of assumptions about efficiencies, cost savings and other benefits of being a vertically integrated company that may not be achieved. For example, we provide services through NSR that supply feedstock, raw materials, for the products MMI manufactures. If demand shifts disproportionately or inversely for NSR services and MMI products, we may have a shortage of feedstock and we would need to obtain more of our raw materials from other sources at a higher cost, or we might accumulate a surplus of feedstock and incur storage expenses. Furthermore, we are subject to a wider range of laws and regulations due to our vertical integration. The cost of compliance and dedication of management resources across all segments of our business may be higher than competitors that are not vertically integrated.
We may be adversely affected if customers reduce their outsourcing.
Our business and growth strategies benefit from the continuation of a current trend toward outsourcing services. Customers will outsource if they perceive that outsourcing may provide quality services at a lower overall cost and permit them to focus on their core business activities. We cannot be certain that this trend will continue or not be reversed or that customers that have outsourced functions will not decide to perform these functions themselves. If a significant number of our existing customers reduced their outsourcing and elected to perform the services themselves, such loss of customers could have a material adverse impact on our business, financial position, results of operations and cash flows.
Because we operate our business through dispersed locations across the United States, our operations may be materially adversely affected by inconsistent practices and the operating results of individual branches may vary.
We operate our business through a network of dispersed locations throughout the United States, supported by corporate executives and certain centralized services in our headquarters, with local branch management retaining responsibility for day-to-day operations. Our operating structure could make it difficult for us to coordinate procedures across our operations in a timely manner or at all, and certain of our branches may require significant oversight and coordination from headquarters to support their growth. In addition, the operating results of an individual branch may differ from that of another branch for a variety of reasons, including market size, management practices, competitive landscape, regulatory requirements, and local economic conditions. Inconsistent or incomplete implementation of corporate strategy and policies at the local level could materially and adversely affect our business, financial position, results of operations and cash flows.
47
We may not successfully implement our business strategies, including achieving our growth objectives.
We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the anticipated benefits of our various growth or other initiatives. Our various business strategies and initiatives, including our growth, operational and management initiatives, are subject to business, economic and competitive uncertainties, and contingencies, many of which are beyond our control. In addition, we may incur certain costs as we pursue our growth, operational and management initiatives, and we may not meet anticipated implementation timetables or stay within budgeted costs. As these initiatives are undertaken, we may not fully achieve our expected efficiency improvements or growth rates, or these initiatives could adversely impact our customer retention, supplier relationships or operations. Also, our business strategies may change from time to time considering our ability to implement our business initiatives, competitive pressures, economic uncertainties or developments, or other factors.
If we are unable to hire and retain key personnel, we may not be able to implement our business plan.
The execution of our business strategy and our financial performance will continue to depend in significant part on our executive management team and other key management personnel, our ability to identify and complete suitable acquisitions and our executive management team’s ability to execute new operational initiatives. We rely heavily on Anthony Raynor, the founder and CEO of the Company, to execute our business strategy. Consequently, the loss of Mr. Raynor may have a substantial effect on our future success or failure. We do not have and generally do not intend to acquire keyman life insurance on any of our executives, including Mr. Raynor. We may have to recruit qualified personnel with competitive compensation packages, equity participation, and other benefits that may affect the working capital available for our operations. Management may have to seek to obtain outside independent professionals to assist them in assessing the merits and risks of any business proposals as well as assisting in the development and
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operation of many company projects. No assurance can be given that we will be able to obtain such needed assistance on terms acceptable to us. Our failure to attract additional qualified employees or to retain the services of key personnel could have a material adverse effect on our operating results and financial condition.
Future acquisitions or other strategic transactions could negatively impact our reputation, business, financial position, results of operations and cash flows.
We have acquired businesses in the past and expect to continue to acquire businesses or assets in the future. However, there can be no assurance that we will be able to identify and complete suitable acquisitions. For example, due to the highly fragmented nature of our industry, it may be difficult for us to identify potential targets with revenues or profits sufficient to justify taking on the risks associated with pursuing their acquisition. The failure to identify suitable acquisitions and successfully integrate these acquired businesses may limit our ability to expand our operations and could have an adverse effect on our business, financial position, results of operations and cash flows.
In addition, acquired businesses may not perform in accordance with expectations, and our business judgments concerning the value, strengths and weaknesses of acquired businesses may not prove to be correct. We may also be unable to achieve expected improvements or achievements in businesses that we acquire. The process of integrating an acquired business may create unforeseen difficulties and expenses, including the diversion of resources away from our operations; the inability to retain employees, customers and suppliers; difficulties implementing our strategy at the acquired business; the assumption of actual or contingent liabilities (including those relating to the environment); failure to effectively and timely adopt and adhere to our internal control processes, accounting systems and other policies; write-offs or impairment charges relating to goodwill and other intangible assets; unanticipated liabilities relating to acquired businesses; and potential expenses associated with litigation with sellers of such businesses.
If management is not able to effectively manage the integration process, or if any significant business activities are interrupted because of the integration process, we may not be able to realize anticipated benefits and revenue opportunities resulting from acquisitions and our business could suffer. Although we conduct due diligence investigations prior to each acquisition, there can be no assurance that we will discover or adequately protect against all contingencies and material liabilities of an acquired business for which we may be responsible as a successor owner or operator.
In connection with our acquisitions, we generally require that key management and former principals of the businesses we acquire enter into non-competition agreements in our favor. Enforceability of these non-competition agreements varies from state to state and may depend on the relevant facts and circumstances. Consequently, we cannot predict with certainty whether, if challenged, a court will enforce any non-competition agreement. Increased competition could materially and adversely affect our business, financial position, results of operations and cash flows.
48
Seasonality affects the demand for our services and products and our results of operations and cash flows.
The demand for our services and products and our results of operations are affected by the seasonal nature of our services and products in certain regions. Our services and products have seasonal variability such as increased mulching in the spring, leaf removal and cleanup work in the fall, and disaster (hurricane) recovery in the summer and the fall. Typically, our revenues and net income have been higher in the spring, which corresponds with our second fiscal quarter. Such variability in demand for our services and products causes our results of operations to vary from quarter to quarter and from year to year in the same quarter. Due to the seasonal nature of the services, we provide, we also experience seasonality in our employment and working capital needs. Our employment and working capital needs generally correspond with the increased demand for our services in the spring, summer and falls months and employment levels and operating costs are generally at their highest during such months. Consequently, our results of operations and financial position can vary from quarter-to-quarter and from year-to-year in the same quarter. If we are unable to effectively manage the seasonality and year-to-year variability, our results of operations, financial position and cash flow may be adversely affected.
Our operations are impacted by weather conditions.
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Weather may impact the timing of performance of our services and sales of our products (mulch) from quarter-to-quarter and from year-to-year in the same quarter. Certain extreme weather events, such as hurricanes and tropical storms, can result in increased revenues related to cleanup and other services. However, such weather events may also impact our ability to deliver other services and our products or cause damage to our facilities or equipment. These weather events can also result in higher fuel costs, higher labor costs and shortages of raw materials and products. As a result, a perceived earnings benefits related to extreme weather events may be moderated. There is a risk that demand for our services and products will change in ways that we are unable to predict.
Increases in raw material costs, fuel prices, wages and other operating costs, and changes in our ability to source adequate supplies and materials in a timely manner, could adversely impact our business, financial position, results of operations and cash flows.
Our financial performance may be adversely affected by increases in our operating expenses, such as fuel, wages and salaries, employee benefits, health care, subcontractor costs, vehicle, facilities and equipment leases, insurance and regulatory compliance costs, all of which may be subject to inflationary pressures. While we seek to manage price and availability risks related to raw materials through procurement strategies, these efforts may not be successful, and we may experience adverse impacts due to increasing tariffs and rising prices of such products. In addition, we closely monitor wage, salary, and benefit costs to remain competitive in our markets. Attracting and maintaining a high-quality workforce is a priority for our business, and if wage, salary or benefit costs increase, including as a result of minimum wage legislation, our operating costs will increase as they have in the past. We cannot predict the extent to which we may experience future increases in operating expenses as well as various regulatory compliance costs. To the extent such costs increase, we may be prevented, in whole or in part, from passing these cost increases through to our existing and prospective customers, which could have a material adverse impact on our business, financial position, results of operations and cash flows.
Our ability to offer our products and services to our customers is dependent upon our ability to obtain adequate supplies, materials, and products from manufacturers, distributors, and other suppliers. Any disruption or shortage in our sources of supply due to unanticipated increased demand or disruptions in production or delivery of products could result in a loss of revenues, reduced margins, and damage to our relationships with suppliers and customers. In addition, we source certain materials and products we use in our business from a limited number of suppliers. If our suppliers experience difficulties or disruptions in their operations or if we lose any significant supplier, we may experience increased supply costs or may experience delays in establishing replacement supply sources that meet our quality and control standards. The loss of, or a substantial decrease in the availability of, supplies and products from our suppliers or the loss of key supplier arrangements could adversely impact our business, financial position, results of operations and cash flows.
If we are unable to accurately estimate the overall risks, requirements or costs when we bid on or negotiate contracts that are ultimately awarded to us, we may achieve lower than anticipated profits or incur contract losses.
