SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
We believe that it is important to communicate our future expectations to our
security holders and to the public. This report, therefore, contains statements
about future events and expectations which are "forward-looking statements"
within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the
Securities Exchange Act of 1934, including the statements about our plans,
objectives, expectations and prospects under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations." You
can expect to identify these statements by forward-looking words such as "may,"
"might," "could," "would," "will," "anticipate," "believe," "plan," "estimate,"
"project," "expect," "intend," "seek" and other similar expressions. Any
statement contained in this report that is not a statement of historical fact
may be deemed to be a forward-looking statement. Although we believe that the
plans, objectives, expectations and prospects reflected in or suggested by our
forward-looking statements are reasonable, those statements involve risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements, and we
can give no assurance that our plans, objectives, expectations and prospects
will be achieved.
Important factors that might cause our actual results to differ materially from
the results contemplated by the forward-looking statements are contained in the
"Risk Factors" section of and elsewhere in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2020 filed on April 15, 2021, and in our
subsequent filings with the Securities and Exchange Commission. The following
discussion of our results of operations should be read together with our
financial statements and related notes included elsewhere in this report.
Company Overview and Product Brands
The Company was formed as a Nevada corporation on November 26, 2007. The Company
was involved in exploration and development of mining properties until September
30, 2013, when it discontinued operations. In June 2017, the Company's creditors
filed a petition in the District Court of Harris County, Texas for the
appointment of a receiver. In August of 2017, the court appointed a receiver
(who was subsequently appointed as an officer and director of the Company), and
in February 2018, the receiver appointed William Alessi as a director of the
Company and then resigned as a director and officer of the Company.
On February 6, 2019, the Company acquired trademarks and intellectual property,
which includes all rights and trade secrets to the hemp-derived CBD-infused line
of consumer beverages sold under the "Good Hemp" brand. Since then, the Company
has been conducting operations under the "Good Hemp" trade name and through the
http://www.goodhemplivin.com/ website. Information on this website is not a part
of this report on Form 10-Q.
On April 30, 2019, the Company acquired from Mr. Spoone the "CANNA HEMP" and
"CANNA" trademarks including all rights and trade secrets and related inventory.
At June 30, 2021, the Company had not attributed any value to these acquired
trademarks.
On August 24, 2020, with an effective date of July 1, 2020, the Company entered
into a joint venture agreement with Paul Hervey ("Hervey"), an individual, for
the purpose of cultivating hemp on approximately 9 acres of farmland and in
approximately 3,700 square feet of greenhouse space in North Carolina (referred
to as "Olin Farms").
On February 9, 2021, the Company formed Good Hemp Wellness, LLC, a limited
liability company formed under the laws of the State of North Carolina, to sell
CBD products to customers through chiropractic offices.
On April 1, 2021, the Company entered into an agreement to purchase Diamond
Creek Group, LLC, a North Carolina limited liability company which sells the
Diamond Creek brand of high alkaline water products, for a total purchase price
of $643,000. On April 2, 2021, the Company closed the acquisition and paid the
initial $500,000 portion of the purchase price, and on April 23, 2021, paid the
$143,000 purchase price balance.
The Company is now a North Carolina based company that is made up of industry
veterans focused on exploiting niche markets in the hemp and beverage
industries. The Company's products include high alkaline water products,
hemp-based beverage products under Good Hemp® brand, and CBD softgels under the
Good Hemp Wellness brand. Good Hemp® products include two lines of hemp-based
beverages described below. Good Hemp® products have been sold throughout the
United States since 2016 via Amazon.com, as well as local retailers.
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Products
Good Hemp® 2oh!, CANNA HEMP and CANNA are a line-up of refreshing, all-natural,
"good-for-you", ready-to-drink waters in six flavors: blueberry-blast, island
coco-lime, kiwi-strawberry, lemon-twist, mango-fandango and Q-cumbermint. Each
Good Hemp® 2oh! beverage is 16.9 fluid ounces infused with 10 mg of hemp oil
(CBD rich), 6g of prebiotic fiber, has 0 g of sugar, contains no artificial
sweeteners or artificial flavors, is gluten free, vegan, and contains 0 net
carbs.
