Form 10-Q/A Rogue One, Inc. For: Jun 30
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E-mailU.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 1)
For the quarterly
period ended
For the transition period from ________________ to ________________.
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check
mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☐
Indicate by check
mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required
to submit such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company
| ||
| Emerging growth company
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If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of August 8, 2022, the Registrant had shares of Common Stock issued and outstanding.
Statement Regarding Forward Looking Statements
This Amendment No. 1 to the Prior Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). For this purpose, any statements contained herein that are not statements of current or historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "scheduled," "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results could differ materially from those expressed or forecasted in any such forward-looking statements as a result of certain factors. Such factors are set forth in "Risk Factors," in this Form Amendment No. 1 to the Prior Report includes, among others, risks and uncertainties related to:
•the impact of the COVID-19 pandemic on our business, results of operations and financial condition;
•the success of third parties in marketing our products;
•our reliance on third party suppliers and collaborative partners;
•our dependence on key personnel;
•our dependence upon a number of significant suppliers and others over which we have no control;
•competitive conditions in our industry;
•our limited alcoholic beverage product line and the intense competition that we face from large, diversified alcoholic beverage companies that possess far greater managerial and financial resources than we have currently and will likely have for the foreseeable future;
•our ability to market and sell our existing and future products successfully;
•expansion of our international operations;
•the impact of alcoholic and other regulation on our business;
•the success of our acquisitions and other strategic development opportunities;
•our ability to develop, commercialize and gain market acceptance of our products;
•cybersecurity incidents and related disruptions and our ability to protect our stakeholders’ privacy;
•product returns or liabilities;
•volatility of our stock price;
•our ability to avoid bankruptcy, insolvency and otherwise manage the new business that we acquired on June 30, 2021 when we acquired Human Brands International, Inc.
Readers are cautioned not to place undue reliance on these forward-looking statements.
Although we believe that expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect the passage of time, any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as otherwise required by applicable securities laws. These forward-looking statements apply only as of the date of this Amendment No. 1.
As used herein, the term “we,” “us,” “our,” and the “Company” refers to Rogue One, Inc., a Nevada corporation, and subsidiaries unless otherwise noted.
Item 1A. Risk Factors
Our business is subject to many significant business risks that are largely beyond our control. We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements. We have not attempted to rank any of the risks shown below but we caution you that any investment in our Company involves a substantially high risk of loss. You should carefully consider the risks described below, before you make any investment decision regarding our Company. Additional risks and uncertainties, including those generally affecting the market in which we operate or that we currently deem immaterial, may also impair our business. If any such risks actually materialize, our business, financial condition and operating results could be adversely affected. In such case, the trading price of our common stock could decline.
The following risk factors are not exhaustive and the risks discussed herein do not purport to be inclusive of all possible risks but are intended only as examples of possible investment risks. To facilitate understanding of the various business risks applicable to our Company and the strategic alliance companies through which we intend to operate our business during the foreseeable future, the risk factors discussed herein address our Company together with the risks applicable to our operations that we intend to conduct with our strategic alliance partners.
Risks Related to our Business and Industry
WE ARE SUBJECT TO THE RISKS INHERENT IN A NEW BUSINESS VENTURE.
We are subject to substantially all the risks inherent in a new business venture. Because of our history of changing our business plan combined with several changes in management, we have no comparable history of operations that would allow an investor to evaluate our past performance with comparable products in a similar business. We are also a small company and we have limited capital compared to many others that operate with sophisticated business models developed with sophisticated business analytics. As a result, we are particularly susceptible to adverse effects of changing economic conditions and consumer tastes, competition, and other contingencies or events beyond our control. We are also aware that because of our acquisition of Human Brands International, Inc. on June 30, 2021, that our business, assets, and operations have changed. We also know that consumer tastes are changing, and we do not have the market research capabilities to fully understand and anticipate these and other changes in the marketplace.
WE HAVE NO HISTORY OF PROFITABILITY AND GENERATING POSITIVE CASH FLOW.
We have no history of generating profits and positive cash flow. As a result any purchase of our Common Stock is subjects the investor to total loss of their investment resulting from insolvency, bankruptcy, or some other action by our present and future creditors since our common stock (and our preferred stock) is and will be subordinate to the rights of our existing and future creditors.
UNCERTAIN CASH FLOW.
We do not have any history of generating and sustaining our operations with a positive cash flow. That is, our operations have been characterized by negative cash flows whereby our cash disbursements have exceeded our cash receipts. For these and other reasons, any person who acquires our Common Stock faces a significant risk of loss of their entire investment.
SUBSTANTIAL LIKELIHOOD OF IMMEDIATE AND SUBSTANTIAL DILUTION.
While we have no present plans to raise capital and no prospect that any additional capital can be raised in sufficient amounts, on a timely basis, and on reasonable terms, in the event that any significant additional capital is raised, holders of our common stock face a substantial likelihood of immediate and substantial dilution of their interests in the company.
IMPACT OF COVID-19 PANDEMIC ON OUR OPERATIONS AND BUSINESS
Since March of 2020, our operations and those of others who market and sell Tequila and other alcoholic beverages have been adversely impacted by the COVID-19 pandemic. The results of operations for the six months ended June 30, 2021, are not necessarily indicative of the results to be expected for the full year or any future period, particularly in light of the COVID-19 pandemic and its effects on the domestic and global economies.
Beginning in the first quarter of 2020, to limit the spread of COVID-19, governments took various actions including the issuance of stay-at-home policies and social distancing procedures and guidelines, causing some businesses to adjust, reduce or suspend business and operating activities. The stay-at-home policies deployed early in 2020 to combat the spread of COVID-19 resulted in a decrease in the sale of alcoholic beverages at retail bars and restaurants and otherwise negatively impacted the operations and sales of Human Brands International, Inc. which we acquired on June 30, 2021 (“Human Brands”). Beginning in the second quarter of 2020, certain local, state and federal governments began to ease the stay-at-home policies and allowed more businesses and facilities to re-open, leading to a limited recovery in sales and associated demand for the Tequila products of Human Brands. In some part, and of different degrees depending on the geography, due to the introduction and acceptance of COVID-19 vaccines, restrictions have eased in many of the market areas in which we operate. While this trend is encouraging, with the rise in COVID-19 variants, the extent to which the continuation, or additional waves, of COVID-19, or an outbreak of other health epidemics could impact our business, results of operations and financial condition, including the potential for write-offs or impairments of assets and suspension of capital investments, will depend on future developments. We are unable to predict with certainty the effects of the COVID-19 pandemic on our customers, suppliers, and vendors, as well as the actions of governments, and when and to what extent normal economic and operating conditions can resume; these effects may differ from those assumed in our projected estimates. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business, mainly in our ability to effectively market and sell the alcoholic products of Human Brands, as a result of any economic impact that may occur in the future.
ABSENCE OF CONTROL AND AUTHORIZED “BLANK CHECK” PREFERRED STOCK.
Any person who acquires our Common Stock will not have any real ability to elect any Director to our Board of Directors or otherwise influence or control the policies or direction of the Company since we previously issued shares of preferred stock to Joe E. Poe, Jr. and these shares possess super-voting rights that allows Joe E. Poe, Jr. the unfettered to elect all Directors to our Board of Directors and thereby control the Company. Our Articles of Incorporation authorize the Company’s Board of Directors to authorize and issue one or more series of our Preferred Stock each with such rights and privileges as our Board of Directors determines without the necessity of obtaining any consent or approval of our common stockholders. As a result, holders of our Common Stock have no real ability to control or influence the Company at any time in the future.
COMMON STOCK SUBORDINATE TO CLAIMS OF EXISTING AND FUTURE CREDITORS.
All of our Common Stock is subordinate to the claims and interests of our existing and future creditors and as a result, any person who acquires our Common Stock is subject to a high risk of the total loss of their investment.
LIMITED AND SPORADIC TRADING MARKET FOR OUR COMMON STOCK.
Our Common Stock is traded only on a limited and sporadic basis as an unlisted security on the OTC Market and there is no likelihood that any liquid trading market will ever develop or if it does develop that any such market can be sustained. As a result, holders of our Common Stock may find it very difficult to undertake any re-sale of their holdings without incurring a prolonged delay and likely at a significant discount to observed prices. For these reasons our Common Stock should not be considered a liquid investment and it is entirely unsuitable for investors who seek to make only liquid investments.
NO LIKELIHOOD OF DIVIDENDS.
We have no history of achieving and sustaining profitability and, for that matter, we have no history of paying any dividends. In the unlikely event that we generate profits, if any, we anticipate that all such profits will be reinvested into the Company.
ABSENCE OF WORKERS’ COMPENSATION INSURANCE AND LIMITED INSURANCE COVERAGE.
We do not have any workers’ compensation insurance coverage. As a result, in the event that any employee of the Company suffers any personal injury or any property damage while in the employ of the Company or in any capacity as an employee of the Company, we may be exposed to claims under applicable state laws involving tort claims for personal injury and property damage. The extent of these claims could range from several tens of thousands of dollars to tens of million of dollars. In addition, we may be exposed to claims from the Oklahoma Department of Insurance as well. As a result, the Company is exposed to existential claims that could result in insolvency and bankruptcy with the further result that persons who acquire our Common Stock could lose their entire investment.
LIMITED MANAGERIAL RESOURCES; LACK OF “KEY MAN” INSURANCE.
Currently we have three officers each of whom is also a director. As a result, our ability to manage our business effectively is constrained by the limited amount of our managerial resources and there can be no assurances that we can retain the services of our three officers/directors in the future and otherwise attract and retain other experienced, talented, and skilled management talent necessary to execute our business plan. We have not entered into any employment agreement with any of them and we have no present plans to enter into any such agreement. Further, we do not have any “key man” life insurance on the life of each of our three officers and directors and we do not anticipate obtaining any such insurance at any time in the future. The loss of the services of any or all of our three officers would likely result in protracted and serious financial losses with the high likelihood that stockholders would lose all or nearly all of their investment.
It may be more difficult for the Company to prepare for and respond to these types of risks and the risks described elsewhere in this Form 10-Q than for a company with an established business and operating cash flow. If the Company is not able to manage these risks successfully, the Company’s operations could be negatively impacted. Due to changing circumstances, the Company may be forced to change dramatically, or even terminate, its planned operations.
RISKS ASSOCIATED WITH IMPLEMENTATION OF BUSINESS PLAN.