A significant portion of our contracts are subject to competitive bidding and/or are negotiated on a fixed- or capped-fee basis for the services covered. Such contracts generally require that the total amount of work, or a specified portion thereof, be performed for a single price irrespective of our actual costs. If our cost estimates for a contract are inaccurate, or if we do not execute the contract within our cost estimates, then cost overruns may cause the contract not to be as profitable as we expected or could cause us to incur losses.
Our success depends on our executive management and other key personnel.
Our future success depends to a significant degree on the skills, experience and efforts of our executive management and other key personnel and their ability to provide us with uninterrupted leadership and direction. The failure to retain our executive officers and other key personnel or a failure to provide adequate succession plans could have an adverse impact. The availability of highly qualified talent is limited, and the competition for talent is robust. A failure to replace executive management members or other key personnel efficiently or effectively and to attract, retain and develop new qualified personnel could have an adverse effect on our operations and implementation of our strategic plan.
Our future success depends on our ability to attract, retain and maintain positive relations with trained workers.
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Our future success and financial performance depend substantially on our ability to attract, train and retain workers, including account, branch and regional management personnel. The tree care, debris removal and storm/disaster recovery services industry are labor intensive, and industry participants, including us, experience high turnover rates among hourly workers and competition for qualified supervisory personnel. In addition, we, like many trees care, debris removal and storm/disaster recovery service providers who conduct a portion of their operations in seasonal climates, employ a portion of our field personnel for only part of the year.
We have historically relied on the H-2B visa program to bring workers to the United States on a seasonal basis. We employed approximately 47 seasonal workers in 2023 and 2022, through the H-2B visa program. If we are unable to hire enough seasonal workers, through the H-2B program or otherwise, we may experience a labor shortage. In the event of a labor shortage, whether related to seasonal or permanent staff, we may have difficulty delivering our services in a high-quality or timely manner, and we could experience increased recruiting, training and wage costs in order to attract and retain employees, increasing our operating costs and reducing our profitability.
In 2022, during the busiest times of the year for our business, we employed over 200 workers, none of whom are presently represented by a labor union. As of June 2023, we have employed approximately 221 full time employees, 18 of them being seasonal. If a significant number of our employees were to attempt to unionize, and/or successfully unionized, including in the wake of any future legislation that makes it easier for employees to unionize, our business could be negatively affected. Any inability by us to negotiate collective bargaining arrangements could result in strikes or other work stoppages disrupting our operations, and new union contracts could increase operating and labor costs. If these labor organizing activities were successful, it could further increase labor costs, decrease operating efficiency and productivity in the future, or otherwise disrupt or negatively impact our operations. Moreover, a collective bargaining agreement could require periodic contributions to multiemployer defined benefit pension plans. Required contributions to such plans could increase because of a shrinking contribution base because of the insolvency or withdrawal of other companies that currently contribute to these plans, the inability or failure of withdrawing companies to pay their withdrawal liability, low interest rates, lower than expected returns on pension fund assets or other funding deficiencies. Additionally, in the event we were to withdraw from such plans, in which we were forced to participate, as a result of our exiting certain markets or otherwise, and if the relevant plans were underfunded, we could become subject to a withdrawal liability. The amount of such required contributions may be material.
Our business could be adversely affected by a failure to properly verify the employment eligibility of our employees.
We use the U.S. government’s “E-Verify” program to verify employment eligibility for all new employees throughout our company. However, use of E-Verify does not guarantee that we will successfully identify all applicants who are ineligible for employment. Although we use E-Verify and require all new employees to provide us with government-specified documentation evidencing their employment eligibility, some of our employees may, without our knowledge, be unauthorized workers. The employment of unauthorized workers may subject us to fines or penalties, and adverse publicity that negatively impacts our reputation and may make it more difficult to hire and keep qualified employees. We are subject to regulations of U.S. Immigration and Customs Enforcement, or ICE, and we are audited from time to time by ICE for compliance with work authentication requirements. While we believe we follow applicable laws and regulations, if we are found not to be in compliance as a result of any audits, we may be subject to fines or other remedial actions. See “Business—Regulatory Overview—Employee and Immigration Matters.”
Termination of a significant number of employees in specific markets or across our company due to work authorization or other regulatory issues would disrupt our operations and could also cause adverse publicity and temporary increases in our labor costs as we train new employees. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration compliance laws. Our reputation and financial performance may be materially harmed because of any of these factors. Furthermore, immigration laws have been an area of considerable political focus in recent years, and the U.S. Congress and the Executive Branch of the U.S. government from time to time consider or implement changes to federal immigration laws, regulations, or enforcement programs. Further changes in immigration or work authorization laws may increase our obligations for compliance and oversight, which could subject us to additional costs and potential liability and make our hiring process more cumbersome or reduce the availability of potential employees.
Our use of subcontractors to perform work under certain customer contracts exposes us to liability and financial risk.
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We use subcontractors to perform work in situations in which we are not able to self-perform such work. If we are unable to hire qualified subcontractors, our ability to successfully complete a project or perform services could be impaired. If we are not able to locate qualified third-party subcontractors or the amount we are required to pay for subcontractors exceeds what we have estimated, we could incur losses or realize lower than expected margins. We may not have direct control over our subcontractors, and although we have in place controls and programs to monitor the work of our subcontractors, there can be no assurance that these programs will have the desired effect. The actual or alleged failure to perform or negligence of a subcontractor may damage our reputation or expose us to liability, which could impact our results of operations. Furthermore, if our subcontractors are unable to cover the cost of damages or physical injuries caused by their actions, whether through insurance or otherwise, we may be held liable for such costs.
If we fail to comply with requirements imposed by applicable law or other governmental regulations, we could become subject to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.
We are subject to governmental regulation at the federal, state, and local levels in many areas of our business, such as employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, transportation laws, environmental laws, false claims or whistleblower statutes, disadvantaged business enterprise statutes, tax codes, antitrust and competition laws, intellectual property laws, governmentally funded entitlement programs and cost and accounting principles, the Foreign Corrupt Practices Act, other anti-corruption laws, lobbying laws, motor carrier safety laws and data privacy and security laws. We may be subject to review, audit or inquiry by applicable regulators from time to time.
While we attempt to comply with all applicable laws and regulations, there can be no assurance that we are always in full compliance with all applicable laws and regulations or interpretations of these laws and regulations or that we will be able to comply with any future laws, regulations or interpretations of these laws and regulations. If we fail to comply with applicable laws and regulations, including those referred to above, we may be subject to investigations, criminal sanctions, or civil remedies, including fines, penalties, damages, reimbursement, injunctions, seizures or disgorgements of the ability to operate our motor vehicles. The cost of compliance or the consequences of non-compliance, could have a material adverse effect on our business and results of operations. In addition, government agencies may make changes in the regulatory frameworks within which we operate that may require either the corporation as a whole or individual businesses to incur substantial increases in costs to comply with such laws and regulations.
Adverse litigation judgments or settlements resulting from legal proceedings relating to our business operations could materially adversely affect our business, financial position and results of operations.
From time to time, we are subject to allegations, and may be party to legal claims and regulatory proceedings, relating to our business operations. Such allegations, claims or proceedings may, for example, relate to personal injury, property damage, general liability claims relating to properties where we perform services, vehicle accidents involving our vehicles and our employees, regulatory issues, contract disputes or employment matters and may include class actions. See Item 8 “Legal Proceedings”. Such allegations, claims and proceedings have been and may be brought by third parties, including our customers, employees, governmental or regulatory bodies or competitors. Defending against these and other such claims and proceedings is costly and time consuming and may divert management’s attention and personnel resources from our normal business operations, and the outcome of many of these claims and proceedings cannot be predicted. If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, our business, financial position, results of operations and cash flows could be materially adversely affected.
Currently, we carry a broad range of insurance for the protection of our assets and operations. However, such insurance may not fully cover all material expenses related to potential allegations, claims and proceedings, or any adverse judgments, fines or settlements resulting therefrom, as such insurance programs are often subject to significant deductibles or self-insured retentions or may not cover certain types of claims. To the extent we are subject to a higher frequency of claims, are subject to more serious claims or insurance coverage is not available, our liquidity, financial position, results of operations, and cash flows could be materially adversely affected.
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We are also responsible for our legal expenses relating to such claims. We reserve currently for anticipated losses and related expenses. We periodically evaluate and adjust our claims reserves to reflect trends in our own experience as well as industry trends. However, ultimate results may differ from our estimates, which could result in losses over our reserved amounts.
Some of the equipment that our employees use is dangerous, and an increase in accidents resulting from the use of such equipment could negatively affect our reputation, results of operations and financial position.
Many of the services that we provide pose the risk of serious personal injury to our employees. Our employees regularly use dangerous equipment. As a result, there is a significant risk of work-related injury and workers’ compensation claims. To the extent that we experience a material increase in the frequency or severity of accidents or workers’ compensation claims, or unfavorable developments on existing claims or fail to comply with worker health and safety regulations, our operating results and financial position could be materially and adversely affected. In addition, the perception that our workplace is unsafe may damage our reputation among current and potential employees, which may impact our ability to recruit and retain employees, which may adversely affect our business and results of operations.
