UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1−SA
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[X]
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SEMIANNUAL REPORT PURSUANT TO REGULATION A
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or
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[ ]
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SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A
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For the fiscal semiannual period ended May
31, 2019
HEMP NATURALS, INC.
(Exact name of issuer as specified in its charter)
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Delaware
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47-5604166
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(State or other jurisdiction of incorporation
or organization)
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(I.R.S. Employer Identification No.)
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1000 5th Street, Suite 200, Miami
Beach, Florida 33139
(Full mailing address of principal executive
offices)
(347) 301-8431
(Issuer’s telephone number, including
area code)
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|
Item 1.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Use of Terms
Except as otherwise indicated by the
context and for the purposes of this report only, references in this report to “we,” “us,” “our”
or “our company” refer to Hemp Naturals, Inc., a Delaware corporation.
Special Note Regarding Forward Looking Statements
Certain information contained in this
report includes forward-looking statements. The statements herein which are not historical reflect our current expectations and
projections about our company’s future results, performance, liquidity, financial condition, prospects and opportunities
and are based upon information currently available to our company and our management and our interpretation of what is believed
to be significant factors affecting the businesses, including many assumptions regarding future events.
Forward-looking statements, which involve
assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,”
“should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,”
or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results,
performance, liquidity, financial condition, prospects and opportunities could differ materially from those expressed in, or implied
by, these forward-looking statements as a result of various risks, uncertainties and other factors. Actual events or results may
differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation,
the risks outlined under “Risk Factors” included in our Offering Statement on Form 1-A, as amended and supplemented
to date, and matters described in this report generally. There can be no assurance that the forward-looking statements contained
in this report will in fact occur.
Potential investors should not place
undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking
to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances
or any other reason.
The specific discussions herein about
our company include financial projections and future estimates and expectations about our company’s business. The projections,
estimates and expectations are presented in this report only as a guide about future possibilities and do not represent actual
amounts or assured events. All the projections and estimates are based exclusively on our management’s own assessment of
our business, the industry in which we work and the economy at large and other operational factors, including capital resources
and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from
the projections.
Overview
Hemp Naturals, Inc. is
an early stage company that plans to change its existing business plan at this time from the anticipated sale of other hemp based
products, excluding our ‘Rolling Naturals’ rolling papers made out of hemp-based material that are presently available
for sale at promotional prices that generate minimal revenue, to focus on real-estate development and remodeling utilizing bio-composite
materials including but not limited to “HempCrete.” We plan on purchasing properties for the purpose of keeping
them as rental properties, and/or remodeling them and selling them at a profit.
Our business operations
span through a systematic process of purchasing empty plots, clearing and preparing them for development, drawing and designing
the building plans, and ultimately erecting the building for commercial purposes. We can decide to sell, rent, or lease the building
depending on its location and other variables, too.
Hempcrete is made from lime and hemp shivs (a waste product from hemp fiber growing); it can be used for walls, floors, and for
roof insulation. It’s breathable, absorbing and emitting moisture to regulate internal humidity and avoid trapped moisture
and mold growth. It provides excellent acoustic and thermal insulation and thermal mass, is lightweight thus reducing construction
costs, and it’s environmentally friendly.
Business Progress
To date, our operations have consisted of developing
our website and producing and distributing hemp-based rolling papers as promotion for the Company. With the purchase of an investment
property in March 2019, we expect to experience negative working capital until that property is rented or sold.
We have two part time employees, Levi Jacobson
our Chief Executive Officer and Maryna Bleier our Secretary. Currently, both Mr. Jacobson and Ms. Bleier have the flexibility to
work on our business up to 25 to 30 hours per week but are prepared to devote more time if necessary. We do not presently have
pension, health, annuity, insurance, stock options, profit sharing, or similar benefit plans; however, we may adopt plans in the
future. There are presently no personal benefits available to our officer and director. During the initial implementation of our
business plan, we intend to hire independent consultants to assist in the development and execution of our business operations.
Recent Developments
On April 2, 2019, the Company terminated its securities
registration with the SEC and is no longer required to report quarterly. The Company will report semi-annually to the SEC.
On July 31, 2019 an offering statement
submitted by the Company was approved by the SEC. The Company is offering, on a best-efforts, self-underwritten basis, a
number of shares of our common stock at a fixed priced per share between $0.05 and $2.00 with no minimum amount to be sold up to
a maximum of 100,000,000 shares, but not to exceed $5,000,000 in gross proceeds. The fixed price per share determined upon qualification
shall be fixed for the duration of the Offering unless a post-effective amendment is filed to reset the price per share and approved
by the Commission. There is no minimum investment required from any individual investor. The shares are intended to be sold directly
through the efforts of our officer and director. We have authorized capital stock consisting of the following. The total number
of shares of capital stock which the Corporation shall have authority to issue is: one billion two hundred twenty million (1,220,000,000).
These shares shall be divided into two classes with one billion two hundred million (1,200,000,000) shares designated as common
stock at $.0001 par value (the "Common Stock") and twenty million (20,000,000) shares designated as preferred stock at
$.0001 par value (the "Preferred Stock").The Preferred Stock of the Corporation shall be issuable by authority of the
Board of Director(s) of the Corporation in one or more classes or one or more series within any class and such classes or series
shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions
as the Board of Directors of the Corporation may determine, from time to time.