We acquired Human Brands International, Inc. (“Human Brands”) on June 30, 2021 and while we believe that the business of Human Brands and its Tequila products may have commercial promise, we continue to face substantial risks, uncertainties, expenses, and difficulties in our efforts to implement our business plan. The extent of these risks are not known and we have no demonstrable record of operations of any substance upon which anyone can evaluate our business and prospects. Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development. For these and many other reasons, we cannot assure any purchaser of our common stock or our preferred stock that we will be successful in implementing our business plan or otherwise achieving our objectives.
CHANGES IN CONSUMER PREFERENCES AND DISCRETIONARY SPENDING MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUE, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
We are subject to shifting and uncertain consumer preferences away from the Tequila products that are currently produced and marketed by our subsidiary, Human Brands. Consumer tastes and preferences change frequently and we have no ability to influence these changing tastes and preferences. In that respect, we face a clear risk that we may be unable to develop new products that appeal to consumers, or changes in our product mix that eliminate items popular with some consumers could harm our business. Also, the Tequila and any other alcoholic beverage offered by our subsidiary, Human Brands, will be subject to the level of discretionary consumer spending, which is influenced by general economic conditions and the availability of discretionary income. Accordingly, we may experience declines in revenue during economic downturns or during periods of uncertainty. Any material decline in the amount of discretionary spending could have a material adverse effect on our sales, results of operations, business and financial condition.
FLUCTUATIONS IN VARIOUS COMMODITY, PACKAGING AND SUPPLY COSTS, COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
We are aware that the prices of the main ingredients of our existing Tequila products (manufactured and marketed by our subsidiary, Human Brands) can be highly volatile. Supplies and prices of the various products used to produce Tequila can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries. An increase in pricing of any major ingredients that we use in our products could have a significant adverse effect on our profitability. In addition, higher diesel prices have, in some cases, resulted in the imposition of surcharges on the delivery of commodities to distributors. Additionally, higher diesel and gasoline prices may affect our supply costs and may affect our sales going forward. To help mitigate the risks of volatile commodity prices and to allow greater predictability in pricing, we hope to enter into fixed price or to-be-fixed priced purchase commitments. We cannot assure you that these activities will be successful or that they will not result in our paying substantially more than would have been required absent such activities. We do not presently have any multi-year pricing agreements (with fixed processing costs), and none with guaranteed volume commitments.
We may not be able to prevent others from using our intellectual property, and may be subject to claims by third parties that we infringe on their intellectual property.
While the Tequila products marketed and sold by Human Brands, our subsidiary uses proprietary formulations, neither Human Brands nor the Company has any registered patents. Preventing and policing the unauthorized use of our intellectual property is often difficult and any steps we take may not, in every case, prevent the infringement by unauthorized third parties. Further, there can be no assurance that our efforts to enforce our rights and protect our intellectual property will be successful. We may need to resort to litigation to enforce our intellectual property rights, which may result in substantial costs and diversion of resources and management attention.
Further, although management does not believe that our products infringe on the intellectual rights of others, there is no assurance that we will not be the target of infringement or other claims. Such claims, even if not true, could result in significant legal and other costs and may be a distraction to our management or interrupt our business.
LITIGATION AND PUBLICITY CONCERNING PRODUCT QUALITY, HEALTH AND OTHER ISSUES, WHICH CAN RESULT IN LIABILITIES AND ALSO CAUSE CONSUMERS TO AVOID OUR PRODUCTS, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS, BUSINESS AND FINANCIAL CONDITION.
We are aware that the beverage and food service businesses (including our business in selling Tequila alcoholic beverages) can be adversely affected by litigation and complaints from consumers or government authorities resulting from food and beverage quality, illness, injury or other health concerns or operating issues stemming from one retail location or a limited number of retail locations. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging consumers from buying our products. We could also incur significant liabilities, if a lawsuit or claim results in a decision against us, or litigation costs, regardless of the result. We do not carry any product liability and other related insurance and we have no present plans to do so. As a result, we will be directly exposed to all such claims and any related claims alleging losses due to our products and any asserted related losses with the consequential result that holders of our Common Stock and our Preferred Stock could easily suffer the total loss of their investment.
BEVERAGE AND FOOD SAFETY CONCERNS AND INSTANCES OF FOOD-BORNE ILLNESSES COULD HARM OUR CONSUMERS, RESULT IN NEGATIVE PUBLICITY AND CAUSE THE TEMPORARY CLOSURE OF SOME CONSUMERS’ STORES AND, IN SOME CASES, COULD ADVERSELY AFFECT THE PRICE AND AVAILABILITY OF FRUITS, ANY OF WHICH COULD HARM OUR BRAND REPUTATION, RESULT IN A DECLINE IN SALES OR AN INCREASE IN COSTS.
We consider food and beverage safety a top priority and will dedicate substantial resources towards ensuring that consumers enjoy high-quality, safe and wholesome products. However, we cannot guarantee that controls and training will be fully effective in preventing all food-borne illnesses. Furthermore, reliance on third-party suppliers and distributors increases the risk that food-borne illness incidents (such as E. coli, Hepatitis A, Salmonella or Listeria) could occur outside of our control and at multiple locations. We intend to utilize High Pressure Processing (HPP) whenever possible to mitigate these risks.
Instances of food-borne illnesses, whether real or perceived, and whether at our consumers’ stores or those of our competitors, could harm consumers and otherwise result in negative publicity about us or the products we serve, which could adversely affect sales. If there is an incident involving consumers’ C-stores and other approved channels serving contaminated products, consumers may be harmed, our sales may decrease and our brand name may be impaired. If consumers become ill from food-borne illnesses, we could be forced to temporarily suspend some operations. If we react to negative publicity by changing our products or other key aspects of the Fresh Promise experience, we may lose consumers who do not accept those changes, and may not be able to attract enough new consumers to produce the revenue needed to make our operations profitable. In addition, we may have different or additional competitors for our intended consumers as a result of making any such changes and may not be able to compete successfully against those competitors. Food safety concerns and instances of food-borne illnesses and injuries caused by food contamination have in the past, and could in the future, adversely affect the price and availability of affected ingredients and cause consumers to shift their preferences, particularly if we choose to pass any higher ingredient costs along to consumers. As a result, our costs may increase and our sales may decline. A decrease in consumer traffic as a result of these health concerns or negative publicity, or as a result of a change in our products or smoothie experience or a temporary suspension of any of our consumer operations, could materially harm our business.
THE ALCOHOLIC BEVERAGE INDUSTRY AND THE FOOD SERVICE INDUSTRY HAS INHERENT OPERATIONAL RISKS THAT MAY NOT BE ADEQUATELY COVERED BY INSURANCE.
We currently do not have any product liability insurance or any related insurance. If we later acquire any such insurance, we cannot assure you or any holder of our Common Stock that we will carry sufficient insurance against all risks or that our insurers will pay a particular claim. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our operations. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we may receive indemnity insurance coverage for tort liability. Our insurance policies may also contain deductibles, limitations and exclusions which, although we may believe are standard in the food service industry, may nevertheless increase our costs.
WE FACE UNCERTAINTY IN OUR EFFORTS TO GAIN AND SUSTAIN ANY RETAIL DISTRIBUTION OF OUR EXISTING ALCOHOLIC BEVERAGE PRODUCTS AND THOSE THAT WE MAY SEEK TO MARKET IN THE FUTURE.
We have not determined if we can achieve and sustain the existing wholesale and retail distribution of the Tequila products that we acquired upon our acquisition of Human Brands International, Inc. (“Human Brands”) on June 30, 2021. In the event that that we are successful in overcoming these and other significant challenges, we are aware that our future results depend on various factors, including successful selection of new markets, market acceptance of our brands, consumer recognition of the quality of our products and willingness to pay our prices (which reflect our often-higher ingredient costs,) the quality and performance of our equipment and general economic conditions. In addition, as with the experience of other retail food and beverage concepts who have tried to expand nationally, we may find that our product concepts have limited or no appeal to consumers in new markets or we may experience a decline in the popularity of our brands. We are also aware that any newly opened stores may not succeed, future markets may not be successful and average store revenue may not meet expectations. Moreover, we anticipate that we may incur losses and negative cash flow for several years, at a minimum. As a result, investors who acquire our Common Stock should be prepared to lose their entire investment.
OUR FAILURE TO MANAGE OUR GROWTH EFFECTIVELY COULD HARM OUR BUSINESS AND OPERATING RESULTS.
We are hopeful that the Tequila and other products marketed by our subsidiary, Human Brands International, Inc. (“Human Brands”) can be sustained and that the operations of Human Brands and the Company can be conducted profitably and with positive cash flow. However, we cannot assure you that we can achieve these objectives for any period of time. The Tequila and other alcohol products marketed by Human Brands face intense marketing and pricing pressures from many large, well-established competitors who each possess far greater managerial and financial resources that we have currently and likely will have at any time in the foreseeable future.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND COULD FALL BELOW THE EXPECTATIONS OF INVESTORS DUE TO VARIOUS FACTORS.
Our operating results may fluctuate significantly because of various factors, including:
| 1. | The impact of inclement weather, natural disasters and other calamities, such as earthquakes and/or hurricanes, which could cause a delay in getting our products to our consumers; | |
| 2. | Unseasonably cold or wet weather conditions could cause a delay in getting our products to our consumers; | |
| 3. | Profitability of our operations where our products are sold, especially in new markets; | |
| 4. | Adverse international trade restrictions with respect to the operations that Human Brands conducts in Mexico and our ability to import the Tequila products produced by Human Brands into the United States; | |
| 5. | Variations in general economic conditions, including those relating to changes in diesel and gasoline prices; | |
| 6. | Negative publicity about the ingredients we use or the occurrence of food-borne illnesses or other problems at stores where our products are available; | |
| 7. | Changes in consumer preferences and discretionary spending and particularly with respect to the consumption of alcoholic beverages; | |
| 8. | Increases in infrastructure costs; and | |
| 9. | Fluctuation in supply prices for our existing Tequila product line and any product extensions that we may later develop. |
Because of these factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year. Average consumers’ store revenue or comparable store revenue in any particular future period may decrease. In the future, our operating results may fall below the expectations of investors. In that event, the value of our Common Stock or other securities would likely decrease.
OUR CONSUMERS AND SUPPLIERS COULD TAKE ACTIONS THAT HARM OUR REPUTATION AND REDUCE OUR PROFITS.
Consumers and suppliers are separate entities and are not our employees. Further, we do not exercise control over the day-to-day operations of our consumers and suppliers. Any operational shortcomings of our consumers and suppliers are likely to be attributed to our system-wide operations and could adversely affect our reputation and have a direct negative impact on our profits.