Any failure, inadequacy, interruption, security failure or breach of our information technology systems, whether owned by us or outsourced or managed by third parties, could harm our ability to effectively operate our business and could have a material adverse effect on our business, financial position results of operations, and cash flows.
We are dependent on certain centralized automated information technology systems and networks to manage and support a variety of business processes and activities. Our ability to effectively manage our business and coordinate the sourcing of supplies, materials and products and our services depends significantly on the reliability and capacity of these systems and networks. Such systems and networks are subject to damage or interruption from power outages, telecommunications problems, data corruption, software errors, network failures, security breaches, acts of war or terrorist attacks, fire, flood, and natural disasters. Our servers or cloud-based systems could be affected by physical or electronic break-ins, and computer viruses or similar disruptions may occur. A system outage may also cause the loss of important data or disrupt our operations. Our existing safety systems, data backup, access protection, user management, disaster recovery and information technology emergency planning may not be sufficient to prevent or minimize the effect of data loss or long-term network outages.
We may periodically upgrade our existing information technology systems with the assistance of third-party vendors, and the costs to upgrade such systems may be significant. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of our operations. If we cannot meet our information technology staffing needs, we may not be able to fulfill our technology initiatives while continuing to provide maintenance on existing systems. We could be required to make significant capital expenditures to remediate any such failure, malfunction or breach with our information technology systems or networks. Any material disruption or slowdown of our systems, including those caused by our failure to successfully upgrade our systems, and our inability to convert to alternate systems in an efficient and timely manner could have a material adverse effect on our business, financial position, results of operations, and cash flows.
We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing confidential information of our customers, employees and third parties. Unlawful or unauthorized activities by third parties, and failures in systems, software, encryption technology, or other tools may facilitate or result in a compromise or breach of these systems. We are subject to risks caused by data breaches and operational disruptions, particularly through cyber-attack or cyber- intrusion, including by computer hackers, foreign governments and cyber terrorists. Any unauthorized disclosure of confidential information could damage our reputation, interrupt our operations and could result in a violation of applicable laws, regulations, industry standards or agreements and potentially subject us to costs, penalties and liabilities The occurrence of any of these events could have a material adverse impact on our reputation, business, financial position, results of operations and cash flow. Although we maintain insurance coverage for various cybersecurity risks, there can be no guarantee that all costs incurred will be fully insured.
We may not be able to adequately protect our intellectual property, which could harm the value of our brand and adversely affect our business.
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Our ability to implement our business plan successfully depends in part on our ability to further build brand recognition using our trademarks, service marks and other proprietary intellectual property, including our name, logos and licensed technology. While it is our policy to protect and defend vigorously our intellectual property, we cannot predict whether such actions will be adequate to prevent infringement or misappropriation of these rights. Although we believe that we have sufficient rights to all of our trademarks, service marks and other intellectual property rights, we may face claims of infringement that could interfere with our business or our ability to market and promote our brands. If we are unable to successfully defend against such claims, we may be prevented from using our intellectual property rights in the future and may be liable for damages.
Although we make a significant effort to avoid infringing known proprietary rights of third parties, we may be subject to claims of infringement by third parties. Responding to and defending such claims, regardless of their merit, can be costly and time- consuming, and we may not prevail. Depending on the resolution of such claims, we may be barred from using a specific mark or other rights, may be required to enter into licensing arrangements from the third-party claiming infringement or may become liable for significant damages. If any of the foregoing occurs, our ability to compete could be affected or our business, financial position and results of operations may be adversely affected.
Not applicable.
We may fail to successfully execute our business plan.
Our stockholders may lose their entire investment if we fail to execute our business plan. Our prospects must be considered in light of the following risks and uncertainties, including but not limited to, competition, the erosion of ongoing revenue streams, the ability to retain experienced personnel and general economic conditions. We cannot guarantee that we will be successful in executing our business plan. If we fail to successfully execute our business plan, we may be forced to cease operations, in which case our stockholders may lose their entire investment.
Our auditors have indicated that there is substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements for the Company, included elsewhere in this Current Report on Form 10-Q have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the accompanying June 30, 2023 financial statements, the Company had $1,391,508 gross profit and $5,298,752 total expenses, which resulted in a net loss of ($3,907,244). As of June 30, 2023, the Company’s total assets were $134,713,176 and total current liabilities were $22,197,925. The Company projects rest of year working capital requirements to be roughly $26,017,634. These factors among others raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Our auditors have indicated that there is substantial doubt about our ability to continue as a going concern.
Our auditors have indicated that there is a substantial doubt about our ability to continue as a going concern. We had operating losses of $1,618,690 for the three months ended June 30, 2023, and $3,555,202 for the six months ended January 31, 2022. The Company’s ability to continue as a going concern ultimately is dependent on the management’s ability to obtain equity or debt financing, attain further operating efficiencies, and achieve profitable operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for our Company to continue as a going concern. While we believe in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect or the timeframe in which it may occur. Our ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues. For further discussion about our ability to continue as a going concern and our plan for future liquidity, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
We may suffer from lack of availability of additional funds.
We expect to have ongoing needs for working capital in order to fund operations and to continue to expand our operations. To that end, we will be required to raise additional funds through equity or debt financing. However, there can be no assurance that we will be
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successful in securing additional capital on favorable terms, if at all. If we are successful, whether the terms are favorable or unfavorable, there is a potential that we will fail to comply with the terms of such financing, which could result in severe liability for us. If we are unsuccessful, we may need to (a) initiate cost reductions; (b) forego business development opportunities; (c) seek extensions of time to fund liabilities, or (d) seek protection from creditors. In addition, any future sale of our equity securities would dilute the ownership and control of your shares and could be at prices substantially below prices at which our shares currently trade. Our inability to raise capital could require us to significantly curtail or terminate our operations altogether. We may seek to increase our cash reserves through the sale of additional equity or debt securities. The sale of convertible debt securities or additional equity securities could result in additional and potentially substantial dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity. In addition, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties.
In addition, if we are unable to generate adequate cash from operations, and if we are unable to find sources of funding, it may be necessary for us to sell all or a portion of our assets, enter into a business combination, or reduce or eliminate operations. These possibilities, to the extent available, may be on terms that result in significant dilution to our shareholders or that result in our shareholders losing all of their investment in our Company.
Our common stock is subject to risks arising from restrictions on reliance on Rule 144 by shell companies or former shell companies.
Under a regulation of the SEC known as “Rule 144,” a person who beneficially owns restricted securities of an issuer and who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which will be 6 months for the common stock. However, Rule 144 is unavailable for the resale of securities issued by an issuer that is a shell company (other than a business combination related shell company) or, unless certain conditions are met, that has been at any time previously a shell company.
The SEC defines a shell company as a company that has (a) no or nominal operations and (b) either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets.
Rule 144 is available for the resale of securities of former shell companies if and for as long as the following conditions are met:
(i) the issuer of the securities that was formerly a shell company has ceased to be a shell company;
(ii) the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
(iii) the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
(iv) at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company known as “Form 10 Information.”
Our common stock price may decrease due to factors beyond our control.
The stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for early-stage companies and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our stock.
The market price of our stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
? variations in our quarterly operating results;
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? changes in general economic conditions;
? changes in social preferences;
? the governmental rules and regulation of our industry;
? changes in market valuations of similar companies;
? announcements by us or our competitors of significant acquisitions, strategic partnerships or joint ventures, or capital
commitments;
? poor reviews;
? production facility disruption;
? product recalls; and
? the inability to hire or retain key management members or personnel.
Any such fluctuations may adversely affect the market price or value of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
Our common stock is subject to the application of the “penny stock” rules which could adversely affect the market price of our common stock and increase transaction costs to sell those shares.
The SEC has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:
? that a broker or dealer approve a person’s account for transactions in penny stocks; and
? the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of
the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:
? obtain financial information and investment experience objectives of the person; and,
? make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient
knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:
? sets forth the basis on which the broker or dealer made the suitability determination; and,
? that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
The market price for our common stock is particularly volatile which could lead to wide fluctuations in our share price. You may be unable to sell your common stock shares at or above your purchase price, or at all, which may result in substantial losses to you.
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock shares will be at any time, or if our common stock shares will ever be able to trade, or as to what effect the sale of shares or the availability of common stock shares for sale at any time will have on the prevailing market price.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023) Page 94 of 96
If we are unable to comply with the financial reporting requirements mandated by the SEC’s regulations, investors may lose confidence in our financial reporting and the price of our common stock could decline.
If we fail to maintain effective internal controls over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be impaired. If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of its public reporting could cause our stock price to decline.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial officer (our “Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of June 30, 2023, our disclosure controls and procedures were effective.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Except as set forth herein, as of the filing date of this Annual Report on Form 10-K, there are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or which our property is the subject. In addition, none of our officers, directors, affiliates or 5% stockholders (or any associates thereof) is a party adverse to us, or has a material interest adverse to us, in any material proceeding.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Page 95 of 96
On November 8, 2022, we issued to a private investor a convertible note in the amount of $1,100,000 bearing 10% interest at a conversion price of $0.50 per share of common stock. These securities were issued in reliance on Section 4(a)(2) of the Securities Act.