Going Concern
Our current financial condition raises
substantial doubt regarding our ability to continue as a going concern. Our financial statements are prepared using U.S. generally
accepted accounting principles, or GAAP, applicable to a going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. However, as shown in the accompanying financial statements, we have sustained
substantial losses from operations since inception and do not have a predictable revenue stream. The lack of a proven profitable
business strategy that would generate a predictable revenue stream raises substantial doubt for our company to continue as a going
concern. It is management’s plan in this regard to obtain additional working capital through equity financings. The accompanying
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should we be unable to continue in existence.
Results of Operations
For the six months ended May 31, 2019,
we generated revenue of $549 and our cost of sales was $589, resulting in a gross loss of $40. Our general and administrative
expenses totaled $3,572,706, which consisted primarily of compensation for officers and consultants (including stock-based compensation),
professional fees and other expenses incurred in connection with general operations. As a result of the foregoing, our operating
loss for the six months ended May 31, 2019 was $3,572,746.
For the six months ended May 31, 2018,
we generated no revenue and our cost of sales was $0. Our general and administrative expenses totaled $3,069,424, which consisted
primarily of compensation for officers and consultants (including stock-based compensation), professional fees and other expenses
incurred in connection with general operations. As a result of the foregoing, our operating loss for the six months ended
May 31, 2018 was $3,069,424.
As noted above, our total general and
administrative expenses increased by $503,282, or 16%, year-over-year. This increase was primarily due to increases in professional
fees.
Liquidity and Capital Resources
As of May 31, 2019, we had
cash and cash equivalents in the amount of $200,340 and total liabilities of $1,089,013. The following table provides detailed
information about our net cash flow for the period indicated:
Cash Flow
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Six Months Ended May 31,
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2019
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2018
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Net cash used in operating activities
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$
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(708,360
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)
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$
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(67,417)
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Net cash used in investing activities
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(265,000
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)
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—
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Net cash provided by financing activities
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1,075,452
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83,850
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Net increase in cash and cash equivalents
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102,092
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16,433
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Cash and cash equivalents at beginning of period
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98,248
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11
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Cash and cash equivalents at end of period
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$
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200,340
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$
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16,444
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Our net cash used in operating activities
for the six months ended May 31, 2019 was $708,360, which consisted of our net loss of $2,994,747 and decreases in inventory of
$303, accrued expenses of $14,306 and non-cash interest expense of $469,779 and the gain on change of fair value of derivative
liability of $271,439, offset by stock based compensation in the amount of $3,012,214 and contributed expenses of $30,000. Our
net cash used in operating activities for six months ended May 31, 2018 was $67,417, which consisted of our net loss of $3,181,960
and decreased accrued expenses in the amount of $1,871, offset by loss on change of fair value of derivative liability of $40,419,
expenses contributed to capital of $35,941, non-cash interest expense of $72,117 and stock based compensation of $2,967,937.
Our net cash used in investing activities
for six months ended May 31, 2019 was $265,000, which consisted of a purchase of real property. We had no investing activities
for the six months ended May 31, 2018.
Our net cash provided by financing activities
for the six months ended May 31, 2019 was $1,075,452, which consisted of cash received for the sale of stock of $172,000, proceeds
from the conversion of convertible notes payable of $73,619 and proceeds from selling new convertible loans of $829,833. Our net
cash provided by financing activities for the six months ended May 31, 2018 was $83,850, which consisted of contributed cash of
$5,100 and proceeds from the sale of convertible notes payable of $78,750.
During the six months ended May 31,
2019 we entered into private share purchase agreements with six purchasers, selling a total of 3,440,000 shares at $.05 per share
for $172,000. During the six months ended May 31, 2019 we entered into fifteen convertible loan agreements with twelve entities
resulting in a total of $829,833 in gross proceeds.
Historically, we have been funded through
the proceeds of these agreements and capital contributions made by our CEO. There is substantial doubt that we can continue as
an on-going business for the next twelve months unless we are successful in generating sufficient revenues from our operations
or we obtain additional capital. Due to our early stage of development, we do not anticipate that we will generate enough revenues
from our operations for the next twelve months. Accordingly, we must raise cash from sources other than operations or our business
may fail. It is management’s plan in this regard to obtain additional working capital through equity financings. However,
we have not identified any potential source of alternative financing. There can be no guarantees that any such financing would
become available to us. If we cannot raise additional capital, we would be required to cease business operations. As a result,
investors could lose their investment.
Purchase of Real Property and Other
Obligations
On March 18, 2019
we purchased real property as an investment for the Company with a cash payment of $265,000. Professional fees paid during
the reporting period included $7,850 in legal and architect fees related to developing this property. We estimate that our
total capital expenditures related to this investment in the year ended November 30, 2019 will reach approximately $750,000
Such funds will be used to pay our architects, developers and contractors.
On May 1, 2019 the
Company entered into an agreement to purchase additional real property as an investment. At this time the Company paid $178,500
as a deposit on the purchase of the property. This deposit is held in escrow at the time of filing. The remainder of
the purchase price of $378,500 will be paid on the scheduled closing date, December 1, 2019. The plans for these investments
are clearing and preparing it for development, drawing and designing the building plans, and finally erecting the building
for commercial purposes.
Off-Balance Sheet Arrangements
As of May 31, 2019, we did not have
any off-balance sheet arrangements.
Critical Accounting Policies and
Estimates
The preparation of financial statements
in conformity with GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported,
including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting
policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding
of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal
of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment,
often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent
periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because
of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.