OUR REVENUE IS SUBJECT TO VOLATILITY BASED ON WEATHER AND VARIES BY SEASON.
Seasonal factors could also cause our revenue to fluctuate from quarter to quarter. Our revenue may be lower during the winter months and the holiday season and during periods of inclement weather and higher during the spring, summer and fall months. Our revenue will likely also vary from quarter to quarter as a result of the number of trading days, that is, the number of days in a quarter when stores are open.
WE COULD FACE LIABILITY FROM OUR CONSUMERS, SUPPLIERS OR GOVERNMENT.
A consumer, supplier or government agency may bring legal action against us based on the consumer/ supplier relationships. Various state and federal laws govern our relationship with consumers and suppliers. If we fail to comply with these laws, we could be liable for damages to consumers or suppliers and fines or other penalties. Expensive litigation with our consumers/suppliers or government agencies may adversely affect both our profits and our important relations with our consumer/suppliers.
WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL ON ACCEPTABLE TERMS.
We are aware that our business may require significant capital in the future each year and for many years even if we can implement our business plans. We are also aware that any business that grows typically has negative cash flow as funds are needed to support higher levels of inventory and receivables together with higher advertising and marketing expenditures. As a result of these and related circumstances and even if we are successful in implementing our business plan, any person who acquires our Common Stock or our Preferred Stock will likely suffer significant and immediate dilution and otherwise become subordinate to the rights and claims of creditors. In addition, any financing that we obtain may not, however, be available on terms favorable to us, or at all. Our ability to obtain additional funding will be subject to various factors, including market conditions, our operating performance, lender sentiment and our ability to incur additional debt in compliance with other contractual restrictions, such as financial covenants under our credit facility. These factors may make the timing, amount, terms and conditions of additional financings unattractive. Our inability to raise capital could impede our growth.
THE MARKETING AND SALE OF OUR TEQUILA PRODUCT AND ANY OTHER CONSUMER PRODUCT EXPOSES US TO SIGNIFICANT RISK OF LITIGATION TOGETHER WITH THE DISTRACTION OF OUR LIMITED MANAGEMENT, INCREASING OUR EXPENSES OR SUBJECTING US TO MATERIAL MONEY DAMAGES AND OTHER REMEDIES.
The marketing of Tequila and any other consumer product is highly risky. We are aware that consumers could file complaints or lawsuits against us alleging that we are responsible for some illness or injury their consumers suffered at or after a visit to their stores, or that we have problems with food quality or operations. We are also subject to a variety of other claims arising in the ordinary course of our business, including personal injury claims, contract claims and claims alleging violations of federal and state law regarding workplace and employment matters, discrimination and similar matters, and we could become subject to class action or other lawsuits related to these or different matters in the future. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and money away from our operations and hurt our performance. A judgment significantly in excess of our insurance coverage for any claims could materially and adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations may also materially and adversely affect our reputation or prospects, which in turn could adversely affect our results. The food and beverage services industry has been subject to a growing number of claims based on the nutritional content of food products they sell and disclosure and advertising practices. We have no present plans to obtain insurance coverage for these risks or any risks associated with or arising out of any product that we plan to market and sell in the future. As a result, in the event that we incur costs and liabilities as a result of or associated with our planned offering and sale of our products, we likely will face protracted and significant financial costs and protracted losses thereby with the result that anyone who acquires our Common Stock or our Preferred Stock likely will lose their entire investment.
WE MAY ALSO INCUR COSTS RESULTING FROM OTHER SECURITY RISKS WE MAY FACE IN CONNECTION WITH OUR ELECTRONIC PROCESSING AND TRANSMISSION OF CONFIDENTIAL CONSUMER INFORMATION.
In the event that we are able to implement our business plan then we are likely to face the risks from using commercially available software and other technologies to provide security for processing and transmission of consumer credit card data. Our systems could be compromised in the future, which could result in the misappropriation of consumer information or the disruption of systems. Either of those consequences could have a material adverse effect on our reputation and business or subject it to additional liabilities with consequential and significant financial losses arising thereby.
WE ARE EXPOSED TO INCREASED COSTS AND RISKS ASSOCIATED WITH COMPLIANCE WITH CHANGING LAWS, REGULATIONS AND STANDARDS IN GENERAL, AND SPECIFICALLY WITH INCREASED AND NEW REGULATION OF CORPORATE GOVERNANCE AND DISCLOSURE STANDARDS.
We expect to spend an increased amount of management time and external resources to comply with existing and changing laws, regulations and standards in general, and specifically relating to corporate governance. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 requires management to annually review and evaluate all of our internal control systems, and file attestations of the effectiveness of these systems by our management and by our independent auditors. This process may require us to hire additional personnel and use outside advisory services and result in additional accounting and legal expenses. If in the future our chief executive officer, chief financial officer or independent auditors determine that our controls over financial reporting are not effective as defined under Section 404, investor perceptions may be adversely affected and could cause a decline in the value of our stock. If our independent auditors are unable to provide an unqualified attestation of management’s assessment of our internal control over financial reporting, or disclaim an ability to issue an attestation, it could result in a loss of investor confidence in our financial reports, adversely affect our stock value and our ability to access the capital markets or borrow money. Failure to comply with other existing and changing laws, regulations and standards could also adversely affect the Company.
THE REPORT OF OUR INDEPENDENT AUDITORS INDICATES UNCERTAINTY CONCERNING OUR ABILITY TO CONTINUE AS A GOING CONCERN AND THIS MAY IMPAIR OUR ABILITY TO RAISE CAPITAL TO FUND OUR BUSINESS PLAN.
Our independent auditors have raised substantial doubt about our ability to continue as a going concern. We cannot assure you that this will not impair our ability to raise capital on attractive terms. Additionally, we cannot assure you that we will ever achieve significant revenues and therefore remain a going concern.
COMPETITORS WITH MORE RESOURCES MAY FORCE US OUT OF BUSINESS.
We are aware that the Tequila product marketed and sold by our subsidiary, Human Brands International, Inc. (and any other products that we may sell competes with many large and well-established companies, food and beverage service, C-stores and other approved channels and otherwise, on the basis of taste, quality and price of product offered, consumer service, atmosphere, location and overall guest experience. Aggressive pricing by our competitors or the entrance of new competitors into our markets could reduce our revenue and profit margins and otherwise result in significant financial losses that could result in insolvency or bankruptcy.
WE MAY NOT BE ABLE TO ACHIEVE AND SUSTAIN PROFITABILITY WITHOUT SIGNIFICANT ADDITIONAL FINANCING WHICH MAY BE UNAVAILABLE.
To date, we have funded our operations with minimal financial resources, and we have not generated sufficient cash from operations to be profitable or to maintain sufficient inventory. Unless we are successful in generating sufficient revenues to finance operations as a going concern while also achieving profitability and positive cash flow, we may experience liquidity and solvency problems. Such liquidity and solvency problems may force the Company to cease operations if additional financing is not available.
THE COST TO MEET OUR REPORTING AND OTHER REQUIREMENTS AS A PUBLIC COMPANY SUBECT TO THE EXCHANGE ACT OF 1934 WILL BE SUBSTANTIAL AND MAY RESULT IN US HAVING INSUFFICIENT FUNDS TO EXPAND OUR BUSINESS OR EVEN MEET ROUTINE BUSINESS OBLIGATIONS.
Subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, we will incur ongoing expenses associated with professional fees for accounting, legal, and a host of other expenses for annual reports and proxy statements that could limit our ability to invest in inventory, accounts receivable, marketing, product development, and other necessary expenditures.
WE MAY HAVE DIFFICULTY IN ATTRACTING AND RETAINING MANAGEMENT AND OUTSIDE INDEPENDENT MEMBERS TO OUR BOARD OF DIRECTORS AS A RESULT OF THEIR CONCERNS RELATING TO THEIR INCREASED PERSONAL EXPOSURE TO LAWSUITS AND STOCKHOLDER CLAIMS BY VIRTUE OF HOLDING THESE POSITIONS IN A PUBLICLY HELD COMPANY.
We are aware that directors and management of publicly traded corporations are increasingly concerned with the extent of their personal exposure to lawsuits and stockholder claims, as well as governmental and creditor claims which may be made against them, particularly in view of recent changes in securities laws imposing additional duties, obligations and liabilities on management and directors. Due to these perceived risks, directors and management are also becoming increasingly concerned with the availability of directors’ and officers’ liability insurance to pay on a timely basis the costs incurred in defending such claims. We currently do not carry directors’ and officers’ liability insurance. Directors’ and officers’ liability insurance has recently become much more expensive and difficult to obtain. If we are unable to provide directors’ and officers’ liability insurance at affordable rates or at all, it may become increasingly more difficult to attract and retain qualified outside directors to serve on our board of directors.
We may lose potential independent board members and management candidates to other companies that have greater directors’ and officers’ liability insurance to insure them from liability or to companies that have revenues or have received greater funding to date which can offer more lucrative compensation packages. The fees of directors are also rising in response to their increased duties, obligations and liabilities as well as increased exposure to such risks. As a company with a limited operating history and limited resources, we will have a more difficult time attracting and retaining management and outside independent directors than a more established company due to these enhanced duties, obligations and liabilities.
WE MAY NOT ACHIEVE RESULTS SIMILAR TO ANY CURRENT OR FUTURE FINANCIAL PROJECTIONS.
Projections and estimated financial results are based on estimates and assumptions that are inherently uncertain and, though considered reasonable by us, are subject to significant business, economic, and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond our control. Accordingly, there can be no assurance that the projected results will be realized or that actual results will not be significantly lower than projected. Neither we nor any other person or entity assumes any responsibility for the accuracy or validity of the projections.
Risks Related to an Investment in our Common Stock
OUR DIRECTORS HAVE THE RIGHT TO AUTHORIZE THE ISSUANCE OF ADDITIONAL SHARES OF OUR PREFERRED STOCK.
Our directors, within the limitations and restrictions contained in our articles of incorporation and without further action by our stockholders, have the authority to issue shares of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series. Any issuance of shares of preferred stock could adversely affect the rights of holders of our common stock.
IF THERE IS A MARKET FOR OUR SECURITIES IN THE FUTURE, OUR STOCK PRICE MAY BE VOLATILE AND ILLIQUID.