On May 5, 2023, we issued to a private investor a convertible note in the amount of $1,200,000 bearing 12% interest at a conversion price of $0.50 per share of common stock. On May 12, 2023 the value of the convertible note was increased to $1,600,000 bearing the same 12% interest and $0.50 conversion price. These securities were issued in reliance on Section 4(a)(2) of the Securities Act .
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.
Exhibit
No. Document
OTC Markets Group Inc.
OTCQX U.S. and OTCQB Disclosure Guidelines (v 13 Updated May 2, 2023)
Page 96 of 96
57
SIGNATURES
Accum/Distribution graph is going straight up.
I like that, undervalued.
Where is this net loss coming from?
News out!!
The Sustainable Green Team, LTD. Announces Engagement of First Level Capital For Business Advisory and Investor Relations Services in Preparation of Proposed Uplisting To Nasdaq Exchange
Orlando, FL, June 28, 2023 (GLOBE NEWSWIRE) -- The Sustainable Green Team, LTD. (OTCQX: SGTM) (“SGTM” or the “Company”), a provider of environmentally conscious solutions in the arbor care, disposal, and recycling industries, announced today that it has hired First Level Capital LLC, a full-service advisory and investor relations firm (the "Firm" or “First level Capital”). First Level Capital will provide strategic business advisory and investor relations services for the Company’s 2023 and 2024 corporate initiative roadmap, including its goal of a proposed uplisting to the Nasdaq exchange.??
The Sustainable Green Team’s Chief Executive Officer Tony Raynor stated, “After meeting with the First Level Capital team at our Nasdaq interview and discussing our corporate initiatives for the next several months, we felt the timing was right to retain the Firm in order to advance our roadmap as articulated in SGTM’s Form 10 filed earlier this month. As we hope complete or goal of becoming a fully reporting company, we look forward to working with First Level Capital and their team, while leveraging their expertise to achieve our goals.”
Michael Friedman, President of First Level Capital stated, “We are extremely pleased to be partnered with The Sustainable Green Team and in alignment with their vision at this exciting and critically important time for the Company. I believe SGTM is ideally positioned to accelerate revenue and market opportunities on multiple fronts, as we tell their story.”
Company management believes that once the Form 10 becomes effective, the Company’s new fully reporting status and proposal for uplisting will provide key strategic benefits, serving the best interests of all shareholders at a time when the Company is poised for meaningful growth. We hope that a move to a national exchange will improve capital market access for existing and prospective new investors, as well as enhance the Company’s ability to drive growth and new revenue streams. Although no assurance can be given, the proposed uplisting is expected to go to vote before a majority of shareholders with application to the exchange on or before December 15, 2023.
About The Sustainable Green Team, Ltd.
The Company is a wholesale manufacturer and national supplier of wood-based mulch, soil, including the soil amendment products: HumiSoil® and XLR8® and are lumber products. The Company sells directly to mass merchandisers, home centers, hardware stores, nurseries, garden centers, convenience stores, food stores, and wholesale distributors. The Company’s primary corporate objective is to provide a solution for the treatment and handling of tree debris that has been historically sent to local landfills and disposal sites, creating an environmental burden and pressure on disposal sites around the nation.
To learn more, please visit: https://www.thesustainablegreenteam.com/ or visit SGTM’s YouTube Channel.
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements included within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding our expected future financial position, results of operations, cash flows, financing plans, business strategy, products and services, competitive positions, growth opportunities, plans and objectives of management for future operations, including words such as “anticipate,” “if,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” “should,” “will,” and other similar expressions are forward-looking statements and involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
Company Contact
Nickolas S. Tabraue?Chief Compliance Officer and?Chief Investor Relations?(786) 375-7281?ntabraue@sgtmltd.com
?
My only concern is the money the billionaires have to manipulate the stock prices prior to the merger.
The writing is on the wall Stockforce. I believe a new phase is beginning for RXMD on and after July 1, 2023. It would be nice to get a conference call from management to bring us up to date.
Nevada
(State or other jurisdiction of incorporation or organization)
65-0783722 (I.R.S. Employee Identification No.)
As filed with the Securities and Exchange Commission on June 21, 2023
3250 Mary St., Suite 410
Coconut Grove, FL 33133
(305) 560-5355
(Address, including zip code, and telephone number, including area code of registrant’s principal executive offices)
Charles M. Fernandez
Chief Executive Officer
3250 Mary St., Suite 410
Coconut Grove, FL 33133
(305) 560-5355
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Ralph V. De Martino, Esq. Marc Rivera, Esq. ArentFox Schiff LLP 901 K Street NW, Suite 700 Washington, DC 20001 Tel: (202) 724-6848 Fax: (202) 778-6460
Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: ?
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: ?
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ?
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ?
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ?
If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ?
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ? Accelerated filer ? 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 provided pursuant to Section 7(a)(2)(B) of Securities Act. ?
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NextPlat Corp
(Exact name of registrant as specified in its charter)
The information in this prospectus is not complete and may be changed. The Selling Stockholder may not sell these securities or accept an offer to buy these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting offers to buy these securities in any jurisdiction where such offer or sale is not permitted
Subject to Completion, dated June 21, 2023
PROSPECTUS 3,428,571 shares of Common Stock NextPlat Corp
Pursuant to this prospectus, the selling stockholder identified herein (the “Selling Stockholder”) is offering on a resale basis an aggregate of3,428,571 shares of our common stock, par value $0.0001 per share (“Common Stock”).
The foregoing 3,428,571 shares of Common Stock offered for resale hereby were acquired by the Selling Stockholder in a private placement transaction pursuant to a securities purchase agreement by and between us and the Selling Stockholder, dated April 5, 2023 (the “Purchase Agreement”).
We will not receive any of the proceeds from the sale by the Selling Stockholder of the common stock.
The Selling Stockholders may sell any or all of the shares on any stock exchange, market or trading facility on which the shares are traded or in privately negotiated transactions at fixed prices that may be changed, at market prices prevailing at the time of sale or at negotiated prices. Information on the Selling Stockholders and the times and manners in which they may offer and sell our shares is described under the sections entitled “Selling Stockholders” and “Plan of Distribution” in this prospectus. While we will bear all costs, expenses and fees in connection with the registration of the shares, we will not receive any of the proceeds from the sale of our shares by the Selling Stockholders.
Our shares are currently traded on the Nasdaq Capital Market (the “Nasdaq”) under the symbol “NXPL”. On June 20, 2023, the closing price for our shares on Nasdaq was $2.59 per share.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required.
Investing in our securities involves risks. See “Risk Factors” beginning on page 6 of this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DATED _______, 2023
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
PROSPECTUS SUMMARY
RISK FACTORS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
CAPITALIZATION
USE OF PROCEEDS
SELLING STOCKHOLDERS
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
i
ABOUT THIS PROSPECTUS
1 2 3 4 6 8 9 10 11 12 14 14
This prospectus is filed in conjunction with a registration statement that we filed with the Securities and Exchange Commission (the “SEC”). Under this registration process, the Selling Stockholder may from time to time offer and sell or otherwise dispose up to 3,428,571 shares of our common stock covered by this prospectus. As permitted by the rules and regulations of the SEC, the registration statement filed by us includes additional information not contained in this prospectus.
This prospectus and the documents incorporated by reference into this prospectus include important information about us, the securities being offered and other information you should know before investing in our securities. You should not assume that the information contained in this prospectus is accurate on any date subsequent to the date set forth on the front cover of this prospectus or that any information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus is delivered or shares of common stock are sold or otherwise disposed of on a later date. It is important for you to read and consider all information contained in this prospectus, including the documents incorporated by reference therein, in making your investment decision. You should also read and consider the information in the documents to which we have referred you under “Where You Can Find More Information” and “Incorporation of Certain Information by Reference” in this prospectus.
You should rely only on this prospectus and the information incorporated or deemed to be incorporated by reference in this prospectus. We have not, and the selling stockholders have not, authorized anyone to give any information or to make any representation to you other than those contained or incorporated by reference in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus does not constitute an offer to sell or the solicitation of
an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference in this prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
Unless otherwise indicated, information contained or incorporated by reference in this prospectus concerning our industry, including our general expectations and market opportunity, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily uncertain due to a variety of factors, including those described in “Risk Factors” beginning on page 6 of this prospectus. These and other factors could cause our future performance to differ materially from our assumptions and estimates.
Certain Defined Terms and Conventions
Unless otherwise indicated, references in this prospectus to:
? “shares,” “common shares,” and “common stock” are to shares of our common stock, par value $0.0001 per share.
? “US$” and “U.S. dollars” are to the legal currency of the United States.
? “we,” “us,” “our,” “NextPlat,” “NXPL” or the “Company” refer to NextPlat Corp, a Nevada corporation, and its subsidiaries.