We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation
of our financial statements:
Revenue and Cost Recognition.
We apply revenue recognition provisions pursuant to ASC No. 606, Revenue Recognition, which provides guidance on the recognition,
presentation and disclosure of revenue in financial statements filed with the SEC. The guidance outlines the basic criteria that
must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies.
We determine revenue recognition through
the following steps:
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·
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identification of the contract, or contracts, with a customer;
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·
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identification of the performance obligations in the contract;
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·
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determination of the transaction price;
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·
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allocation of the transaction price to the performance obligations in the contract; and
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·
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recognition of revenue when, or as, we satisfy a performance obligation.
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Cash and Cash Equivalents.
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Fair Value of Financial Instruments.
Our balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate
their fair value because of the relatively short period of time between the origination of these instruments and their expected
realization. ASC 820, “Fair Value Measurements and Disclosures”, defines fair value as the exchange price that would
be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value
hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent
sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the
best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and
the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
- Level
1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or
liabilities.
- Level
2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar
assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability
(e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or
other means.
- Level
3 - Inputs that are both significant to the fair value measurement and unobservable.
Fair value estimates discussed herein
are based upon certain market assumptions and pertinent information available to management as of May 31, 2019. The respective
carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of
these instruments. These financial instruments include accrued expenses.
Stock-Based Compensation.
ASC 718, “Compensation – Stock Compensation”, prescribes accounting and reporting standards for all share-based
payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering
to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based
payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements
based on their fair values. That expense is recognized over the period during which an employee is required to provide services
in exchange for the award, known as the requisite service period (usually the vesting period). We account for stock-based compensation
issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity – Based Payments to
Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever
is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based
payment transaction is determined at the earlier of performance commitment date or performance completion date.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No.
2014-09, “Revenue from Contracts with Customers” (Accounting Standards Codification 606 (“ASC 606”)).”
ASU No. 2014-09 provides guidance for revenue recognition. The standard’s core principle is that a company will recognize
revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make
more estimates than under current guidance. These may include identifying performance obligations in the contract and estimating
the amount of variable consideration to include in the transaction price attributable to each separate performance obligation.
Subsequent to the initial standards, the FASB has also issued several ASUs to clarify specific revenue recognition topics. This
guidance is effective for our company for its fiscal year beginning on December 1, 2018. We have adopted this standard using the
modified retrospective approach to initially apply the update and recognize the remaining contract value at the date of application.
We do not expect the adoption of ASU 2014-09 to have any impact on our total cash flows from operating, investing or financing
activities.
In February 2016, the FASB issued ASU
2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use assets and
lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific accounting
guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and
quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and
uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December
15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption
permitted. We are currently evaluating the impact of the adoption of this standard will have on our financial statements.
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Item 2.
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Other Information
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We have no information to disclose
that was required to be in a report on Form 1-U during the semiannual period covered by this Form 1-SA but was not reported.
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Item 3.
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Financial Statements
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INDEX TO FINANCIAL STATEMENTS
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Page
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Unaudited Financial Statements for the Six Months Ended March 31, 2019 and 2018
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Balance Sheets as of May 31, 2019 and November 30, 2018
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F-1
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Statements of Operations for the Six Months Ended May 31, 2019 and 2018
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F-2
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Statement of Stockholders Equity (Deficit) for the Six Months Ended May 31, 2019
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F-3
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Statements of Cash Flows for the Six Months Ended May 31, 2019 and 2018
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F-4
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|
Notes to Unaudited Financial Statements
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F-5
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HEMP
NATURALS, INC.
BALANCE SHEETS
(UMAUDITED)
|
|
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May 31,
2019
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|
November 30, 2018
(Audited)
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|
ASSETS
|
|
|
|
|
|
|
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Current Assets
|
|
|
|
|
|
|
|
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Cash and cash equivalents
|
|
$
|
200,340
|
|
|
$
|
98,248
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|
Other Receivable
|
|
|
—
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|
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4.525
|
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Inventory
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|
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15,969
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|
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11,141
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Prepaid Expenses
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|
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4,222,986
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|
|
|
7,231,200
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|
Total Current Assets
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|
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4,439,295
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|
|
|
7,345,115
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|
|
|
|
|
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Fixed Assets
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|
|
|
|
|
|
|
|
1713 Moffett St
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$
|
265,000
|
|
|
$
|
—
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|
Total Fixed Assets
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|
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265,000
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|
|
|
—
|
|
|
|
|
|
|
|
|
|
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TOTAL ASSETS
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$
|
4,704,295
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|
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$
|
7,345,115
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|
|
|
|
|
|
|
|
|
|
LIABILITIES & STOCKHOLDERS’ EQUITY
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|
|
|
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|
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Current Liabilities
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|
|
|
|
|
|
|
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Derivative Liability
|
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$
|
—
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|
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$
|
915,878
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Convertible Notes Payable
|
|
|
1,077,513
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|
|
|
73,020
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Accrued Expenses
|
|
|
11,500
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|
|
|
25,806
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|
Total Current Liabilities
|
|
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1,089,013
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|
|
|
1,014,704
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|
|
|
|
|
|
|
|
|
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TOTAL LIABILITIES
|
|
|
1,089,013
|
|
|
|
1,014,704
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|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
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|
|
|
|
|
|
|
|
Preferred stock, $.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of May 31, 2019 and November 30, 2018
|
|
|
—
|
|
|
|
—
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|
|
|
|
|
|
|
|
|
|
Common stock, $.0001 par value, 500,000,000 shares authorized, 329,295,216 and 324,739,783 shares issued and outstanding as of May 31, 2019 and November 30, 2018, respectively
|
|
|
32,930
|
|
|
|
32,474
|
|
Subscription Receivable
|
|
|
—
|
|
|
|
(4,000)
|
|
Additional Paid in Capital
|
|
|
17,098,521
|
|
|
|
16,823,358
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|
Accumulated Deficit
|
|
|
(13,516,169
|
)
|
|
|
(10,521,422)
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
3,615,282
|
|
|
|
6,330,411
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY
|
|
$
|
4,704,295
|
|
|
$
|
7,345,115
|
The accompanying notes are an integral part
of these unaudited financial statements.