We can make no assurance that there will be a public market for our common Stock in the future. If there is a market for our Common Stock in the future, we anticipate that such market may be illiquid and might be subject to wide fluctuations in response to several factors, including, but not limited to the following factors:
| (1) | actual or anticipated variations in our results of operations; | |
| (2) | our ability or inability to generate new revenue; | |
| (3) | our ability to anticipate and effectively adapt to a developing market; | |
| (4) | our ability to attract, retain and motivate qualified personnel; | |
| (5) | consumer satisfaction and loyalty; | |
| (6) | increased competition; and | |
| (7) | conditions and trends in the market for organic and natural products. |
CONVERSION OF OUR PROMISSORY NOTES OR SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET BY SELLING SHAREHOLDERS MAY CAUSE A REDUCTION IN THE PRICE OF OUR STOCK AND PURCHASERS WHO ACQUIRE SHARES FROM THE SELLING SHAREHOLDERS MAY LOSE SOME OR ALL OF THEIR INVESTMENTS.
If a market for our shares develops, sales of a substantial number of shares of our Common Stock in the public market could cause a reduction in the price of our Common Stock. If selling Shareholders resell a substantial portion of the issued and outstanding shares of our Common Stock it could have an adverse effect on the price of our Common Stock. As a result of any such decreases in the price of our Common Stock, purchasers who acquire shares from Selling Shareholders may lose some or all of their investment.
OUR EXISTING SHAREHOLDERS WILL EXPERIENCE SUBSTANTIAL AND IMMEDIATE DILUTION.
In the event that we are able to implement our business plan, we will need to raise significant additional capital from the sale of debt, equity, or both. Any funds that we receive from the sale of our debt or equity may not be available on favorable terms, or at all. Furthermore, if we issue debt or equity securities to raise additional funds, our existing shareholders will experience substantial and immediate dilution, and the new debt or equity securities may have rights, preference, and privileges senior to those of our existing shareholders. If we cannot raise funds on acceptable terms, we may not be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated consumer requirements.
There is no assurance that we will be profitable, and we may not be able to successfully develop, manage or market our products and services. We may not be able to attract or retain qualified executives and technological personnel and our products and services may become obsolete. Government regulation may hinder our business. Additional dilution in outstanding stock ownership will be incurred due to the issuance of more shares, stock options, or the exercise of stock options, and other risks inherent in our business.
Currently, there is a public market for our securities, but there can be no assurances that the public market will develop further and, if developed further, it is likely to experience significant price fluctuations.
We have a trading symbol for our common stock, namely ‘ROAG’. There can be no assurances as to whether:
| ● | the market for our shares will continue to develop; or | |
| ● | the prices at which our common stock will trade. |
Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these risk factors, investor perception of our Company and general economic and market conditions.
WE ARE SUBJECT TO THE PENNY SOCK RULES WHICH WILL MAKE OUR COMMON STOCK MORE DIFFICULT TO SELL.
We are subject to the SEC’s “penny stock” rules because our securities sell below $5.00 per share. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.
Furthermore, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for our securities. As long as our securities are subject to the penny stock rules, the holders of such securities will find it more difficult to sell their securities.
SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE.
The sale of a significant number of shares of common stock at any particular time could be difficult to achieve at the market prices prevailing immediately before such shares are offered. In addition, sales of substantial amounts of common stock, including shares issued upon the exercise of outstanding options and warrants, under Securities and Exchange Commission Rule 144 or otherwise could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital at that time through the sale of our securities.
STATUS OF “PENNY STOCK” AND IMPACT ON MARKET LIQUIDITY.
Trading in our Common Stock is limited. Consequently, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, our Common Stock. In the absence of a security being quoted on NASDAQ, or the Company having $2,000,000 in net tangible assets, trading in the Common Stock is covered by Rule 3a51-1 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended for non-NASDAQ and non-exchange listed securities. Under such rules, broker/dealers who recommend such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with their spouse) must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. Securities are also exempt from this rule if the market price is at least $5.00 per share, or for warrants, if the warrants have an exercise price of at least $5.00 per share. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure related to the market for penny stocks and for trades in any stock defined as a penny stock. The Commission has adopted regulations under such Act which define a penny stock to be any NASDAQ or non-NASDAQ equity security that has a market price or exercise price of less than $5.00 per share and allow for the enforcement against violators of the proposed rules. In addition, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule prepared by the Commission explaining important concepts involving a penny stock market, the nature of such market, terms used in such market, the broker/dealer's duties to the customer, a toll-free telephone number for inquiries about the broker/dealer's disciplinary history, and the customer's rights and remedies in case of fraud or abuse in the sale. Disclosure also must be made about commissions payable to both the broker/dealer and the registered representative, current quotations for the securities, and, if the broker/dealer is the sole market maker, the broker/dealer must disclose this fact and its control over the market. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. While many NASDAQ stocks are covered by the proposed definition of penny stock, transactions in NASDAQ stock are exempt from all but the sole market-maker provision for (i) issuers who have $2,000,000 in tangible assets has been in operation for at least three years ($5,000,000 if the issuer has not been in continuous operation for three years), (ii) transactions in which the customer is an institutional accredited investor, and (iii) transactions that are not recommended by the broker/dealer. In addition, transactions in a NASDAQ security directly with the NASDAQ market maker for such securities, are subject only to the sole market-maker disclosure, and the disclosure with regard to commissions to be paid to the broker/dealer and the registered representatives. The Company's securities are subject to the above rules on penny stocks and the market liquidity for the Company's securities could be severely affected by limiting the ability of broker/dealers to sell the Company's securities.
LIKELIHOOD OF GOVERNMENTAL APPROVAL OF OUR PRINCIPAL PRODUCTS.
Companies have been the target of class action lawsuits and other proceedings alleging, among other things, violations of federal and state workplace and employment laws. Proceedings of this nature, if successful, could result in our payment of substantial damages. And because the operations of our subsidiary, Human Brands International, Inc. are largely conducted in Mexico, we are exposed to ever-changing labor and other laws of Mexico.
Our results of operations may be adversely affected by legal or governmental proceedings brought by or on behalf of employees or consumers. In recent years, a number of companies, including companies that produce and market alcoholic beverages, have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law. A number of these lawsuits have resulted in the payment of substantial awards by the defendants. Although we are not currently a party to any material class action lawsuits, we could incur substantial damages and expenses resulting from lawsuits, which would increase the cost of operating the business and decrease the cash available for other uses.
WE ARE SUBJECT TO GOVERNMENT AND INDUSTRY REGULATION.
Since we sell and market Tequila, we are subject to various federal, state and local regulations and we likely will face greater regulations in the future. Our products are subject to state and local regulation by health, sanitation, food and workplace safety and other agencies. We may experience material difficulties or failures in obtaining the necessary licenses or approvals for new products which could delay planned execution of our business plan. We are subject to the U.S. Americans with Disabilities Act and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas. We may in the future have to modify office and warehouse space, for example by adding access ramps or redesigning certain architectural fixtures, to provide service to or make reasonable accommodations for disabled persons. The expenses associated with these modifications could be material. Our operations are also subject to the U.S. Fair Labor Standards Act, which governs such matters as minimum wages, over-time and other working conditions, along with the U.S. Americans with Disabilities Act, family leave mandates and a variety of similar laws enacted by the states that govern these and other employment law matters. In addition, federal proposals to introduce a system of mandated health insurance and flexible work time and other similar initiatives could, if implemented, adversely affect our operations. In recent years, there has been an increased legislative, regulatory and consumer focus on nutrition and advertising practices in the food industry. As a result, we may in the future become subject to initiatives in the area of nutrition disclosure or advertising, such as requirements to provide information about the nutritional content of our products, which could increase our expenses.
AS A PUBLIC COMPANY, WE ARE SUBJECT TO COMPLEX LEGAL AND ACCOUNTING REQUIREMENTS THAT WILL REQUIRE US TO INCUR SIGNIFICANT EXPENSES AND WILL EXPOSE US TO RISK OF NON-COMPLIANCE.
As a public company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply.
Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence and/or governmental or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.
WE MAY BE SUBJECT TO SHAREHOLDER LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.
As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROGUE ONE, INC
CONDENSED CONSOLIDATED BALANCE SHEET FOR THE PERIOD ENDED ON JUNE 30, 2021, (Unaudited)
| June 30 | December 31 | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Other assets | ||||||||
| Prepayment | ||||||||
| Fully controlled companies | ||||||||
| Associated companies | ||||||||
| Shares publicly traded - SRSG - | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible Assets | ||||||||
| Goodwill | ||||||||
| Assets pledged | ||||||||
| Total noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Other liabilities | ||||||||
| Payroll liabilities | ||||||||
| Related party loans | ||||||||
| Loans and Notes payable | ||||||||
| Notes payable related party | ||||||||
| Convertible notes payable | ||||||||
| Convertible notes payable - accrued interest - | ||||||||
| Derivative liabilities | ||||||||
| Loans payable | ||||||||
| Total current liabilities | ||||||||
| SBA loan | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Noncontrolling interest | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock - Series A, $ par value. shares authorized; shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | ||||||||
| Preferred stock - Series D, $ par value. share authorized; zero shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | ||||||||
| Preferred stock - Series E, $ par value. shares authorized; and shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | ||||||||
| Common stock, $ par value. shares authorized; and shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively | ||||||||
| Common Stock to be Issued | ||||||||
| Preferred Shares Series E Conversion rights | ||||||||
| Preferred Series E Potential conversion into common stock | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders' equity | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
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ROGUE ONE, INC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD ENDED ON JUNE 30, 2021 (Unaudited)
| Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues | $ | |||||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Board member fees | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Stock based compensation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Profit (Loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Derivative liability expense | ( | ) | ( | ) | ||||||||||||
| Loss on change in value of derivative liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total others | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net profit (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net profit (loss) attributable to common shareholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) per share applicable to common stockholders - basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) per share applicable to common stockholders - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding - basic | ||||||||||||||||
| Weighted average number of common shares outstanding - diluted | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ROGUE ONE, INC
Condensed Consolidated Statements of Stockholders' (Deficit) (Unaudited)
Three Months Ended June 30
|
Preferred Stock | Common Stock | Additional | Non- | Shares | Total | ||||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series D | Series E | paid-in- | controlling | to be | Accumulated | Shareholders' | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | capital | interest | Issued | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||||
| BALANCE, March 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||
| Net loss | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series D preferred stock for common stock | ( |
) | - | ( |
) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred stock to an officer as compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||||||||||||||
| BALANCE, March 31, 2021 | $ | $ | $ | $ | $ | $ | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Human Brands International, Inc - Merge | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred stock in connection with sales made under private or public offerings | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private or public offerings | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible debentures and accrued interest into common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE, June 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||||||||||||
| For the Six Months Ended on June 20 | Preferred Stock | Common Stock | Additional paid-in-capital | Non controlling interest | Shares to be Issued | Accumulated Deficit | Total Shareholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series D | Series E | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Shares | Value | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series D preferred stock for common stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred stock to an officer as compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of Series E preferred stock for common stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred stock in connection with sales made under private or public offerings | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred and common stock in lieu of cash for accrued compensation to employees, officers and/or directors | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred and common stock as compensation to employees, officers and/or directors | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series E preferred stock in exchange for fees and services rendered | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in connection with sales made under private or public offerings | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Return of common stock issued in connection with the acquisition of a business | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible debentures and accrued interest into common stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Human Brands International, Inc - Merge | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||||||||
See accompanying notes to the condensed consolidated financial statements
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ROGUE ONE, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| June 30 | June 30 | |||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Biological Assets Remeasurement | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of debt discount | ||||||||
| Preferred stock issued as compensation to employees, officers and/or directors | ||||||||
| Preferred stock issued in exchange for fees and services | ||||||||
| Derivative expense | ||||||||
| Loss on change in value of derivative liabilities | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses and other current assets | ( |
) | ||||||
| Accounts payable | ( |
) | ||||||
| Related party loans | ||||||||
| Other liabilities | ||||||||
| Payroll liabilities | ||||||||
| Net cash used in operating activities | ( |
)) | ( |
) | ||||
| Cash flows from investing activities: | ||||||||
| Cash received from merger transaction | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from issuance of preferred stock | ||||||||
| Related party loans | ||||||||
| Proceeds from short term loans | ||||||||
| Proceeds from promissory note | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Non-Cash Investing and Financing Activities | ||||||||
| Common stock issued to reduce convertible promissory notes payable | $ | $ | ||||||
| Series E preferred stock issued in lieu of cash for accrued officer compensation | $ | $ | ||||||
| Common stock issued in connection with the acquisition of a business | $ | $ | ||||||
| Preferred stock issued in connection with the acquisition of a business | $ | $ | ||||||
| Conversion of related party debt | $ | $ | ||||||
| Capital lease additions to fixed assets | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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ROGUE ONE, INC.
