READ:"FROM MATT VEAL CEO OF HJOE" on March 9th:
"A message to the recent requests for information on Conversions of Debts and Sales
I’ve been asked for additional details about the status of our Company – particularly in terms of the convertible note situation and the sales situation. Not surprisingly, these have been correctly identified as the priorities of our Company at this time. In order to assess where we are, we think it’s helpful to look at where we have been.Although we have filed hundreds of pages of financial disclosures in accordance with the legal requirements, it isn’t always easy to sift through everything and find the priority information. Perhaps the following summary can best address things.
At the beginning of 2013, our Company found itself in an unexpected situation. It had quickly built itself to over $1,000,000 in annual revenues on a sustained basis, and went public on a reverse merger. The reasons for doing the reverse merger were simple; having grown so fast it needed capital. It had been promised $2 million in fresh capital as part of the transaction, but all it inherited was an expensive public company overhead, what little cash that was raised went to fees to the folks who also controlled the free trading stock. And of course the owners of that free trading stock sold their positions without helping the Company, and the need for capital increased!
The company then entered into an arrangement whereby it pledged its receivables for an overadvance of $300k to pay for additional marketing costs. Understand that although it had sold $2 million of product from inception, it built its brand from the initial capital contributions of its founders, plus whatever it could raise. And it spent $2 million on building the Hangover Joe’s Get’Up’N’Go brand.
This over advance was intended to be paid from profits, and the Company had a very good arrangement in Australia, which had sold near 200,000 bottles and was set to sell even more. However, a second misfortune hit – the contact manufacturer at the time, Private label – allegedly shipped a container of bottles to Australia in the French labeling that was for Canada. Also the co-packer didn't correctly perf the bottles and we had another container that could not even be put on the market. But the manufacturer never actually filled the Australian shipment, allegedly costing us the customer we had projected millions in sales in Australia. I have to say allegedly because of course we are in costly litigation with the contract manufacturer. We are currently working now to also re-establish this market. On top of losing the customer we had additional ramifications to our Company. We defaulted on the over advance to our lender, and since they had a convertible clause, that limited our financing capability. We did raise $400k in capital from an investor, and we also raised $125k in a convertible note situation. We were still confident that our sales could pull us through as we entered into a multimillion dollar contract with a Korean Company, Media CO 2 UK.
So we entered 2014 owing $625k in convertible notes due to fees and penalties, but confident that we would have the sales to get through the challenges. However, we began to run into problems with the Korean arrangement – first our representative did not make the necessary filings wit the Japanese FDA and due to their own financial condition they went out of business during 2014. We were contractually blocked from going into another direction for a while as this sorted out. It just seemed like 2013 had snakebit our beloved Hangover Joe's Brand pretty hard in 2013 after a couple of years of initial success.
But for all of our misfortunes new opportunities did present themselves. We were able to sign Larry the Cable Guy o sponsor our next product, Git-R-Done Energy shots. We got the brand launched, worked out a settlement in tranches wit TCA, and had our first production run. We did have to borrow an additional $600k to accomplish those steps. And while our soft launch of Git R Done was successful, we did face almost $700,000 of conversions of debt in 2014, which given the three challenges of 2013, was detrimental to our stock price. Those conversions have required us to pay almost $50,000 in conversion costs (2 increases in authorized shares plus expenses with the transfer agent.
So 2015 found us still owing $700k of convertible notes plus needing additional financing. Between our founders and additional convertible lenders, we found another 100k, but have had at least double that in conversions of our stock, including almost 100k in the last two weeks. We did find an arrangement to complete the final tranches of the TCA settlement , complete a second production run for Git R Done energy with our new manufacturer, film a TV appearance with food factory, reinvigorate our foreign sales operations, and have some very promising US chain sales we look forward to hopefully announcing in the second quarter of 2015.
For those of you that have stuck with us, we are grateful. What lies ahead is still formidable –still 500k of convertible debt. The debt would seem much smaller if our sales could be restored to 2012 levels, but we are not there yet, but soon do expect to start shipping in large volumes to Asia. We have even more promising opportunities than ever, but each requires time and a few remaining steps to fall in place. Our founders have been squeezed to the max, I’ve had to sell my house, but these aren’t complaints – we do this because we believe, we are believers and doers. Not pie in the sky – we have tasks that have been done, ones to complete, and new ones on the horizon that we can accomplish. Yes, there re those who have lost faith and perhaps a few that had expectations based on our initial success that could not be sustained through the misfortunes. As your CEO, I haven’t always been able to articulate the right message, or more importantly haven’t always been able to solve these challenges at the pace the market has demanded of us. But a lot has been achieved, and more achievements are possible, and we are redoubling our efforts. We remind our believers that bashers who try to harm this company with lies and disinformation we will have our attorneys monitoring for this and will be swift to take action in the future. Also our social media is for our customers and if someone bashes on our social media you will be banned. They have an agenda and they hate that this company has continued to survive and move forward with all the efforts they made to make this not possible. We are survivors and believers and we know how strong both of our brands are and we will defend them at all times.
Hangover Joe's has a tremendous opportunity ahead of itself, but like most companies, it’s not easy. We have good people, a good plan and none of the misfortunes have defeated our spirits. For our new investors, we appreciate the confidence, and we want to assure you there is a path forward".
Thank you and happy 2015!
Matthew Veal CEO
AI