HEMP
NATURALS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
For the Six Months Ended May 31,
|
|
|
|
2019
|
|
2018
|
|
Revenue
|
|
$
|
549
|
|
|
$
|
—
|
|
Total Revenue
|
|
|
549
|
|
|
|
—
|
|
Cost of goods sold
|
|
|
589
|
|
|
|
—
|
|
Gross loss
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
General and Administrative
|
|
|
3,572,706
|
|
|
|
3,069,424
|
|
Total Operating Expenses
|
|
|
3,572,706
|
|
|
|
3,069,424
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
$
|
(3,572,746
|
)
|
|
$
|
(3,069,424)
|
|
|
|
|
|
|
|
|
|
|
Other Income(Expenses):
|
|
|
|
|
|
|
|
|
Interest Expense
|
|
|
306,560
|
|
|
|
(72,117)
|
|
Gain(Loss) on Change of Fair Value of Derivative Liability
|
|
|
271,439
|
|
|
|
(40,419)
|
|
Total Other Expenses
|
|
|
577,999
|
|
|
|
(112,536)
|
|
Loss Before Income Tax Provision
|
|
$
|
(2,994,747
|
)
|
|
$
|
(3,181,960)
|
|
Income Tax Provision
|
|
|
—
|
|
|
|
—
|
|
Net Loss
|
|
$
|
(2,994,747
|
)
|
|
$
|
(3,181,960)
|
|
Basic and Diluted Net loss Per Common Stock
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01)
|
|
Weighted
average number of common stock outstanding – basic and diluted
|
|
|
327,833,823
|
|
|
|
310,104,005
|
The accompanying notes are
an integral part of these unaudited financial statements.
HEMP
NATURALS, INC.
STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED MAY
3, 2019 and 2018
(UNAUDITED)
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
Accumulated
Deficit
|
|
|
|
Subscription
Receivable
|
|
|
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Total Stockholder
Equity (Deficit)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, November 30, 2017 (Audited)
|
|
|
266,125,983
|
|
|
$
|
26,613
|
|
|
$
|
7,709,151
|
|
|
$
|
(4,024,103
|
)
|
|
$
|
—
|
|
|
$
|
3,711,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
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|
|
58,000,000
|
|
|
|
5,800
|
|
|
|
8,984,200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,990,000
|
|
Contributed capital from related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
41,041
|
|
|
|
—
|
|
|
|
—
|
|
|
|
41,014
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,181,960
|
)
|
|
|
—
|
|
|
|
(3,181,960)
|
|
Balance, May 31, 2018
|
|
|
324,125,983
|
|
|
$
|
32,413
|
|
|
$
|
16,734,393
|
|
|
$
|
(7,206,062
|
)
|
|
|
—
|
|
|
$
|
9,560,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common shares
|
|
|
450,000
|
|
|
|
45
|
|
|
|
23,955
|
|
|
|
—
|
|
|
|
(4,000
|
)
|
|
|
20,000
|
|
Issuance of common stock upon conversion of convertible debt
|
|
|
163,800
|
|
|
|
16
|
|
|
|
33,710
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,726
|
|
Contributed capital from related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
31,300
|
|
|
|
—
|
|
|
|
|
|
|
|
31,300
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,315,359
|
)
|
|
|
|
|
|
|
(3,315,359)
|
Balance, November 30, 2018
(Audited)
|
|
|
324,739,783
|
|
|
$
|
32,474
|
|
|
$
|
16,823,358
|
|
|
$
|
(10,521,422
|
)
|
|
$
|
(4,000
|
)
|
|
$
|
6,330,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the sale of common shares
|
|
|
3,440,000
|
|
|
|
344
|
|
|
|
171,756
|
|
|
|
—
|
|
|
|
—
|
|
|
|
172,000
|
|
Issuance of common stock upon conversion of convertible debt
|
|
|
1,115,433
|
|
|
|
112
|
|
|
|
73,507
|
|
|
|
—
|
|
|
|
—
|
|
|
|
73,619
|
|
Subscription receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,000
|
|
|
|
4,000
|
|
Contributed capital from related parties
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,994,747
|
)
|
|
|
—
|
|
|
|
(2,994,747)
|
|
Balance, May 31, 2019
|
|
|
329,295,216
|
|
|
$
|
32,930
|
|
|
$
|
17,098,521
|
|
|
$
|
(13,516,169
|
)
|
|
$
|
—
|
|
|
$
|
3,615,282
|
The accompanying notes
are an integral part of these unaudited financial statements.