NOTES TO THE AMENDED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ENDED ON JUNE 30, 2021
(UNAUDITED)
EXPLANATORY NOTE
This Amendment No. 1 to the Quarterly Report on Form 10-Q/A (the "Amendment") amends the Quarterly Report on Form 10-Q of Rogue One, Inc., for the period ended June 30, 2021 (the "Original Filing"), that was originally filed with the U.S. Securities and Exchange Commission on August 25, 2021.
The Amendment is being filed solely to correct entries in the Original Filing pertaining to the “Amended and Restated Merger Agreement and Plan of Reorganization” dated on June 30, 2021, amending, and restating the agreement of September 23, 2021, with Human Brands International, Inc.
Except as described above, the Amendment does not modify any other disclosures presented in, or exhibits to, the Original Filing in any way.
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Rogue One, Inc. (“Rogue One” or the “Company”) is a consumer products and marketing company focused on the high-margin, multi-trillion-dollar alcoholic beverages sector.
On June 27, 2017, Creative Edge Nutrition, a Nevada corporation ("CEN") and Rogue One executed an asset purchase agreement whereby the Company purchased the assets and liabilities of CEN's subsidiary, Giddy Up Energy Products, Inc. ("Giddy"). As consideration, the Company agreed to exchange 47,197,601 shares of its common stock. On January 24, 2018, the Company completed the distribution of its common shares to the CEN shareholders in order to consummate the acquisition of Giddy. On December 7, 2020, the Company and Giddy entered into a Settlement Agreement, Waiver and Release of Claims whereby each party warranted and represented that they sought to fully and mutually rescind the purchase agreement dated June 27, 2017 and, in so doing, for Giddy to acquire the assets previously sold and, at the same time, for each of the parties to waive and release all claims, both known and unknown, and to indemnify and hold all other parties harmless. In addition, the parties agreed to enter into an exclusive licensing agreement for the Giddy Up brand in the category of alcoholic beverages.
On September 23, 2020, the Company entered into a Merger Agreement and Plan of Reorganization with Human Brands International, Inc., a private corporation organized pursuant to the laws of the State of Nevada (“Human Brands”), pursuant to which, at the effective time, Human Brands shareholders will exchange 100% of the equity in Human Brands in exchange for a majority controlling interest in the Company. On June 30, 2021, the Acquisition Agreement was made effective pending certain closing conditions. Under the terms of the Acquisition Agreement, the Company agreed to issue an aggregate of shares of its Series D preferred stock and an aggregate of shares of its common stock to acquire all of the outstanding capital stock of Human Brands.
Human Brands operating divisions currently own and manage over 250,000 agave plants, several premium spirit brands, and hold exclusive import and export rights for a variety of spirit brands. Its core foundation is built upon its bulk tequila production operations. Human Brands currently has supply contracts with well-known tequila brands, celebrities and athletes.
On
April 7, 2021 the Company effected a
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. On a consolidated basis, the Company has incurred significant operating losses since inception.
Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. Historically, the Company has raised capital through the issuance of convertible debt as a measure to finance working capital needs. The Company will be required to continue to do so until such time that its consolidated operations become profitable.
Basis of Presentation
The Company has prepared the accompanying condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The Company believes these condensed consolidated financial statements reflect all adjustments (consisting of normal, recurring adjustments) that are necessary for a fair presentation of its condensed consolidated financial position and consolidated results of operations for the periods presented.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of 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. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company places its
cash with a high credit quality financial institution. The Company’s account at this institution is insured by the Federal Deposit
Insurance Corporation (“FDIC”) up to $
Fair Value of Financial Instruments
The Company uses the market approach to measure fair value for its financial instruments. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The respective carrying value of certain balance sheet financial instruments approximates its fair value. These financial instruments include cash, related party payables, accounts payable, accrued liabilities and short-term borrowings. Fair values were estimated to approximate carrying values for these financial instruments since they are short term in nature, and they are receivable or payable on demand.
Net income (loss) per share is calculated in accordance with ASC 260, Earnings per Share. Basic net income (loss) per common share is based on the weighted average number of shares of common stock outstanding at June 30, 2021 and 2020. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. At June 30, 2021 and 2020, the Company had convertible notes outstanding that could be converted into approximately and common shares based up the closing bid price of the Company’s common stock at June 30, 2021 and 2020, respectively. Shares which would result from the conversion of the convertible notes were excluded from the calculation of net loss per share for 2021 and 2020 because the effect would be anti-dilutive.
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).
Income Taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, Accounting for Income Taxes, which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC 740-10, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions will be highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
The Company has adopted ASC 740-10-25, Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. Management has not filed tax returns for the years ended December 31, 2014 through 2020.
Recent Accounting Pronouncements
Except for rules and interpretive releases of the SEC under the authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification™ (“ASC”) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company. Management has reviewed the aforementioned rules and releases and believes any effect will not have a material impact on the Company’s present or future financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The amendment will be effective for public companies with fiscal years beginning after December 15, 2020; early adoption is permitted. The Company is evaluating the impact of this amendment on its consolidated financial statements.
In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. The Company believes the adoption will modify the way the Company analyzes financial instruments, but it does not anticipate a material impact on results of operations. The Company is in the process of determining the effects adoption will have on its consolidated financial statements.
NOTE 2 – GOING CONCERN
The Company’s condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
The
Company incurred a net loss of $
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include, obtaining debt or equity capital from various lenders, institutions and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – GENERAL BALANCE SHEET CONSIDERATIONS
FASB ASC does not require an entity to present a classified balance sheet or mandate a particular order of balance sheet accounts. However, FASB ASC 210-10-05-4states that entities usually present a classified balance sheet to facilitate calculation of working capital.
ASC210-10-05-5 indicates that in the statements of manufacturing, trading, and service entities, assets and liabilities are generally classified and segregated. The FASB ASC glossary includes definitions of current assets and current liabilities for when an entity presents a classified balance sheet. FASB ASC 210-10-45 provides additional guidance to determining these classifications.
Cash and Cash Equivalents
Rules
5-02-1 of Regulation S-X states that separate disclosure should be made of the cash and cash items that are restricted regarding withdrawal
or usage. The Company didn’t recognize any restriction on the cash and cash equivalents assets as of June 30, 2021, has $
Current Receivables
FASB
ASC 310 states that allowance for credit losses should be deducted from the related receivables and appropriately disclosed. FASB ASC
310-10-50-4 requires as applicable, any unearned income, unamortized premiums and discounts, and net unamortized deferred fees and costs
to be disclosed in the financial statements. Under FASB ASC 825, fair value disclosure is not required for trade receivables when the
carrying amount of the trade receivable is due in one year or less. As of June 30, 2021, the Company had Accounts Receivable of $
Inventory
Rule 5-02.6 of Regulation S-X requires separate presentation in the balance sheet or notes of the amounts of major classes of inventory, such as finished goods, work in process, raw materials, and supplies. Additional disclosures are required for amounts related to long-term contracts or programs.
| Schedule of inventory | ||||||||||||||||
| Location | Finished Products | Supplies | Biological Assets | Total USD | ||||||||||||
| CapCity Beverages, LLC | $ | $ | ||||||||||||||
| Tequila Armero S.A de CV | ||||||||||||||||
| Industrias Naturales de Tequilas S.A de CV | ||||||||||||||||
| Sobre Todo Alimentacion | ||||||||||||||||
| Turaso S de PR de RL | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Marketable Securities
In March 2018, FASB released Accounting Standard Update (ASU) No 2018-04, Investments – Debt Securities (Topic 320) and Regulated Operations (Topic 980). This update supersedes FASB ASC 320-10-S55-1 and 320-10-599-1. FASB ASC 810-10-S00-1 is added along with paragraphs 980-810-S45-1. No additional disclosure requirements are listed.
FASB ASC 320-10-50 includes detailed disclosure requirements for various marketable securities, including matters such as the nature and risks of the securities, cost, fair value, contractual maturities, impairment of securities, and certain transaction information. FASB ASC 321-10-50 provides additional disclosure requirements for marketable securities classified as equity securities.
| Schedule of marketable securities | |||||||||||||||||||||||
| As of June 30, 2021 | |||||||||||||||||||||||
| Issuer | Symbol | Quantity | Book Value | Total Equity Value | Market Value p/share | Market Value Equity as of June 30, 2021 | |||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| $ | |||||||||||||||||||||||
| Total: | $ | $ | |||||||||||||||||||||
Property, Plant and Equipment
Are the long-lived physical assets of the Company acquired for use in the Company’s normal business operation and not intended for resale by the Company. FASB ASC 360, Property, Plant and Equipment states that these assets are initially recorded at historical cost, which includes the cost necessarily incurred to bring them to the condition and location necessary for their intended use. FASB ASC 835-20 establishes standards for capitalizing interest cost as part of the historical cost of acquiring assets constructed by the Company for its own use or produced for the Company by others for which deposits or progress payments have been made.