Good Hemp® fizz is a line-up of carbonated refreshing, all-natural,
"good-for-you", "ready-to-drink carbonated beverages in three flavors:
blueberry-bam, mango-tango and citrus-twist. Each Good Hemp® fizz beverage is 12
fluid ounces infused with 10 mg of hemp oil (CBD rich), 6 g of prebiotic fiber,
contains no artificial sweeteners or artificial flavors, is gluten free and
vegan.
Good Hemp Wellness is a line of CBD soft gels that uses a proprietary super
absorption formula which minimizes the nutrients lost during the digestive
process and allows consumers to absorb more CBD in smaller doses.
Diamond Creek High Alkaline Water is a 9.5pH high alkaline natural spring water,
sourced from the highest quality, award winning springs. Diamond Creek is
available in one gallon, one liter and half liter bottles and aids in balancing
the body's pH while providing superior hydration resulting from a proprietary
ionization process.
As of June 30, 2021, Diamond Creek water was availablein over 1500 stores in the
United States.
Our Growth Strategy
Expanding our US distribution reach to service national chain stores; increase
awareness of our brand in the United States; securing additional chain,
convenience and key account store listings for all our brands nationwide and
internationally; increasing our warehouse direct to retail channel; focusing on
full-service Class "A" distributors; and focusing on placing our products in
produce, natural and cold sets as opposed to the grocery aisles.
We will be looking for strategic acquisitions and partnerships in the beverage
and hemp sectors, such as Diamond Creek Group, LLC and Olin Farms, to strengthen
our backend supply chain, distribution and relationships with retail customers.
Results of Operations
For the six months ended June 30, 2021 compared to the six months ended June 30,
2020
Six Months Ended Increase/
June 30, 2021 June 30, 2020 (Decrease)
Net Sales $ 529,341 $ 281,346 $ 247,995
Cost of Sales 475,005 212,469 262,536
Gross Profit 54,336 68,877 (14,541 )
Operating Expenses 1,880,405 165,587 1,714,818
Operating Loss (1,826,069 ) (96,710 ) (1,729,359 )
Interest Income 4 - 4
Gain on Write-off of Debt 38,910 - 38,910
Interest Expense (67,740 ) (17,168 ) (50,572 )
Loss on Derivative Liabilities (2,035,529 ) (727,344 ) (1,308,185 )
Net Loss $ (3,890,424 ) $ (841,222 ) $ (3,049,202 )
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Revenue
During the six months ended June 30, 2021, the Company generated $529,341 in net
sales compared to $281,346 for the same period in 2020. This is largely due to
the acquisition of Diamond Creek, which had existing sales.
Cost of Sales
The Company had cost of sales of $475,005 for the six months ended June 30,
2021, compared to $212,469 for the same period in 2020. The increase was
primarily due to increased sales of the Company's products.
Operating Expenses
The Company incurred general and administrative expenses totaling $1,880,405 for
the six months ended June 30, 2021, compared to $165,587 for the same period in
2020. The increase was primarily due to the amortization ($1,322,449) of the
branding agreement in 2021. The remaining increase in the operating expenses is
from the subsidiaries that were acquired during the current six-month period.
Net Loss
The Company had a net loss of $3,890,424 for the six months ended June 30, 2021,
compared to a net loss of $841,222 for the same period in 2020. This increase
was primarily due to the amortization ($1,322,449) of the branding agreement and
the change in derivative liabilities of $2,035,529.