HEMP
NATURALS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
For the Six Months Ended May
31,
|
|
|
|
2019
|
|
2018
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,994,747
|
)
|
|
$
|
(3,181,960)
|
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Expenses contributed to capital
|
|
|
30,000
|
|
|
|
35,941
|
|
Stock based compensation
|
|
|
3,012,214
|
|
|
|
2,964,937
|
|
Loss/(Gain) on change of fair value of derivative liability
|
|
|
(271,439
|
)
|
|
|
40,419
|
|
Non-cash interest expense
|
|
|
(469,779
|
)
|
|
|
72,117
|
|
Changes in current assets and liabilities:
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
(303
|
)
|
|
|
—
|
|
Accrued expenses
|
|
|
(14,306
|
)
|
|
|
(1,871)
|
|
Net cash used in operating activities
|
|
|
(708,360
|
)
|
|
|
(67,417)
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase of real property
|
|
$
|
265,000
|
|
|
$
|
—
|
|
Net cash used in investing activities
|
|
|
265,000
|
|
|
|
—
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock
|
|
|
172,000
|
|
|
|
—
|
|
Proceeds from convertible notes payable
|
|
|
903,452
|
|
|
|
78,750
|
|
Contributed capital from shareholder
|
|
|
—
|
|
|
|
5,100
|
|
Net cash provided by financing activities
|
|
|
1,075,452
|
|
|
|
83,850
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
102,092
|
|
|
|
16,433
|
|
Cash and cash equivalents at beginning of period
|
|
|
98,248
|
|
|
|
11
|
|
Cash and cash equivalents at end of period
|
|
|
200,340
|
|
|
|
16,444
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common stock issued recorded as prepaid expense
|
|
$
|
—
|
|
|
$
|
8,990,000
|
The accompanying notes are an integral part
of these unaudited financial statements.
HEMP NATURALS, INC.
NOTES TO UNAUDITED FINANCIAL
STATEMENTS
Note 1 – Organization and Description
of Business
Hemp Naturals, Inc. (the Company) was incorporated under the laws
of the State of Delaware on November 13, 2015. The Company intends to offer consumer goods that are made of industrial hemp and/or
the non-psychoactive ingredients of the cannabis plant.
The Company has elected November 30th
as its year end.
Note 2 – Summary of Significant Accounting
Policies
Basis of Presentation
The consolidated financial
statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America
("US GAAP").
Inventories
Inventories, consisting of products available for sale, are primarily
accounted for using the first-in, first-out ("FIFO") method, and are valued at the lower of cost or realizable value.
This valuation requires Hemp Naturals, Inc. to make judgments, based on currently-available information, about the likely method
of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable
values of each disposition category.
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. In the opinion of management, all adjustments
necessary in order to make the financial statements not misleading have been included. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at May 31, 2019
and November 30, 2018 were $200,340 and $98,248, respectively.
Income Taxes
The Company accounts for income taxes under
ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to 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 recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that
the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized
at May 31, 2019 and November 30, 2018.
Basic Earnings (Loss) Per Share
The Company computes basic and diluted earnings (loss) per share
in accordance with ASC Topic 260, Earnings per Share. Basic earnings (loss) per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share
reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or
equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
The Company does not have any potentially
dilutive instruments as of May 31, 2019 or November 30, 2018 and, thus, anti-dilution issues are not applicable.
Fair Value of Financial Instruments
The Company’s balance sheet includes certain financial
instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively
short period of time between the origination of these instruments and their expected realization.
ASC 820, Fair Value Measurements
and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s
own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable
inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The
three levels of the fair value hierarchy are described below:
|
|
•
|
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
|
|
•
|
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
•
|
Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
|
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of May 31, 2019. The respective carrying value of certain on-balance-sheet
financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments
include accrued expenses.
Convertible
Instruments
The
Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives
and Hedging Activities.
Applicable
GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative
financial instruments according to certain criteria. The 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
remeasured at fair value under other GAAP 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.
The
Company accounts for convertible instruments, when it has been determined that the embedded conversion options should not be bifurcated
from their host instruments, as follows: 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 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 stated date of redemption.
The Company accounts for the conversion
of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity
linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value,
with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
Related Parties
The Company follows ASC 850, Related Party Disclosures, for
the identification of related parties and disclosure of related party transactions.
Share-Based Compensation
ASC 718, “Compensation – Stock Compensation”,
prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired.
Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such
as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee
stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized
over the period during which an employee is required to provide services in exchange for the award, known as the requisite service
period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees
and consultants in accordance with the provisions of ASC 505-50, “Equity – Based Payments to Non-Employees.” Measurement
of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a)
the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction
is determined at the earlier of performance commitment date or performance completion date.
Note 3 – Going Concern
The
accompanying 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. The Company has not generated minimal revenues since inception. For
the six months ended May 31, 2019, the Company has a net loss of $2,994,747 and an accumulated deficit of $10,521,422
at November 30, 2018. These factors among others raise substantial doubt about the ability of the Company to continue as a going
concern. At the date of this filing, management has spent several months focused on marketing,
both online and at the retail level. The Company’s website has been developed. Our expectation is that the promotional phase
of rolling paper sales will transition to profitable operations during the next fiscal year, however there is no certainty regarding
this. In the meantime, we plan to raise money in the next fiscal years by issuing convertible notes and privately selling shares
of common stock. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Note 4 – Commitments and Contingencies
The Company follows ASC 450-20, Loss Contingencies, to
report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines
and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated. There were no commitments or contingencies as of May 31, 2019 and November 30, 2018 other than the
below:
Office Space
The Company contracted the use of 3,000 square feet of space owned
by our Secretary, Maryna Bleier, who has been and will be contributing the space, valued at $5,000 per month, to the Company as
additional paid-in capital July 1, 2016 until July 1, 2028. Beginning July 1, 2028, the Company is obligated to pay $5,000 monthly
for the use of their office space per the terms of the rental contract.