FASB ASC 210-10-45-4 indicates that property, plant and equipment, should be classified as noncurrent when a classified balance sheet is presented. Under FASB ASC 805-20-55-37, some use rights acquired in a business combination may have characteristics of tangible, rather than intangible assets.
The
Company had $
Other Noncurrent Assets
On
June 30, 2021, and December 31, 2020, other noncurrent assets were $
Goodwill
The Company besides the Goodwill recognized on the acquisition of Human Brands International, Inc., part of the acquired assets was Goodwill Human Brands International, Inc., recognized on the acquisition of its subsidiaries now part of Rogue One, Inc.
The Company didn’t calculate any adjustment in the Goodwill of the companies listed in the chart below, however the Company will review finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of assets may not be recoverable. If required, recoverability of these assets is determined by comparison of their carrying value to the estimated future undiscounted cash flow the assets are expected to generate over their remaining estimated useful lives. If such assets are considered to be impaired, the impairment to be recognized in earnings equals the amount by which the carrying value of the assets exceeds their estimated fair value determined by either a quoted market price, if any, or a value determined by utilizing a discount cash flow technique.
| Schedule of goodwill | ||||
| Company Subsidiary | Recognized Goodwill | |||
| Sobre Todo Alimentacion S.A de CV | $ | |||
| Tequila Armero S.A de CV | ||||
| Tequila Copter S.A de CV | ||||
| Mazcal Arte | ||||
| Turaso S de PR de RL | ||||
| Sub-Total | $ | |||
| Human Brands International, Inc | ||||
| Total | $ | |||
Noncontrolling Interests
Common securities held by the noncontrolling interests that do no include put arrangements exercisable outside of the Company’s control are recorded in equity, separate from the Company stockholders’ equity.
The purchase or sale of additional ownership in an already controlled subsidiary is recorded as an equity transaction with no gain or loss recognized in net income (loss) or comprehensive income (loss) as long as the subsidiary remains a controlled subsidiary.
The following chart reflects the breakdown on noncontrolling interests:
| Schedule of breakdown on noncontrolling interests | ||||
| Company Subsidiary | Amount | |||
| Mezcal Arte | $ | |||
| Industrias Naturales de Tequilas S.A de CV | ||||
| Tequila Armero S.A de CV | ||||
| Sobre Todo Alimentacion S.A de CV | ||||
| Tequila Copter S.A de CV | ||||
| Turaso S de PR de RL | ||||
| Total: | $ | |||
NOTE 4 – HUMAN BRANDS INTERNATIONAL, Inc. - Amended and Restated Merger Agreement and Plan of Reorganization” dated on June 30, 2021
On May 19, 2022, the Company filed with the SEC the Form 8-K related to the completion of acquisition or disposition of assets. As previously reported and on June 30, 2021, the Company entered into that certain Merger Agreement and Plan of Reorganization (the “Acquisition Agreement”) with each of the stockholders of Human Brands International, Inc., a Nevada corporation (the “Acquired Company” or “Human Brands”).
Under the terms of the Acquisition Agreement, the Company agreed to issue an aggregate of forty-seven (47) shares of Series D Preferred Stock (par value $0.001) (the “Preferred Shares”) and an aggregate of One Hundred Seventy-Six Million Seven Hundred Seventy-One Thousand Nine Hundred Sixty-Two (176,771,962) shares of the Company’s Common Stock (par value $0.001) (the “Common Shares”) to acquire all of the outstanding capital stock of the Acquired Company.
The Acquisition Agreement was the product of several months of meetings and due diligence conducted by the Company’s officers and directors that resulted in successful negotiations with the officers and directors of the Acquired Company and the stockholders of the Acquired Company.
The Company did not employ or utilize the services of any investment banker, advisor, or other third party in connection with the Acquisition Agreement, the transactions underlying the Acquisition Agreement or both of them. As a result, the Company did not incur or pay any fees to any investment banker, advisor, or other third party but the Company may ignored critically important aspects of the business conducted by the Acquired Company that the Company may later discover with materially adverse consequences to the Company’s financial condition for an indefinite period of time.
All of the Preferred Shares and all of the Common Shares that were issued in accordance with the Acquisition Agreement are “unregistered securities” in that they were issued pursuant to claims of exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”) and Rule 506(b) promulgated by the Securities and Exchange Commission thereunder as well as certain claims to the qualification requirements under state securities laws in the states wherein the holders of all of the outstanding capital stock of the Acquired Company. Moreover, all of the Preferred Shares and all of the Common Shares that were issued pursuant to the Acquisition Agreement were issued with a restricted securities legend and only then after we received certain additional written assurances from the stockholders of the Acquired Company.
Human Brands was founded in late 2014 with a plan to capitalize in perceived growth prospects in the consumer alcoholic products industry. In recent years Human Brands has focused on the tequila products segment within that industry as management believes that the tequila products segment may offer stronger sales growth opportunities relative to other consumer alcoholic segments. The management of Human Brands follows a “ground to glass” strategy that, in practical terms, means that management attempts to control marketing, sales, and assets throughout the selection of raw materials (the agave plants) and the operation of the manufacturing process. The strategy also involves selection and constant management of the marketing channels, advertising programs, and target marketing strategies. Human Brands has had to confront ever-rising costs for raw materials as agave prices have increased by about 694% since 2016.
Currently Human Brands has approximately 400,000 agave plants and has adopted a strategy to grow more agave plants to ensure that the company has a stable supply of raw materials and at price levels that may serve to insulate the company from excessive price increases in the market. The company has adopted a two-part strategy: (a) sell agave plants to generate revenues; and (b) at the same time, use agave produced by the company’s own agave plants as raw material for the company’s tequila products. The Company believes that, if circumstances allow, this strategy may serve to insulate the company from some of the excessive cost pressures in the raw agave market.
Transaction definition: Human Brands International, Inc’s management understand that all transactions have taken place are “Business Acquisition”, under ASC 805 because acquired assets and assumed liabilities, significantly contribute to the ability to create output.
The accounting for a business combination is based on two key principles, which ASC 805 calls the recognition principle and the measurement principle. The objective of the principles is to provide guidance that an acquirer can apply when ASC 805 does not contain specific recognition or measurement guidance for a particular asset or liability.
Under the recognition principle in ASC 805-20-25-1, an acquirer must “recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree.”
NCI is defined in the Master Glossary of the Codification as “The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest.” For example, Company in our case Human Brands International, Inc., acquires a 51% interest in the common stock of the companies listed in the chart above, (which is accounted for as a Business Acquisition), there remains a 49% NCI in Human Brands International, Inc’s consolidated financial statements.
The FASB’s guidance on accounting for business combinations and NCIs reflects the FASB’s view that a consolidated entity represents a single economic unit. When accounting for a business combination, the net assets acquired are recorded as if there was an acquisition of 100% of the target. This is the case regardless of whether 51% or 100% (or any percent in between) of the target is acquired by Human Brands International, Inc. In addition, the net assets acquired are measured predominantly at fair value in accordance with ASC 805. As such, in cases in which less than 100% of the target is acquired by the buyer, in this case Human Brands International, Inc., must also recognize the fair value of the NCI.
Finally in these cases, despite of the business combination effected primarily by exchanging equity interests, and Human Brands International, Inc., is the entity that issues its equity interests, the existent Company’s stockholders at the date of acquisition, still have the control of the Company, therefore is not applicable the commonly called reverse acquisitions, the issuing entity is the acquiree. Subtopic 805-40 provides guidance on accounting for reverse acquisitions; however, such guidance is not complying with the transactions considered hereto.
Transaction Economics
For general information the acquired companies and subsidiaries have recorded sales in the following periods:
| Schedule of companies and subsidiaries have recorded sales | ||||||||||||
| Company | Six
Months Ended on June 30, 2021 | Twelve
Month ended on December 31, 2020 | Twelve
Month ended on December 31, 2019 | |||||||||
| Human Brands International, Inc | $ | $ | $ | |||||||||
| CapCity Beverages, LLC | ||||||||||||
| Sobre Todo Alimentacion S.A de CV | ||||||||||||
| Turaso S de PR de RL | ||||||||||||
| $ | $ | $ | ||||||||||
Under the terms of the Acquisition Agreement, the Company agreed to issue an aggregate of forty-seven (47) shares of Series D Preferred Stock (par value $0.001) (the “Preferred Shares”) and an aggregate of One Hundred Seventy-Six Million Seven Hundred Seventy-One Thousand Nine Hundred Sixty-Two (176,771,962) shares of the Company’s Common Stock (par value $0.001) (the “Common Shares”) to acquire all of the outstanding capital stock of the Acquired Company.
| 1. | Common stock 176,771,962 – (par value $0.001) – Market Value as of June 30, 20211 $0.0479 = $ 8,467,377 |
| 2. | Preferred Series D 45 shares – (par value $0.00001) – This shares have a conversion right of 5,000,000 : 1 common shares, therefore it implies a potential conversion up to 225,000,000 shares of common stock , which as of June 30, 2021 has a Market Value of $0.0479 then equal to $10,777,500 |
| 3. | Based on the foregoing the Company recorded as Commitments and Contingencies as follows: |
| Schedule of outstanding capital stock | ||||||||||||||||||||
| Shares
Quantity | Shares
par value | Allocated
to Common Stock once Issued | Market
Value | Allocated
to APIC once Issued | ||||||||||||||||
| Shares of Common Stock | $ | $ | $ | $ | ||||||||||||||||
| Preferred Shares Series D | ||||||||||||||||||||
| Conversion Right on Series D | ||||||||||||||||||||
| $ | ||||||||||||||||||||
Acquired Companies and Holdings
| Schedule of acquired percentage by companies and holdings | ||||
| Company Name | Holding% | |||
| Human Brands International, INC | ||||
| Cap City Beverages, LLC | ||||
| Tequila Armero S.A de CV | ||||
| Industrias Naturales de Tequilas S.A de CV | ||||
| Tequila Copter S.A de CV | ||||
| Sobre Todo Alimentacion S.A de CV | ||||
| Turaso S de PR de RL | ||||
| Mezcal Arte | ||||
Besides the above-mentioned companies where Rogue One, Inc., holds a controlling majority, included in the acquisition the following companies
| Company Name | Holding % | |||
| Sabores de la Historia S.A de CV | ||||
| Milestone Beverages HK, Ltd. | ||||
| Hacienda Capellania S.A de CV | ||||
The invested amount for the foregoing is disclosed in the financials as Associated companies with a total of $ 703,740
1 https://finance.yahoo.com/quote/ROAG/history?period1=1625011200&period2=1625097600&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true
Goodwill’s Transaction Recognition
Goodwill that is acquired in a business combination must be assigned to one or more reporting units as of the acquisition date. Goodwill is assigned to the reporting units that are expected to benefit from the business combination, regardless of whether other assets or liabilities of the acquired entity are also assigned to those reporting units. An entity’s methodology for determining the amount of acquired goodwill to assign to a reporting unit should be reasonable, supportable, and applied in a consistent manner in accordance with ASC 350-20-35-41. In addition, the methodology should be consistent with the objectives of the approaches described in ASC 350-20-35-42 through ASC 350-20-35-43, which describes two approaches an entity might follow when assigning goodwill to reporting units: an acquisition method approach and a “with-and-without” approach. The use of any approach to assigning goodwill is dependent on facts and circumstances.