For the three months ended June 30, 2021 compared to the three months ended June
30, 2020
Three Months Ended Increase/
June 30, 2021 June 30, 2020 (Decrease)
Net Sales $ 455,537 $ 210,903 $ 244,634
Cost of Sales 419,551 144,592 274,959
Gross Profit 35,986 66,311 (30,325 )
Operating Expenses 482,345 86,149 396,196
Operating Loss (446,359 ) (19,838 ) (426,521 )
Interest Income 4 - 4
Interest Expense (50,554 ) (3,366 ) (47,188 )
Loss on Derivative Liabilities (1,950,700 ) (629,782 ) (1,320,918 )
Other Expenses - 315 (315 )
Net Loss $ (2,447,609 ) $ (652,671 ) $ (1,794,938 )
Revenue
During the three months ended June 30, 2021, the Company generated $455,537 in
net sales compared to $210,903 for the same period in 2020. This is largely due
to the acquisition of Diamond Creek, which had existing sales.
Cost of Sales
The Company had cost of sales of $419,551 for the three months ended June 30,
2021, compared to $144,592 for the same period in 2020. The increase was
primarily due to increased sales of the Company's products.
Operating Expenses
The Company incurred general and administrative expenses totaling $482,345 for
the three months ended June 30, 2021, compared to $86,149 for the same period in
2020. The increase was primarily due to the amortization $220,408 of the
branding agreement in 2021. The remaining increase in the operating expenses is
from the subsidiaries that were acquired during the current three-month period.
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Net Loss
The Company had a net loss of $2,447,609 for the three months ended June 30,
2021, compared to a net loss of $652,782 for the same period in 2020. This
increase was primarily due to the amortization $220,408 of the branding
agreement and the change in derivative liabilities of $1,950,700.
Liquidity and Capital Resources
We had cash used in operations of $438,179 for the six months ended June 30,
2021, compared to $1,543,409 for the six months ended June 30, 2020. The
increase in cash used in operating activities for the six months ended June 30,
2021 is attributable to the amortization of the branding agreement of $1,322,449
compared to $0 for the six months ended June 30, 2021 and 2020, respectively.
We had cash used in investing activities of $736,055 for the six months ended
June 30, 2021, and $0 for the six months ended June 30, 2020.
We had cash provided by financing activities of $1,219,682 for the six months
ended June 30, 2021, compared to cash provided by $1,531,461 for the six months
ended June 30, 2020.
As of June 30, 2021, the Company had cash and cash equivalents of $105,316. We
do not have sufficient resources to effectuate our business. We expect to incur
a minimum of $200,000 in expenses during the next twelve months of operations.
We estimate that these expenses will be comprised primarily of general expenses
including overhead, inventory purchases, legal and accounting fees.
As of June 30, 2021, and 2020, the Company has primarily been funded by Mr.
Alessi and Mr. Chumas. In addition, the Company has issued convertible notes to
unrelated third parties. As of June 30, 2021, and December 31, 2020, related
party notes totaled $510,575 and $400,575, net of discounts, respectively, and
third-party notes totaled $1,137,782 and $306,010, net of discounts,
respectively.
The Company does not know of any trends, demands, commitments, events or
uncertainties that will result in, or that are reasonable likely to result in,
our liquidity increasing or decreasing in any material way.
The Company does not know of any significant changes in expected sources and
uses of cash.
The Company does not have any commitments or arrangements from any person to
provide it with any equity capital.
Going Concern
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As reflected in the financial
statements, the Company had a working capital deficit of $5,165,822 at June 30,
2021 and had a loss of $3,890,424 for the six months ended June 30, 2021, which
raises substantial doubt as to the Company's ability to continue as a going
concern for a period of one year from the issuance of these financial
statements.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
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Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make a number
of 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. Such estimates and assumptions affect the reported
amounts of revenues and expenses during the reporting period. We base our
estimates on historical experiences and on various other assumptions that we
believe to be reasonable under the circumstances. Actual results may differ
materially from these estimates under different assumptions and conditions. We
continue to monitor significant estimates made during the preparation of our
financial statements. On an ongoing basis, we evaluate estimates and assumptions
based upon historical experience and various other factors and circumstances. We
believe our estimates and assumptions are reasonable in the circumstances;
however, actual results may differ from these estimates under different future
conditions.
Reclassification of Certain Expenses
The results of operations as of June 30, 2021 were prepared on a consistent
basis with prior periods.
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