Real Property Investment
The Company has entered into an agreement to purchase a property
as an investment. The closing date for the purchase is December 1, 2019.
Note 5 – Prepaid Expenses
During the year ended November 30, 2017, the Company issued 130,000,000
shares of common stock as compensation for office rent and consulting services.
During the year ended November 30, 2018, the Company issued 58,000,000
shares of common stock as compensation for consulting services. At May 31, 2019. the $4,222,986 in prepaid expenses consists of
approximately $3,376,903 in prepaid consulting services and $846,083 in prepaid office rent.
The above transactions were originally
recorded as prepaid expenses and are being amortized over the life of each respective contract for services.
Note 6 – Convertible Notes Payable
On February 28, 2018, the Company entered into a share purchase
agreement with third party Adar Bays LLC (“Adar”) in which the Company issued a $78,750 promissory note to Adar at
8% annual interest and convertible into shares of the Company’s common stock at a conversion price equal to a 55% discount
based on the lowest trading price for the previous twenty days. The one year promissory note was purchased March 6, 2018. On October
8, 2018, $10,000 of the principal of the loan was converted to 163,800 shares of common stock at a conversion price per share of
$.06105. On February 28, 2019 this note was paid in full.
On October 1, 2018, the Company entered
into a share purchase agreement with third party Power Up Lending LLC (“Power Up”) in which the Company sold a $65,000
promissory note to Power Up at 12% annual interest and convertible into shares of the Company’s common stock at a conversion
price equal to a 61% discount based on the lowest trading price for the previous twenty days. The one year promissory note was
purchased October 4, 2018. This note was sold to Coventry Enterprises, LLC on March 19, 2019.
On October 18, 2018, the Company entered into a share purchase agreement
with third party Power Up Lending LLC (“Power Up”) in which the Company sold a $78,000 promissory note to Power Up
at 12% annual interest and convertible into shares of the Company’s common stock at a conversion price equal to a 55% discount
based on the lowest trading price for the previous twenty days. The one year promissory note was purchased October 22, 2018. This
note was sold to Coventry Enterprises, LLC on March 19, 2019.
On November 8, 2018, the Company entered into a share purchase agreement
with third party Bellridge Capital LP (“Bellridge”) in which the Company sold a $65,000 promissory note to Bellridge
with a $6,500 original issue discount, at 12% annual interest and convertible into shares of the Company’s common stock at
a conversion price equal to a 55% discount based on the lowest trading price for the previous twenty days. The one year promissory
note was purchased November 14, 2018.
On December 4, 2018 (“Closing
Date”), Hemp Naturals, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with EMA Financial LLC.,(the “Investor”), pursuant to which the Company will issue a Six Month, 12% Secured Convertible
Promissory Note, (“Note”) secured by Company common stock with a face value of $65,000.00 which provides a conversion
feature equal to a variable conversion price equal to 61% multiplied by the Market Price defined as the lowest one day closing
bid price for the Company common stock during the twenty day period ending on the latest complete trading day in the OTC Markets
prior to the conversion date. The proceeds will be used for general corporate purposes and working capital. The Agreement carries
a pre-payment penalty if the Note is paid off 30, 60, 90,120,150, or 180 days following the issue date. The pre-payment penalty
is based on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 120%,125%,130%,135%,140%,145%
respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment. The Agreement
includes customary representations, warranties and covenants by the Company and customary closing conditions.
On December 7, 2018 (“Closing
Date”), Hemp Naturals, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with Power Lending Group LTD (the “Investor”), pursuant to which the Company will issue a Six Month, 12% Secured Convertible
Promissory Note, (“Note”) secured by Company common stock with a face value of $43,000 which provides a conversion
feature equal to a variable conversion price equal to 61% multiplied by the Market Price defined as the lowest one day closing
bid price for the Company common stock during the twenty day period ending on the latest complete trading day in the OTC Markets
prior to the conversion date. The proceeds will be used for general corporate purposes and working capital. The Agreement carries
a pre-payment penalty if the Note is paid off 30, 60, 90,120,150, or 180 days following the issue date. The pre-payment penalty
is based on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 120%,125%,130%,135%,140%,145%
respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment. The Agreement
includes customary representations, warranties and covenants by the Company and customary closing conditions.
On December 14, 2018 (“Closing Date”),
Hemp Naturals, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with
Armada Investment Fund LLC (the “Investor”), pursuant to which the Company will issue a Six Month, 12% Secured Convertible
Promissory Note, (“Note”) secured by Company common stock with a face value of $38,500.00 which provides a conversion
feature equal to a variable conversion price equal to 61% multiplied by the Market Price defined as the lowest one day closing
bid price for the Company common stock during the twenty day period ending on the latest complete trading day in the OTC Markets
prior to the conversion date. The proceeds will be used for general corporate purposes and working capital. The Agreement carries
a pre-payment penalty if the Note is paid off 30, 60, 90,120,150, or 180 days following the issue date. The pre-payment penalty
is based on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 120%,125%,130%,135%,140%,145%
respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment. The Agreement
includes customary representations, warranties and covenants by the Company and customary closing conditions.