In the simplest of acquisitions, a new reporting unit will be created in connection with an acquisition, and the assets and liabilities of the acquired entity will be assigned to the new reporting unit. If no synergies with other existing reporting units are expected from the acquisition, all the goodwill arising from the acquisition would be assigned to the new reporting unit.
Many times, though, the specific assets and liabilities of an acquired entity will be assigned to one or more of the acquiring entity’s existing reporting units and, perhaps, new reporting units that are created in connection with the acquisition. If the assets and liabilities that are assigned to reporting units constitute businesses, the goodwill arising from the acquisition may be assigned to the reporting units based on the excess of the fair values of the individual businesses acquired over the fair value of the sum of the individual assets acquired and liabilities assumed that are assigned to the reporting units. This is considered an acquisition method approach.
In some business combinations, synergies may be expected to be realized by existing reporting units that are not assigned any of the acquired assets or assumed liabilities. When synergies are expected in one or more of the entity’s other reporting units, the entity may assign goodwill to the reporting units expecting to benefit from the synergies using a with-and-without approach. The with-and-without approach generally considers the difference between the fair value of the existing reporting unit before and after the acquisition in determining the amount of goodwill to assign to that reporting unit.
| Schedule of intangible assets and goodwill | ||||
| Human Brands International, Inc | ||||
| Identified Assets | $ | |||
| Assumed Liabilities | ( | ) | ||
| Noncontrolling Interest | ( | ) | ||
| Net Equity Acquired | ||||
| Amount Paid & Committed | ||||
| Goodwill | $ | |||
Identified Assets and Assumed Liabilities Breakdown for the Amended and Restated Merger Agreement and Plan of Reorganization” dated on June 30, 2021
| Schedule of recognized identified ssets acquired and liabilities assumed | ||||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventory | ||||
| Other assets | ||||
| Fully controlled companies | ||||
| Associated companies | ||||
| Shares publicly traded - SRSG - | ||||
| Total current assets | ||||
| Property and equipment, net | ||||
| Intangible Assets | ||||
| Goodwill | ||||
| Assets pledged | ||||
| Total noncurrent assets | ||||
| Total assets | $ | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | |||
| Other liabilities | ||||
| Payroll liabilities | ||||
| Related party loans | ||||
| Loans and Notes payable | ||||
| Convertible notes payable | ||||
| Financial loan payable | ||||
| Total current liabilities | ||||
| SBA loan | ||||
| Total liabilities | ||||
| Noncontrolling interest | ||||
| NET EQUITY ACQUIRED | ||||
| Goodwill HBI | ||||
| Amount paid and committed | ( | ) | ||
| Liabilities assumed | $ | |||
Foreign Currency
The Company applies ASC 830 for all financials recorded in other than United States Dollars currency. Such rule applies to the following companies, whose transactions are in Mexican Pesos (M$), and those companies are:
| Company Name |
| Tequila Armero S.A de CV |
| Industrias Naturales de Tequilas S.A de CV |
| Tequila Copter S.A de CV |
| Sobre Todo Alimentacion S.A de CV |
| Turaso S de PR de RL |
| Mezcal Arte |
The Company adopted the exchange rate every working day published in the following URL: https://dof.gob.mx/indicadores_detalle.php?cod_tipo_indicador=158&dfecha=30%2F06%2F2021&hfecha=30%2F06%2F2021#gsc.tab=0 this publication is made through the “Diario Oficial de la Federacion (Mexicana)” which is the equivalent to the United States Office of the Federal Register (OFR).
The Company reported the foreign currency accordingly to FASB 830-30-45-3, which literally says “…a. For assets and liabilities, the exchange rate at the balance sheet date shall be used.….” , which as of June 30, 2021 was M$ 19.815700 = 1 USD.
NOTE 5 – CONVERTIBLE NOTES PAYABLE
The following tables set forth the components of the Company’s convertible notes at June 30, 2021 and December 31, 2020:
| Schedule of convertible notes payable | ||||||||
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Principal value of convertible notes: | $ | $ | ||||||
| Convertible notes from subsidiary | ||||||||
| Total convertible notes, net | $ | $ | ||||||
The following table sets forth a summary of change in our convertible notes payable for the six months ended June 30, 2021:
| Beginning balance, January 1, 2021 | $ | |||
| Amortization of debt discounts | ||||
| Issuance of new convertible notes | ||||
| Convertible notes from subsidiary | ||||
| Conversion of principal amounts outstanding into common stock of the Company | ( | ) | ||
| Ending balance June 30, 2021 | $ |
On
January 28, 2014, the Company converted $11,000 of a $22,000 convertible note to 245 common shares. The note had been purchased from
a former officer of the Company based on the contractual conversion terms per agreement. The balance of this note was $
On
January 5, 2015, the Company executed a promissory note for $20,000. The note bears interest at 6% and has a maturity date of January
5, 2016. It can be converted into common stock at a discount of 30% off of the conversion price. The conversion price is the average
bid price on the 3 days prior to the date of conversion, but no less than $0.0001. This note was sold to a third party on August 21,
2015 and the terms of the notes were modified. The new note bears interest at 8% and has a maturity date of August 20, 2017. It can be
converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average of the three lowest
bid prices during the 10 trading days prior to the date of conversion. The balance of this note was $
On
January 26, 2015, the Company executed a promissory note for $28,000. The note bears interest at 12% and has a maturity date of January
26, 2016. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average
of the three lowest bid prices during the 10 trading days prior to the date of conversion, but no less than $0.0001. The balance of this
note was $
On
February 10, 2015, the Company executed a promissory note for $52,500. The note bears interest at 8% and has a maturity date of February
10, 2016. The note can be converted into common stock at a discount of 55% off of the conversion price. The conversion price is the average
bid price on the 3 days prior to the date of conversion, but no less than $0.0001. The balance of this note was $
On
February 10, 2015, its holder sold dated June 30, 2014 a promissory note for $88,500 to a third-party investor and the terms of the note
were modified. The note bears interest at 8% and has a maturity date of February 10, 2016. It can be converted into common stock at a
discount of 55% off the conversion price. The conversion price is the average bid price on the 3 days prior to the date of conversion,
but no less than $0.0001. On March 1, 2021, the holder converted $4,849 in note principal and $6,152 in accrued interest into 999,999
shares of the Company’s common stock. The balance of this note was $
On
February 13, 2015, the Company executed a promissory note for $50,000. The note bears interest at 8% and has a maturity date of February
13, 2016. The note can be converted into common stock at a discount of 30% off of the conversion price. The conversion price is the average
bid price on the 3 days prior to the date of conversion, but no less than $0.0001. This note was sold to a third party on August 21,
2015 and the terms of the notes were modified. The new note bears interest at 8% and has a maturity date of August 20, 2017. It can be
converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average of the three lowest
bid prices during the 10 trading days prior to the date of conversion. The balance of this note was $
On
March 17, 2015, the Company executed a promissory note for $28,000. The note bears interest at 12% and has a maturity date of March 17,
2016. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average
of the three lowest bid prices during the 10 trading days prior to the date of conversion, but no less than $0.0001. The balance of this
note was $
On
March 27, 2015, the Company executed a promissory note for $15,000. The note bears interest at 6% and has a maturity date of March 27,
2016. The note can be converted into common stock at a discount of 40% off of the conversion price. The conversion price is the average
closing bid price on the three (3) days prior to the date of conversion. The balance of this note was $
On
April 1, 2015, the Company executed a promissory note for $12,000. The note bears interest at 6% and has a maturity date of March 27,
2016. The note can be converted into common stock at a at a rate equivalent to the average closing bid price on the 3 days prior to the
date of conversion. The balance of this note was $
On
May 28, 2015, the Company executed a promissory note for $23,000. The note bears interest at 12% and has a maturity date of February
28, 2016. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average
of the three lowest bid prices during the 20 trading days prior to the date of conversion. The balance of this note was $
On
August 7, 2015, its holder sold two promissory notes aggregating $46,705 and originating in 2014 to a third-party investor and the terms
of the notes were modified. The new note bears interest at 6% and has a maturity date of August 6, 2017. It can be converted into common
stock at a discount of 45% off of the conversion price. The conversion price is the average of the three lowest bid prices during the
20 trading days prior to the date of conversion. The balance of this note was $
On
August 21, 2015, the Company executed a promissory note for $30,000. The note bears interest at 6% and has a maturity date of August
21, 2016. The note can be converted into common stock at a discount of 40% off of the conversion price. The conversion price is the average
closing bid price on the 3 days prior to the date of conversion. The balance of this note was $
On
August 24, 2015, the Company executed two (2) promissory notes, each in the principal amount of $15,000, for an aggregate $30,000. The
notes bear interest at 6% and have a maturity date of August 24, 2016. The notes can be converted into common stock at a discount of
40% off of the conversion price. The conversion price is the average closing bid price on the 3 days prior to the date of conversion.