1
WHERE YOU CAN FIND MORE INFORMATION
For the purposes of this section, the term registration statement means the original registration statement and any and all amendments including the schedules and exhibits to the original registration statement or any amendment. This prospectus does not contain all of the information included in the registration statement we filed. For further information regarding us and the shares offered in this prospectus, you may desire to review the full registration statement, including the exhibits. The registration statement, including its exhibits and schedules, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling 1-202-551-8090. Copies of such materials are also available by mail from the Public Reference Branch of the SEC at 100 F Street, N.E., Washington, D.C. 20549 at prescribed rates. In addition, the SEC maintains a website (http://www.sec.gov) from which interested persons can electronically access the registration statement, including the exhibits and schedules to the registration statement.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In accordance with the Exchange Act, we file reports with the SEC, including annual reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the information we file with them. This means that we can disclose important information to you by referring you to those documents. Each document incorporated by reference is current only as of the date of such document, and the incorporation by reference of such documents should not create any implication that there has been no change in our affairs since the date thereof or that the information contained therein is current as of any time subsequent to its date. The information incorporated by reference is considered to be a part of this prospectus and should be read with the same care. When we update the information contained in documents that have been incorporated by reference by making future filings with the SEC, the information incorporated by reference in this prospectus is considered to be automatically updated and superseded. In other words, in the case of a conflict or inconsistency between information contained in this prospectus and information incorporated by reference into this prospectus, you should rely on the information contained in the document that was filed later.
We incorporate by reference the documents listed below:
? our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 31, 2023;
? our Quarterly Report on Form 10-Q for the quarter dated March 31, 2023, filed with the SEC on May 15, 2023,;
? our Current Reports on Form 8-K and any amendments on Form 8-K/A filed on January 5, 2023, January 27, 2023, April 6, 2023, April 13, 2023, April 26, 2023, and May 11, 2023;
? the description of our common stock, par value $0.0001 per share contained in our prospectus forming a part of the Registration Statement on Form S-1 (File No. 333- 253027), originally filed with the U.S. Securities and Exchange Commission on February 12, 2021, as thereafter amended and supplemented from time to time; and
? all documents that we file with the SEC on or after the effective time of this prospectus pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 and prior to the sale of all the securities registered hereunder or the termination of the registration statement.
Unless expressly incorporated by reference, nothing in this prospectus shall be deemed to incorporate by reference information furnished to, but not filed with, the SEC.
We will provide to each person, including any beneficial owner, who receives a copy of this prospectus, upon written or oral request, without charge, a copy of any or all of the documents we refer to above which we have incorporated by reference in this prospectus. You should direct your requests to the attention of our chief financial officer at our principal executive office located at 3250 Mary Street, Suite 410, Coconut Grove, FL., 33133. Our telephone number is (305) 560-5355.
You should rely only on the information contained or incorporated by reference in this prospectus, in any applicable prospectus supplement or any related free writing prospectus that we may authorize to be delivered to you. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We will not make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus, the applicable supplement to this prospectus or in any related free writing prospectus is accurate as of its respective date, and that any information incorporated by reference is accurate only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial condition, results of operations and prospects may have changed since those dates.
3
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and the documents incorporated herein by reference and does not contain all of the information that you need to consider in making your investment decision. You should carefully read the entire prospectus, including the risks of investing in our securities discussed under “Risk Factors” beginning on page 6 of this prospectus, the information incorporated herein by reference, including our financial statements, and the exhibits to the registration statement of which this prospectus is a part. All references in this prospectus to “we,” “us,” “our,” “NextPlat,” “NXPL,” the “Company” and similar designations refer to NextPlat Corp (formerly Orbsat Corp), unless otherwise indicated or as the context otherwise requires.
Our Company
Overview
Leveraging the e-commerce experience of the Company’s management team and the Company’s existing e-commerce platforms, the Company has embarked upon the rollout of a state-of-the-art e-commerce platform to collaborate with businesses to optimize their ability to sell their goods online, domestically, and internationally, and enabling customers and partners to optimize their e-commerce presence and revenue, which we expect will become the focus of the Company’s business in the future. Historically, the business of NextPlat has been, the provision of a comprehensive array of Satellite Industry communication services, and related equipment sales. As detailed in Online Storefronts and E-Commerce Platforms below, the Company operates two main e-commerce websites as well as 25 third-party e-commerce storefronts such as Alibaba, Amazon and Walmart. These e-commerce venues form an effective global network serving thousands of consumers, enterprises, and governments. NextPlat has announced its intention to broaden its e-commerce platform and is implementing comprehensive systems upgrade to support this initiative. The Company has also begun the design and development of a next generation platform for digital assets built for Web3 (an internet service built using decentralized blockchains). This new platform (“NextPlat Digital”) is currently in the design and development phase and will enable the use of a range of digital assets, such as non-fungible tokens (“NFTs”), in e-commerce and in community- building activities.
Recent Investments in Progressive Care Inc.
Since September 2022, with a view to enhancing our product and services offerings, we invested in, and have determined to use our interests to exert control over, Progressive Care Inc. (OTCQB: RXMD) (“Progressive”), a Florida health services organization and provider of Third-Party Administration (TPA), data management, COVID-19 related diagnostics and vaccinations, 340B contracted pharmacy services, prescription pharmaceuticals, compounded medications, provider of tele-pharmacy services, the sale of anti- retroviral medications, medication therapy management (MTM), the supply of prescription medications to long-term care facilities, and health practice risk management. Our Executive Chairman and Chief Executive Officer, Charles Fernandez, is the Chairman and Chief Executive Officer of Progressive and our Board member, Mr. Rodney Barreto, is the Vice Chairman of Progressive’s board of directors. Our holdings in Progressive include preferred stock, common stock, warrants and convertible debt, and we currently account for it on the equity method.
Online Storefronts and E-Commerce Platforms
We operate two e-commerce websites offering a range of MSS products and solutions through our subsidiaries, Orbital Satcom, which targets customers in North and South America, and GTC which targets customers in the UK, the EU, the Middle East, Asia and the rest of the world. These websites produce sales and attract enquiries from customers and potential customers from all around the world. Over the long term, we plan to develop additional country-specific websites to target customers in South America, Asia and Europe where we anticipate there will be substantial further demand for our products.
In addition to our two main e-commerce websites, we make portable satellite voice, data and tracking solutions easier to find and buy online through our various third- party e-commerce storefronts such as Alibaba, Amazon and Walmart. We currently operate 25 storefronts across various countries in 5 continents. We have invested in personnel to translate our listings correctly in the different countries we are represented in and intend to regularly improve and increase our listings on all e-commerce sites. We currently have more than 9,000 product listings on all third-party sites and invest significantly in inventory to hold at Amazon’s various fulfillment centers around the world to ensure that orders are shipped to customers as quickly as possible. The products include handheld satellite phones, personal and asset tracking devices, portable high-speed broadband terminals, and satellite Wi-Fi hotspots. Our Amazon Marketplaces represented approximately 57.2% and 45.9% of the Company’s revenues during the three months ended March 31, 2023 and 2022, respectively. For the years ended December 31, 2022 and 2021, Amazon online marketplaces represented approximately 54.3% and 63.6% of total sales, respectively. We anticipate that these marketplaces will continue to represent a significant portion of our sales for the foreseeable future. Our e-commerce storefronts enable us to attract a significantly diversified level of sales from all over the world, ensuring we are not overly reliant on any single market or sector for our sales revenue. Furthermore, many products we sell require subscription-based services which allow us to increase our recurring revenue airtime sales.
Communications Services
Through our Global Telesat Communications Ltd and Orbital Satcom Corp business units, we provide Mobile Satellite Services (“MSS”) solutions to fulfill the growing global demand for satellite-enabled voice, data, personnel and asset tracking, Machine-to-Machine (M2M) and Internet of Things (IoT) connectivity services. We provide these solutions for businesses, governments, military, humanitarian organizations, and individual users, enabling them to communicate, connect to the internet, track and monitor remote assets and lone workers, or request SOS assistance via satellite from almost anywhere in the world, even in the most remote and hostile of environments.
We provide voice, data communications, IoT and M2M services via Geostationary and Low Earth Orbit (“LEO”) satellite constellations and offer reliable connectivity in areas where terrestrial wireless or wireline networks do not exist or are limited, including remote land areas, open ocean, airways, the polar regions and regions where terrestrial networks are not operational, for example due to political conflicts and natural or man-made disasters.
We have expertise and long-term experience in providing tracking and monitoring services via satellite, specifically through the Globalstar Low Earth Orbit satellite network. We own unique network infrastructure devices, known as appliqués, which are located in various Globalstar ground stations around the world and provide the signal receipt and processing technology that enables and powers the Globalstar simplex data service. Our ownership of these appliqués provides us with competitive access to the global simplex data service which addresses the market demand for a small and cost-effective solution for sending data, such as geographic coordinates, from assets or individuals in remote locations to a central monitoring station and is used in numerous applications such as tracking vehicles, asset shipments, livestock, and monitoring unattended remote assets. In addition, we also provide tracking and monitoring solutions using Automatic Identification System (AIS), 2G-5G, Push-to-Talk and two-way radio technology.
We generate revenue from both the provision of services and the sale of equipment. Higher margin recurring service revenue from the sale of monthly, annual, and prepaid airtime or messaging plans has historically represented an increasing proportion of our revenue, and we expect that trend to continue as we introduce new products requiring associated airtime or messaging plans.
We provide our products and services directly to end users and reseller networks located both in the United States and internationally through our subsidiaries, U.S. based Orbital Satcom Corp (“Orbital Satcom”) and U.K. based Global Telesat Communications Limited (“GTC”). We have a physical presence in the United States and the United Kingdom, as well as an ecommerce storefront presence in 16 countries across 5 continents. We have a diverse geographical customer base having provided solutions to more than 50,000 customers located in more than 165 countries across most every continent in the world.