On
December 14, 2018 (“Closing Date”), Hemp Naturals, Inc. (the “Company”) entered into a securities purchase
agreement (the “Agreement”) with BHP Capital NY Inc.,(the “Investor”), pursuant to which the Company will
issue a Six Month, 12% Secured Convertible Promissory Note, (“Note”) secured by Company common stock with a face value
of $38,500.00 which provides a conversion feature equal to a variable conversion price equal to 61% multiplied by the Market Price
defined as the lowest one day closing bid price for the Company common stock during the twenty day period ending on the latest
complete trading day in the OTC Markets prior to the conversion date. The proceeds will be used for general corporate purposes
and working capital. The Agreement carries a pre-payment penalty if the Note is paid off 30, 60, 90,120,150, or 180 days following
the issue date. The pre-payment penalty is based on the then outstanding principal at the time of pay off plus accrued and unpaid
interest multiplied by 120%,125%,130%,135%,140%,145% respectively. After the expiration of 180 days following the issue date, the
Company shall have no right of prepayment. The Agreement includes customary representations, warranties and covenants by the Company
and customary closing conditions.
On
December 14, 2018 (“Closing Date”), Hemp Naturals, Inc. (the “Company”) entered into a securities purchase
agreement (the “Agreement”) with Jefferson street Capital LLC (the “Investor”), pursuant to which the Company
will issue a Six Month, 12% Secured Convertible Promissory Note, (“Note”) secured by Company common stock with a face
value of $38,500.00 which provides a conversion feature equal to a variable conversion price equal to 61% multiplied by the Market
Price defined as the lowest one day closing bid price for the Company common stock during the twenty day period ending on the latest
complete trading day in the OTC Markets prior to the conversion date. The proceeds will be used for general corporate purposes
and working capital. The Agreement carries a pre-payment penalty if the Note is paid off 30, 60, 90,120,150, or 180 days following
the issue date. The pre-payment penalty is based on the then outstanding principal at the time of pay off plus accrued and unpaid
interest multiplied by 120%,125%,130%,135%,140%,145% respectively. After the expiration of 180 days following the issue date, the
Company shall have no right of prepayment. The Agreement includes customary representations, warranties and covenants by the Company
and customary closing conditions.
On December 19, 2018 (“Closing
Date”), Hemp Naturals, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with GS CAPITAL PARTNERS, LLC (the “Investor”), pursuant to which the Company will issue up to approximately $140,000
in two 8% Secured Convertible Promissory Notes, (“Notes”) with a face value of $70,000 each which provides conversion
features equal to 55% of the lowest trading price of the Company’s common stock for the last 20 trading days prior to conversion,
as well as 8% per annum interest. The Agreement includes customary representations, warranties and covenants by the Company and
customary closing conditions.
On February 11, 2019 (“Closing
Date”), Hemp Naturals, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with Auctus Fund, LLC, (the “Investor”), pursuant to which the Company will issue a Six Month, 12% Secured Convertible
Promissory Note, (“Note”) secured by Company common stock with a face value of $75,000.00 which provides a conversion
feature equal to a variable conversion price equal to 50% multiplied by the Market Price defined as the lowest one day closing
bid price for the Company common stock during the twenty day period ending on the latest complete trading day in the OTC Markets
prior to the conversion date. The proceeds will be used for general corporate purposes and working capital. The Agreement carries
a pre-payment penalty if the Note is paid off 30, 60, 90, 120, 150, or 180 days following the issue date. The pre-payment penalty
is based on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 120%, 125%, 130%,
135%, 140%, 145% respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment.
The Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions.
On February 22, 2019 (“Closing
Date”), Hemp Naturals, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”)
with COVENTRY ENTERPRISES, LLC., (the “Investor”), pursuant to which the Company will issue a Six Month, 10% Secured
Convertible Promissory Note, (“Note”) secured by Company common stock with a face value of $50,000.00 which provides
a conversion feature equal to a variable conversion price equal to 60% multiplied by the Market Price defined as the lowest one
day closing bid price for the Company common stock during the twenty day period ending on the latest complete trading day in the
OTC Markets prior to the conversion date. The proceeds will be used for general corporate purposes and working capital. The Agreement
carries a pre-payment penalty if the Note is paid off 30, 60, 90, 120, 150, or 180 days following the issue date. The pre-payment
penalty is based on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 120%,
125%, 130%, 135%, 140%, 145% respectively. After the expiration of 180 days following the issue date, the Company shall have no
right of prepayment. The Agreement includes customary representations, warranties and covenants by the Company and customary closing
conditions.
On March 4, 2019 (“Closing Date”),
Hemp Naturals, Inc. (the “Company”) entered into a securities purchase agreement (the “Agreement”) with
Bellridge Capital, LP., (the “Investor”), pursuant to which the Company will issue a Six Month, 12% Secured Convertible
Promissory Note, (“Note”) secured by Company common stock with a face value of $65,000.00 which provides a conversion
feature equal to a variable conversion price equal to 55% multiplied by the Market Price defined as the lowest one day closing
bid price for the Company common stock during the twenty day period ending on the latest complete trading day in the OTC Markets
prior to the conversion date. The proceeds will be used for general corporate purposes and working capital. The Agreement carries
a pre-payment penalty if the Note is paid off 30, 60, 90, 120, 150, or 180 days following the issue date. The pre-payment penalty
is based on the then outstanding principal at the time of pay off plus accrued and unpaid interest multiplied by 120%, 125%, 130%,
135%, 140%, 145% respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment.