MSS Products
Our MSS products rely on satellite networks for voice, data and tracking connectivity and thus are not reliant on cell towers or other local infrastructure. As a result, our MSS solutions are suitable for recreational travelers and adventurers, government and military users, and corporations and individuals wishing to communicate or connect to the internet from remote locations, or in the event of an emergency such as a power outage, following a hurricane or other natural disaster during which regular cell phone,
telephone and internet service may not be available.
Our satellite communications products enable users to make voice calls, send and receive text messages and emails, and transmit GPS location coordinates from virtually anywhere on the planet, no matter how remote the location and regardless of the availability of local communication infrastructure. Our range of satellite data products allow users around the world to connect to the internet, stream live video, and communicate via voice and data applications.
We are a provider of GPS enabled emergency locator distress beacons that can save lives, on land and at sea. Our distress beacons enable essential communication between our customers and search and rescue organizations during emergency situations and pinpoint locational information to Search and Rescue services, essential during an emergency.
4
We provide a wide range of satellite tracking devices used to monitor the location, movements, and history of almost anything that moves. We specialize in offering satellite tracking services through the Globalstar satellite network and have supplied tens of thousands of tracking devices which are used around the world to locate lone workers, track shipping containers, livestock, vehicles, and vessels along with many other types of assets.
The first product launched by the Company, SolarTrack, is a compact, lightweight, IoT tracking device powered by the sun and operating on one of the most modern satellite networks in the world. It is designed for tracking and monitoring anything that moves, or any remote asset used outdoors, almost anywhere in the world and we anticipate strong demand from customers looking for a low cost, low maintenance tracking device to monitor remote assets.
Mapping and Tracking Portal
Our advanced subscription-based mapping and tracking portal, GTCTrack, is available for use by registered customers who pay a monthly fee to access it. This mapping portal provides a universal and hardware-agnostic, cloud-based data visualization and management platform that allows managers to track, command, and control assets in near-real-time. Asset location reports including position, speed, altitude, heading and past location and movement history reports for a wide range of tracking devices and other products sold by us are available through GTCTrack.
Our History of Losses
We have incurred significant net losses since our inception. For the years ended December 31, 2022, 2021, and 2020, we have incurred net losses of approximately $9.2 million, $8.1 million, and $2.8 million, respectively. As of December 31, 2022, we had an accumulated deficit of approximately $31.1 million. We expect to incur significant sales and marketing expenses prior to recording sufficient revenue from our operations to offset these expenses. In the United States, we expect to incur additional losses as a result of the costs associated with operating as a public company.
Risks Associated With Our Company
Any investment in the shares is speculative and involves a high degree of risk. Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus and the other information included and incorporated by reference in this prospectus for a discussion of factors you should carefully consider before investing in our shares. If any of these risks actually occurs, our business, financial condition, results of operations, cash flows and prospects would likely be materially and adversely affected. As a result, the trading price of our Common Stock would likely decline, and you could lose all or part of your investment. Listed below is a summary of some of the principal risks related to our business:
Recent Developments
April 2023 Private Placement
On April 5, 2023, we entered into a securities purchase agreement (the “Purchase Agreement”) with the Selling Stockholder for the sale by the Company in a private placement of 3,428,571 shares of the Company’s common stock (the “Private Placement”). The offering price of the Common Stock was $1.75 per share, the closing price of the Common Stock on April 4, 2023.
The closing of the offering occurred on April 11, 2023. The Company received gross proceeds of $6.0 million for the shares of Common Stock. The Company intends to use the proceeds from the offering for working capital, including supporting the Company’s newly launched E-Commerce Development Program which is designed to assist Florida-based businesses to access international markets in Asia.
The shares of Common Stock offered and sold in the Private Placement were sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act and corresponding provisions of state securities or “blue sky” laws.
May 2023 Investment in Progressive Care
On May 5, 2023, we entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care pursuant to which we agreed to purchase 455,000 newly issued units of securities from Progressive Care (the “Units”) at a price per Unit of $2.20 for an aggregate purchase price of $1 million (the “Unit Purchase”). Each Unit consists of one share of common stock, par value $0.0001 per share, of Progressive Care (“Common Stock”) and one warrant to purchase a share of Common Stock (the “PIPE Warrants”). The PIPE Warrants have a three-year term, and will be immediately exercisable. Each PIPE Warrant is exercisable at $2.20 per share of Common Stock. On May 9, 2023, we closed the transactions contemplated in the SPA.
Simultaneous with the closing, Progressive Care entered into a Debt Conversion Agreement (the “DCA”) with NextPlat and the other holders (the “Holders”) of that certain Amended and Restated Secured Convertible Promissory Note, dated as of September 2, 2022, made by Progressive Care in the original face amount of $2,790,885.63 (the “Note”). Pursuant to the DCA, NextPlat and the other Holders agreed to convert the total $2,887,228.53 of outstanding principal and accrued and unpaid interest to Common Stock at a conversion price of $2.20 per share (the “Debt Conversion”). Of the total 1,312,379 shares of Common Stock issued upon conversion of the Note pursuant to the DCA, NextPlat received 570,599 shares, Charles M. Fernandez, the Executive Chairman and Chief Executive Officer of NextPlat, received 228,240 shares, and Rodney Barreto received 228,240 shares. In addition, each of the Holders also received a warrant to purchase one share of Common Stock for each share of Common Stock they received upon conversion of the Note (the “Conversion Warrants”). The Conversion Warrants have a three-year term, and will be immediately exercisable. Each Conversion Warrant is exercisable at $2.20 per share of Common Stock.
At the same time, we entered into a First Amendment (the “Amendment”) to that certain Securities Purchase Agreement dated November 16, 2022 (the “Debenture Purchase Agreement”) with Progressive Care. Under the Debenture Purchase Agreement, Progressive Care agreed to issue, and we agreed to purchase, from time to time during the three-year term of the Debenture Purchase Agreement, up to an aggregate of $10 million of secured convertible debentures from the Company (the “Debentures”). Pursuant to the Amendment, we agreed to amend the Debenture Purchase Agreement and the form of Debenture attached as an exhibit thereto to have a conversion price of $2.20 per share. At present, no Debentures have been purchased by NextPlat under the Debenture Purchase Agreement.
Company Information
Our principal executive offices are located at 3250 Mary Street, Suite 410, Coconut Grove, Florida, 33133. Our telephone number is (305) 560-5355. The Company’s website address is http://www.nextplat.com. Information contained in, or accessible through, our website does not constitute part of this prospectus and inclusions of our
website address in this prospectus are inactive textual references only.
5
RISK FACTORS
Investing in our securities involves a high degree of risk. Before investing in our securities, you should consider carefully the risks and uncertainties discussed under “Risk Factors” in our latest annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K, which are incorporated by reference herein in their entirety. You should carefully consider each of the following risks, together with all other information set forth in this prospectus, including the financial statements and the related notes, before making a decision to buy our securities. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our securities could decline, and you may lose all or part of your investment.
Risks Related to Our Securities
You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.
We are authorized to issue an aggregate of 50,000,000 shares of common stock and 3,333,333 shares of “blank check” preferred stock. In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We may issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock may create downward pressure on the trading price of the common stock.
You will experience future dilution as a result of future equity offerings.
We may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock. Although no assurances can be given that we will consummate a financing, in the event we do, or in the event we sell shares of common stock or other securities convertible into shares of our common stock in the future, additional and substantial dilution will occur. In addition, investors purchasing shares or other securities in the future could have rights superior to investors in this offering.
We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment.
Cash dividends have never been declared or paid on our common stock, and we do not anticipate such a declaration or payment for the foreseeable future. We expect to use future earnings, if any, to fund business growth. Therefore, stockholders will not receive any funds absent a sale of their shares of common stock. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates. We cannot assure stockholders of a positive return on their investment when they sell their shares, nor can we assure that stockholders will not lose the entire amount of their investment.
The ability of our Board of Directors to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger of the Company.
Our Board of Directors is authorized to issue up to 3,333,333 shares of preferred stock with powers, rights and preferences designated by it. Shares of voting or convertible preferred stock could be issued, or rights to purchase such shares could be issued, to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control of the Company. The ability of the Board of Directors to issue such additional shares of preferred stock, with rights and preferences it deems advisable, could discourage an attempt by a party to acquire control of the Company by tender offer or other means. Such issuances could therefore deprive stockholders of benefits that could result from such an attempt, such as the realization of a premium over the market price for their shares in a tender offer or the temporary increase in market price that such an attempt could cause. Moreover, the issuance of such additional shares of preferred stock to persons friendly to the Board of Directors could make it more difficult to remove incumbent officers and directors from office even if such change were to be favorable to stockholders generally.
6
Our common stock and warrants are thinly traded and there can be no assurance that a more active public market will ever develop. Failure to develop or maintain an active trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your shares.
Our common stock and warrants are listed on Nasdaq but there can be no assurance that an active trading market will develop for our shares and warrants. Should we fail to satisfy the Nasdaq continued listing standards, the trading price of our common stock could suffer and the trading market for our common stock and warrants may be less liquid and our common stock price and warrant price may be subject to increased volatility, making it difficult or impossible to sell shares of our common stock and warrants.