The Agreement includes customary representations, warranties and covenants by the Company and customary closing conditions.
Note 7 – Shareholder Equity
Preferred Stock
The authorized preferred stock of the Company consists of 20,000,000
shares with a par value of $0.0001. The Company has no shares of preferred stock issued and outstanding as of May 31, 2019 and
November 30, 2018.
Common Stock
The authorized common stock of the Company consists of 500,000,000
shares with a par value of $0.0001. There were 324,739,783 and 329,295,216 shares of common stock issued and outstanding as of
May 31, 2019 November 30, 2018, respectively.
On October 11, 2017 170,000 shares of common stock were sold to
1 purchaser at a purchase price of $0.03 per share for gross proceeds of $5,000.
On October 18, 2017 1,250,000 shares of common stock were sold to
1 purchaser at a purchase price of $.03 per share for gross proceeds of $37,500, with $10,905 in cash received and $26,595 recorded
as additional paid-in capital.
In the year ended November 30, 2017, 250,700,000 shares of common
stock were issued to ten shareholders as compensation for office rent and various professional services, primarily business development.
In the year ended November 30, 2018, 58,000,000 shares of common
stock were issued to two shareholders as compensation for consulting services, 450,000 shares of common stock were sold to three
shareholders, for proceeds of $20,000, and 163,800 shares of common stock were issued for the conversion of a convertible note
payable.
In the six months ended May 31, 2019, 3,440,000 shares of common
stock were sold to six shareholders for proceeds of $172,000 and 1,115,433 shares of common stock were issued for the conversion
of a convertible note payable.
Pertinent Rights and Privileges
Holders of shares of Common Stock are entitled to one vote for each
share held to be used at all stockholders’ meetings and for all purposes including the election of directors. Common Stock
does not have cumulative voting rights. Nor does it have preemptive or preferential rights to acquire or subscribe for any unissued
shares of any class of stock.
Holders of shares of Preferred Stock are entitled to voting rights
where one share of Preferred Stock has voting rights equal to one hundred shares of Common Stock.
Additional Paid-In Capital
During the year ended November 30, 2017, our CEO contributed cash
of $6,976 to the Company to pay for expenses and paid $8,810 in operating expenses on behalf of the Company which is recorded as
additional paid in capital. Our Secretary provided rental space to the Company totaling $60,000 for the 2017 fiscal year, which
is recorded as additional paid in capital.
During the year ended November 30, 2018, our CEO paid $5,841 in
operating expenses on behalf of the Company which is recorded as additional paid in capital. Our Secretary provided rental space
to the Company totaling $60,000 for the 2018 fiscal year, which is recorded as additional paid in capital.
During the six months ended May 31,
2019 our Secretary provided rental space to the Company totaling $30,000, which is recorded as additional paid in capital.
Note 8 – Related-Party Transactions
Equity
On November 17, 2017, the Company issued 120,000,000 shares to our
CEO as compensation for development of the business plan.
On November 17, 2017, the Company issued 45,000,000 shares to Blue
Car Enterprise as compensation for an agreement to provide consulting to the Company for two years. Blue Car Enterprise is an entity
solely owned by our CEO.
On January 14, 2018, the Company issued
29,000,000 additional shares to Blue Car Enterprise as compensation for an agreement to provide consulting to the Company for
two years.
Contributed Capital
As of May 31, 2019, our Secretary has
provided the Company contributed office space valued at $30,000.
As of November 30, 2018, our CEO has provided the Company contributed
capital in the form of payment of expenses on behalf of the Company totaling $5,841 and our Secretary has provided the Company
contributed office space valued at $60,000.
As of November 30, 2017, our CEO has provided the Company contributed
capital in the form of cash and payment of expenses on behalf of the Company totaling $15,786 and our Secretary has provided the
Company contributed office space valued at $60,000.
Office Space
At this time our main office space is provided to us rent free by
our Secretary Maryna Bleier which is accounted for as contribution of $5,000 monthly. Our main office space is located at 16950
North Bay Road, Suite 1803 Sunny Isles Beach, Florida 33160. After July 1, 2028, the Company is obligated to pay $5,000 monthly.
Note 9 – Subsequent Events
On July 31, 2019 an offering statement
submitted by the Company was approved by the SEC. The Company is offering, on a best-efforts, self-underwritten basis, a
number of shares of our common stock at a fixed priced per share between $0.05 and $2.00 with no minimum amount to be sold up to
a maximum of 100,000,000 shares, but not to exceed $5,000,000 in gross proceeds. The fixed price per share determined upon qualification
shall be fixed for the duration of the Offering unless a post-effective amendment is filed to reset the price per share and approved
by the Commission. There is no minimum investment required from any individual investor. The shares are intended to be sold directly
through the efforts of our officer and director.
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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HEMP NATURALS, INC.
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Date:
September 5, 2019
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/s/
Levi Jacobson
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Levi Jacobson, Chief Executive Officer, Chief Financial Officer, and Director
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Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
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Date: September 5, 2019
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/s/
Levi Jacobson
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Levi Jacobson, Chief Executive Officer, Chief Financial Officer, and Director
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