Provisions of our Nasdaq listed warrants could discourage an acquisition of us by a third party.
Certain provisions of our Nasdaq listed warrants could make it more difficult or expensive for a third party to acquire us. The Nasdaq listed warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the warrants. These and other provisions of the Nasdaq listed warrants could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to you.
There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq, a failure of which could result in a de-listing of our common stock.
The Nasdaq Capital Market requires that the trading price of its listed stocks remain above one dollar in order for the stock to remain listed. If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.
Our stock price may be volatile.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
? changes in our industry;
? competitive pricing pressures;
? our ability to obtain working capital financing;
? additions or departures of key personnel;
? conversions from preferred stock to common stock;
? sales of our common and preferred stock;
? our ability to execute our business plan;
? operating results that fall below expectations;
? loss of any strategic relationship;
? regulatory developments; and
? economic and other external factors.
In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market, including upon the expiration of any statutory holding period under Rule 144, or issued upon the conversion of preferred stock or exercise of warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
7
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus, any prospectus supplement, and the documents we incorporate by reference contains forward-looking statements within the meaning of the federal securities laws. You should not rely on forward-looking statements in this prospectus, any prospectus supplement, or the documents we incorporate by reference. Forward-looking statements typically are identified by use of terms such as “anticipate,” “believe,” “plan,” “expect,” “future,” “intend,” “may,” “will,” “should,” “estimate,” “predict,” “potential,” “continue,” and similar words, although some forward-looking statements are expressed differently. This prospectus, any prospectus supplement, and the documents we incorporate by reference may also contain forward-looking statements attributed to third parties relating to their estimates regarding the growth of our markets. All forward-looking statements address matters that involve risks and uncertainties, and there are many important risks, uncertainties and other factors that could cause our actual results, as well as those of the markets we serve, levels of activity, performance, achievements and prospects to differ materially from the forward- looking statements contained in this prospectus, any prospectus supplement, and the documents we incorporate by reference. You should also consider carefully the statements under “Risk Factors” and other sections of this prospectus, any prospectus supplement, and the documents we incorporate by reference, which address additional facts that could cause our actual results to differ from those set forth in the forward-looking statements. We caution investors not to place significant reliance on the forward-looking statements contained in this prospectus, any prospectus supplement, and the documents we incorporate by reference. We undertake no obligation to publicly update or review any forward- looking statements, whether as a result of new information, future developments or otherwise.
8
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2023. Because we will not be receiving any proceeds pursuant to the sale of any shares by the Selling Stockholders, our capitalization table is not adjusted to reflect such sales. You should read the following table in conjunction with our financial statements, which are incorporated by reference into this prospectus.
Capitalization
As of March 31, 2023
Common Stock Issued, $0.0001 par value
Additional Paid-In Capital
Statutory Reserves
Accumulated deficit
Accumulated Other Comprehensive Loss
Total:
1,444
57,023,736
(32,334,034
(63,702
24,627,444
9
USE OF PROCEEDS
$
$
) )
All shares of our common stock offered by this prospectus are being registered for the accounts of the Selling Stockholders, and we will not receive any proceeds from the sale of these shares.
10
SELLING STOCKHOLDERS
The Common Stock being offered by the Selling Stockholders are those previously issued to the Selling Stockholders. For additional information regarding the issuances of those shares of Common Stock, see “April 2023 Private Placement” above. We are registering the shares of Common Stock in order to permit the Selling Stockholder to offer the shares for resale from time to time.
The table below lists the Selling Stockholder and other information regarding the beneficial ownership of the shares of Common Stock by the Selling Stockholder. The second column lists the number of shares of common stock beneficially owned by the Selling Stockholder as of June 7, 2023.
The third column lists the shares of Common Stock being offered by this prospectus by the Selling Stockholder.
In accordance with the terms of the Purchase Agreement with the Selling Stockholder, this prospectus generally covers the resale of the shares of common stock issued to the Selling Stockholders in the Private Placement described above. The fourth and fifth columns assume the sale of all of the shares offered by the Selling Stockholder pursuant to this prospectus.
The Selling Stockholder may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
Name of Selling Stockholder(1)
Frost Gamma Investments Trust
Number of shares of Common Stock Owned Prior to this Offering(2)
3,428,571
Maximum Number of shares of Common Stock to be Sold Pursuant to this Prospectus(3)
3,428,571
Number of shares of Common Stock Owned After Offering(4)
3,428,571
Percentage of shares of Common Stock Owned After Offering(4)
0%
(1) The information in this table and the related notes is based upon information supplied by the Selling Stockholder.
(2) Represents the total number of shares of our Common Stock issued or issuable to each Selling Stockholder as of the date of this prospectus, including (i) all of the shares offered hereby, and (ii) to our knowledge, all other securities held by each of the Selling Stockholders, exercisable within 60 days, as of the date hereof.
(3) Assumes that none of the shares of Common Stock offered hereby have been sold or otherwise transferred prior to the date of this prospectus in transactions exempt from the registration requirements of the Securities Act.
(4) Assumes that, after the date of this prospectus and prior to completion of this offering, none of the Selling Stockholders (i) acquires additional shares of our common stock or other securities or (ii) sells or otherwise disposes of shares of our common stock or other securities held by such Selling Stockholders as of the date hereof and not offered hereby.
11
PLAN OF DISTRIBUTION
Each Selling Stockholder of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities
covered hereby may be at fixed
? ?
? ? ? ? ?
? ? ?
on the principal trading market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker-dealer as principal and resale by the broker-dealer for its account; an exchange distribution in accordance with the rules of the applicable exchange; privately negotiated transactions;
settlement of short sales;
i n transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; a combination of any such methods of sale; or
any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.
In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
12
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon for us by ArentFox Schiff LLP, Washington, DC.
EXPERTS
The audited financial statements incorporated by reference in this prospectus and elsewhere in the registration statement have been so incorporated by reference in reliance upon the report of RBSM LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
13
PROSPECTUS 3,428,571 shares of Common Stock NextPlat Corp PROSPECTUS
, 2023
You should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is correct only as of the date of this prospectus, regardless of the time of the delivery of this prospectus or the sale of these securities.
Item 14.
14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS EXPENSES
Other Expenses of Issuance and Distribution.
We estimate the fees and expenses to be incurred by us in connection with the resale of the shares in this offering, other than underwriting discounts and commissions, to be as follows:
SEC registration fee
Legal fees and expenses
Accounting fees and expenses
Miscellaneous expenses
Total
All amounts are estimated except the SEC registration fee.
Indemnification of Directors and Officers
$ 979 $ 5,000 $ 35,000 $ 1,000
$ 41,979
Item 15.
Neither our Amended and Restated Articles of Incorporation (as amended) nor our Amended and Restated Bylaws prevent us from indemnifying our officers, directors and agents to the extent permitted under the Nevada Revised Statutes. NRS Section 78.7502, provides that a corporation may indemnify any director, officer, employee or agent of a corporation against expenses, including fees, actually and reasonably incurred by him in connection with any defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
II-1
Our Amended and Restated Articles of Incorporation (as amended) provides that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the NRS, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification. We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the NRS would permit indemnification.
Our Amended and Restated Bylaws provide that a director or officer of the Company shall have no personal liability to the Company or its stockholders for damages for breach of fiduciary duty as a director or officer, except for damages for breach of fiduciary duty resulting from (a) acts or omissions which involve intentional misconduct, fraud, or a knowing violation of law, or (b) the payment of dividends in violation of section 78.3900 of the NRS as it may from time to time be amended or any successor provision thereto.
Item 16. Exhibit
3.1
3.2
3.3
3.4 3.5
3.6
3.7 5.1* 10.1
23.1* 23.2* 24.1* 107*
Exhibits
Title
Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2014)
Certificate of Amendment to Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2014)
Certificate of Amendment to Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2016)
Bylaws (Incorporated by reference to Exhibit 3.4 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2014)
Certificate of Change to the Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.7 to the Company’s Current Report on Form 8-K filed with the SEC on May 28, 2021).
Certificate of Amendment of the Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 20, 2022).
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 20, 2022).
Opinion of ArentFox Schiff LLP
Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 6, 2023).
Consent of RBSM LLP
Consent of ArentFox Schiff LLP (included in Exhibit 5.1)
Power of Attorney (included in the signature page to this Registration Statement)
Filing Fee Table
* Filed herewith.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the “Securities Act”);
(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission (the “SEC”), pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”), that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
II-2
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) That, for the purpose of determining liability under the Securities Act to any purchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which the prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) That, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned thereunto duly authorized, in Coconut Grove, State of Florida, on June 21, 2023.
NEXTPLAT CORP
indicated:
By: Name: Title:
/s/ Charles M. Fernandez
Charles M. Fernandez
Chief Executive Officer and Executive Chairman of the Board
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Cecile Munnik and Robert Bedwell his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and any subsequent registration statements pursuant to Rule 462 of the Securities Act of 1933 and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorney- in-fact or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates
Signature
Title
Chief Executive Officer and Executive
Chairman of the Board (Principal Executive Officer)
Vice Chairman and Chief Business Development Strategist
Chief Financial Officer (Principal Financial Officer)
Director and President of NextPlat, Chief Executive Officer of Global Operations
Senior Vice President of Mergers, Acquisitions and Special Projects
Chief Compliance Officer
Date June 21, 2023
June 21, 2023 June 21, 2023
June 21, 2023 June 21, 2023 June 21, 2023
/s/ Charles M. Fernandez
Charles M. Fernandez
/s/ Douglas S. Ellenoff
Douglas S. Ellenoff
/s/ Cecile Munnik
Cecile Munnik
/s/ David Phipps
David Phipps
/s/ Paul R. Thomson
Paul R. Thomson
/s/ Robert Bedwell
Robert Bedwell
/s/ Hector Delgado
Hector Delgado
/s/ John Miller
John Miller
/s/ Kendall Carpenter
Kendall Carpenter
/s/ Louis Cusimano
Louis Cusimano
/s/ Rodney Barreto
Rodney Barreto
/s/ Maria Cristina Fernandez
Maria Cristina Fernandez
Director Director Director Director Director Director
June 21, 2023 June 21, 2023 June 21, 2023 June 21, 2023 June 21, 2023 June 21, 2023
II-4
June 21, 2023
Board of Directors NextPlat Corp 3250 Mary St., Suite 410
Coconut Grove, Florida 33133
Re: Registration Statement on Form S-3 Ladies and Gentlemen:
We have acted as counsel to NextPlat Corp, a Nevada corporation (the “Company”), in connection with the Registration Statement on Form S-3 (the “Registration Statement”), filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”). The Registration Statement relates to the registration for resale by the selling stockholder named in the Registration Statement (the “Selling Stockholders”) of up to 3,428,571 shares (the “Shares”) of Company’s common stock, $0.0001 par value per share (“Common Stock”) issued by the Company to the Selling Stockholders.
In connection with our opinion, we have examined the Registration Statement, including the exhibits thereto, and such other documents, corporate records and instruments, and have examined such laws and regulations, as we have deemed necessary for the purposes of this opinion. In making our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity with the originals of all documents submitted to us as copies and the legal capacity of all natural persons. As to matters of fact material to our opinions in this letter, we have relied on certificates and statements from officers and other employees of the Company, public officials and other appropriate persons.
Based on the foregoing and subject to the qualifications set forth below, we are of the opinion that:
1. The Shares have been duly authorized by all necessary corporate action of the Company, and are validly issued, fully paid and non-assessable.
The foregoing opinion is limited to Chapter 78 of the Nevada Revised Statutes, and we express no opinion as to the laws of any other jurisdiction.
Exhibit 5.1
ArentFox Schiff LLP
1717 K Street, NW Washington, DC 20006
202.857.6000 main 202.857.6395 fax afslaw.com
The opinions expressed in this opinion letter are as of the date of this opinion letter only and as to laws covered hereby only as they are in effect on that date, and we assume no obligation to update or supplement such opinion to reflect any facts or circumstances that may come to our attention after that date or any changes in law that may occur or become effective after that date. The opinions herein are limited to the matters expressly set forth in this opinion letter, and no opinion or representation is given or may be inferred beyond the opinions expressly set forth in this opinion letter.
We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement and to the use of this firm’s name under the caption “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.
Very truly yours, ARENTFOX SCHIFF LLP By: /s/ ArentFox Schiff LLP
NextPlat Corp June 21, 2023 Page 2
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated March 31, 2023, relating to the financial statements of NextPlat Corp. and subsidiaries (collectively, the “Company”) appearing in the Annual Report on Form 10-K of the Company for the year ended December 31, 2022.
We also consent to the reference to us under the heading “Experts” in such Registration Statement. /s/ RBSM LLP
New York, NY
June 21, 2023
Exhibit 23.1
Security Type
Security Class Title
Fee Calculation or Carry Forward Rule
Amount Registered(1)
Proposed Maximum Offering Price Per Unit (2)
Maximum Aggregate Offering Price(2)
Fee Rate
Amount of Registration Fee(1)
Carry Forward Form Type
Carry Forward File Number
Carry Forward Initial effective date
Filing Fee Previously Paid In Connection with Unsold Securities to be Carried Forward
Calculation of Filing Fee Tables FORM S-3
(Form Type)
NextPlat Corp
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
$$ $$
$
(1) Fee computed pursuant to Rule 457(a) under the Securities Act of 1933. Represents 3,428,571 shares of our common stock, par value $0.0001 per share of registrant (“Common Stock”) that were issued in connection with a private placement transaction. This registration statement also covers such an indeterminate amount of shares of Common Stock as may become issuable to prevent dilution resulting from stock splits, stock dividends and similar events.
(2) Calculated pursuant to Rule 457(c), solely for the purpose of computing the amount of the registration fee, on the basis of the average of the high and low prices of the registrant’s Common Stock quoted on The Nasdaq Capital Market on June 20, 2023.
Exhibit 107
Newly Registered Securities
Fees to Be Paid
Equity
Common Stock, par value $0.0001 per share
457(a)
3,428,571
$ 2.59
$ 8,879,998.89
0.00011020
$ 978.58
Carry Forward Securities
Carry Forward Securities
Total Offering Amounts
8,879,998.89
978.58
Total Fees Previously Paid
Total Fee Offsets
Net Fee Due
978.58
Table 2: Fee Offset Claims and Sources N/A
The Sustainable Green Team, LTD. Files Form 10-12G, Shares Results from its Annual Shareholder Meeting, and Expands Executive Team
Orlando, FL, June 12, 2023 (GLOBE NEWSWIRE) -- The Sustainable Green Team, LTD. (OTCQX: SGTM) (“SGTM” or the “Company”), a provider of environmentally conscious solutions in the arbor care, disposal, and recycling industries announced today that it has filed with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement on Form 10-12G (the “Form-10”), shares results from their June 9, 2023 first Annual Shareholder Meeting (the “Meeting”), and expands executive team.??
Form-10 Filing
The Form 10 has been filed on June 12, 2023, utilizing the Company’s Fiscal 2022 YE audited financials, and period ended March 31, 2023 financials This registration statement is expected to become effective automatically sixty (60) days from the date of the original filing (the “Effective Date”), pursuant to Section 12(g)(1) of the Exchange Act. As of the Effective Date, the Company will become subject to the reporting requirements of Section 13(a) under the Exchange Act and will be required to file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and it will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act. The registration statement is available on the SEC's website at www.sec.gov and includes information regarding the Company’s business.
Annual Shareholder Meeting Results
On June 9, 2023, 9:00am E.T., the Company hosted its first Annual Shareholder Meeting with approximately 91% of its common stock shareholders in attendance based on its May 12, 2023 record date. The Meeting resulted with the election of Tony Raynor, Bradford B. Baker, and Colleen McAleer to serve as directors of the Board of Directors until the Company’s 2024 Annual Stockholders Meeting, or until their successors are elected and qualified. Furthermore, the Meeting resulted on ratifying BF Borgers CPA PC as the Company’s auditors.
Executive Team Expansion
On June 8, 2023, the Company’s Board of Directors appointed Brian Rivera as Senior Vice President of Development and Strategy.
Mr. Rivera has been with the Company since March 2020 working alongside the CEO as his Executive Assistant. He has been instrumental to the Company since day one assisting and shadowing the CEO, Tony Raynor. Mr. Rivera has been involved in every role within the Company from managing divisions, strategizing partnerships and growth, hiring and coaching staff, educating the public, leading key meetings, and streamlining communication within.
“I am pleased to announce that we have filed our FORM-10 and feel confident that we will achieve full reporting status with the SEC within this summer.” Commented Tony Raynor, SGTM’s CEO. “I was impressed with our first annual shareholder meeting having over 90% of our loyal shareholders participate.” Mr. Raynor ends with, “Since day one, Brian Rivera has worked by my side and been a key to our success. I can’t think of any better individual for our new Senior Vice President of Development and Strategy. The team and I are beyond proud of Brian and welcome him into the executive team!”
About The Sustainable Green Team, Ltd.
The Company is a wholesale manufacturer and national supplier of wood-based mulch, soil, including the soil amendment products: HumiSoil® and XLR8® and are lumber products. The Company sells directly to mass merchandisers, home centers, hardware stores, nurseries, garden centers, convenience stores, food stores, and wholesale distributors. The Company’s primary corporate objective is to provide a solution for the treatment and handling of tree debris that has been historically sent to local landfills and disposal sites, creating an environmental burden and pressure on disposal sites around the nation. ??
To learn more, please visit: https://www.thesustainablegreenteam.com/ or visit SGTM’s YouTube Channel.
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements included within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements regarding our expected future financial position, results of operations, cash flows, financing plans, business strategy, products and services, competitive positions, growth opportunities, plans and objectives of management for future operations, including words such as "anticipate," "if," "believe," "plan," "estimate," "expect," "intend," "may," "could," "should," "will," and other similar expressions are forward-looking statements and involve risks, uncertainties and contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We are under no obligation to (and expressly disclaim any such obligation to) update or alter our forward-looking statements, whether as a result of new information, future events or otherwise.
Company Contact?Nickolas S. Tabraue?Chief Compliance Officer and?Chief Investor Relations?(786) 375-72