The balance of these notes was $
On
September 2, 2015, the Company executed a promissory note for $51,414. The note bears interest at 12% and has a maturity date of February
28, 2016. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average
of the three lowest bid prices during the 20 trading days prior to the date of conversion. The balance of this note was $
On
September 4, 2015, the Company executed a promissory note for $52,500. The note bears interest at 8% and has a maturity date of September
4, 2017. It can be converted into common stock at a discount of 45% off of the conversion price. The conversion price is the average
of the three lowest bid prices during the 10 trading days prior to the date of conversion. The balance of this note was $
During
the year ended December 31, 2015, the Company received debt proceeds from the issuance of five convertible promissory notes aggregating
$99,500 to certain lenders. The Company has attempted with no avail to locate these note agreements and validate the sources of these
debt proceeds. It has exhausted all of its available resources in its efforts to locate these notes and note holders. As such, the Company
has made certain assumptions in regard to the contractual terms associated with these notes, which are consistent with other convertible
debt securities issued during the period. The balance of these notes was $
On
January 1, 2018, the Company executed three promissory notes aggregating $693,819 to settle a legal matter. See Note 9 – Commitments
and Contingencies. The notes bear interest at 12% and have a maturity date of July 10, 2018. The notes can be converted into common stock
at a discount of 45% off of the conversion price. The conversion price is the lowest bid price during the 25 trading days prior to the
date of conversion. On March 6, 2020, one of the holders entered into a note purchase and assignment agreement whereby $50,000 of note
principal was sold to a third-party investor. The balance of these notes was $
On
March 13, 2018, the Company issued a convertible promissory note for $5,500. The note bears interest at 12% and has a maturity date of
March 13, 2020. The note can be converted into common stock at a discount of 50% off of the conversion price. The conversion price is
equal to the lowest bid price during the 20 trading days prior to the date of conversion. The balance of this note was $
On
December 12, 2018, the Company issued a convertible promissory note for $25,000. The note bears interest at 8% and has a maturity date
of December 12, 2020. The note can be converted into common stock at a discount of 40% off of the conversion price. The conversion price
is equal to the lowest bid price during the five trading days prior to the date of conversion. The balance of this note was $
On
March 6, 2020, as described above, a third-party investor purchased $50,000 in note principal from an existing noteholder pursuant to
a note purchase and assignment agreement. On October 21, 2020, the holder converted $4,825 in note principal and $4,605 in accrued interest
into 3,310,000 shares of the Company’s common stock. The balance of this note was $
On
April 3, 2020, the Company issued a convertible promissory note for $35,000. The note bears interest at 12% and has a maturity date of
December 31, 2020. The note can be converted into common stock at a discount of 45% off of the conversion price. The conversion price
is the lowest bid price during the 25 trading days prior to the date of conversion. The balance of this note was $
On
May 26, 2020, the Company issued a convertible promissory note for $15,000. The note bears interest at 12% and has a maturity date of
February 26, 2021. The note can be converted into common stock at a discount of 50% off of the conversion price. The conversion price
is equal to the lowest bid price during the 30 trading days prior to the date of conversion. The balance of this note was $
On
June 8, 2020, the Company issued a convertible promissory note for $11,200. The note was issued with an original issue discount of $1,200,
or an effective interest rate of 12%, and has a maturity date of June 8, 2021. The note can be converted into common stock at a discount
of 50% off of the conversion price. The conversion price is equal to the lowest bid price during the 20 trading days prior to the date
of conversion. The balance of this note was $
On
August 12, 2020, the Company issued a convertible promissory note for $24,000. The note was issued with an original issue discount of
$2,500, or an effective interest rate of 11.6%, and has a maturity date of August 12, 2021. The note can be converted into common stock
at a discount of 50% off of the conversion price. The conversion price is equal to the lowest bid price during the 20 trading days prior
to the date of conversion. The balance of this note was $24,000 and remaining unamortized discount was $
As of June 30, 2021, most of the Company’s convertible promissory notes were in default of payment per the terms of their contractual maturity dates. To the best of its knowledge, the Company has not received any formal notices of default, demands for payment or other forms of claim as a result of these defaults. The Company is accruing interest on these convertible promissory notes at default rates ranging between 12% and 24%.
All
of the convertible notes were analyzed at the time of their issuance for derivative accounting consideration. In some instances, the
Company concluded that a derivative liability existed. The derivative liabilities were measured using the commitment-date stock price.
As of June 30, 2021, and December 31, 2020, the Company determined that the fair value of these derivative liabilities totaled $
The value of the derivative liabilities was determined using the following Black-Scholes methodology:
| Schedule of fair value of assumptions used | ||||
| June
30 2021 |
December
31, 2020 | |||
| Expected dividend yield (1) | % | % | ||
| Risk-free interest rate (2) | – % | – % | ||
| Expected volatility (3) | – % | – % | ||
| Expected life (in years) | – | – |
| (1) |
| (2) |
| (3) |
In accordance with ASC 470-20, Debt with Conversion and Other Options the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security.
At June 30, 2021, the Company did not have any debt discounts related to beneficial conversion features.
At June 30, 2021, the number of shares of common stock underlying these convertible debentures totaled 123,197,372 shares.
NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)
Series A Preferred Stock
The authorized Series A preferred stock of the Company consists of shares with a par value $. At June 30, 2021 and December 31, 2020, the Company had shares of its Series A preferred stock issued and outstanding. The majority of the Series A preferred stock entitles the stockholders to 67% overall voting rights.
Series D Preferred Stock
In April 2018, the Company designated and issued one (1) share of its preferred stock as “Series D”. The share is convertible into 8.70% of the Company’s then outstanding common stock, but no less than 8,500,000 shares of common stock subject to the satisfaction of certain conditions precedent. The holder is entitled to vote with the Company’s common stockholders, entitled to dividends, and certain liquidation rights. The Company, with the holder’s consent, may redeem the preferred share.
On June 15, 2020, the Company issued 8,700,000 shares of common stock upon the conversion of the share of Series D preferred stock.
On May 26, 2021, the Company amended the certificate of designation of its Series D to include a conversion feature whereby each holder of Series D preferred stock shall have the right to convert one share of Series D preferred stock into 5,000,000 shares of the Company’s common stock.
On June 30, 2021, the Company concreted the Merge with Human Brands International, Inc., and as part of such deal committed 45 Shares of Preferred Series D as part of the payment on the Net Acquired Equity.
Series E Preferred Stock
The authorized Series E preferred stock of the Company consists of shares with a par value $. At June 30, 2021 and December 31, 2020, the Company had 50 and 24 shares of its Series E preferred stock issued and outstanding, respectively.
On February 10, 2021, the Company issued 15 shares of Series E convertible preferred stock and 250,000 shares of common stock valued at $225,000 in lieu of cash for unpaid salary amounts to its chief executive officer. Additionally, the Company issued two of its officers an aggregate 6 shares of Series E convertible preferred stock and 100,000 shares of common stock valued at $90,000 as compensation.
On February 11, 2021, the Company issued 4 shares of Series E convertible preferred stock valued at $125,000 to a contractor for services rendered.
On March 1, 2021, the Company issued 2 shares of Series E convertible preferred stock pursuant to subscription agreements with accredited investors for proceeds of $40,000.
On June 14, 2021, the Company issued 2 shares of Series E convertible preferred stock and 200,000 shares of common stock pursuant to subscription agreements with accredited investors for proceeds of $20,000.
Common Stock
The authorized common stock of the Company consists of shares with a par value $. At June 30, 2021 and December 31, 2020, the Company had and shares of its common stock issued and outstanding, respectively.
On December 7, 2020, the Company and Giddy entered into a Settlement Agreement, Waiver and Release of Claims whereby each party warranted and represented that they sought to fully and mutually rescind the purchase agreement dated June 27, 2017 and, in so doing, for Giddy to acquire the assets previously sold and, at the same time, for each of the parties to waive and release all claims, both known and unknown, and to indemnify and hold all other parties harmless. On January 20, 2021, Giddy returned 2,000,000 shares of the Company’s common stock in connection with the agreement.
On February 11, 2021, the Company issued 1,200,000 shares of common stock to its chief executive officer in connection with the conversion of three (3) shares of Series E convertible preferred stock.
During
the six months ended June 30, 2021, the Company issued shares of common stock pursuant to subscription
agreements with accredited investors for proceeds of $
During
the six months ended June 30, 2021, the company issued shares of common stock in connection with the
conversion of $
These issuances were exempt from registration under rule 144.
NOTE 7 – INCOME TAXES
As
of June 30, 2021, the Company had net operating loss carry forwards of approximately $
For the six months ended June 30, 2021, and 2020, a reconciliation of the federal statutory rate of 21% to the Company’s effective tax rate is as follows:
| Schedule of income tax expense benefit | ||||||||
| Six Months Ended June 30 | ||||||||
| 2021 | 2020 | |||||||
| Expected expense (benefit) (21%) | $ | ( | ) | $ | ( | ) | ||
| State income taxes, net of federal benefit | ( | ) | ( | ) | ||||
| Income tax provision (benefit) | ( | ) | ( | ) | ||||
| Valuation allowance | ||||||||
| Accrued expense (benefit) | $ | $ | ||||||
The
cumulative tax effect at the expected rate of
Schedule of deferred tax
| Schedule of deferred tax | ||||||||
| Deferred tax asset attributable to: | June 30 | December 31 | ||||||
| 2021 | 2020 | |||||||
| Net operating loss carryover | $ | $ | ||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
Tax net operating loss carryforwards may be limited pursuant to the IRS Section 382 in the event of certain ownership changes.
NOTE 8 – FAIR VALUE MEASUREMENTS
The Company has adopted the guidance under ASC 820, Fair Value Measurements, for financial instruments measured on a fair value on a recurring basis. ASC 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Further authoritative accounting guidance (ASU No. 2009- 05, Measuring Liabilities at Fair Value) under ASC 820, provides clarification that in circumstances in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.
The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
• Level 1 – Quoted prices in active markets for identical assets and liabilities.
• Level 2 – Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liabilities.
• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. Derivative liabilities are operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the over- all fair value of the financial instruments. In addition, the fair value of free-standing derivative instruments such as warrant and option derivatives are valued using the Black-Scholes model adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations.
The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair value were determined by using the Black Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2020:
Schedule of Fair Value of Liabilities Measured on Recurring Basis
| Schedule of Fair Value of Liabilities Measured on Recurring Basis | ||||||||||||
| Fair
Value Measurements at Reporting Date Using | ||||||||||||
| December 31 | Quoted
prices in Active Markets for Identical Assets | Significant
Other Observable Inputs | Significant Unobservable Inputs | |||||||||
| Description | 2020 | (Level 1) | (Level 2) | (Level 3) | ||||||||
| Convertible promissory notes embedded conversion option | $ | $ | ||||||||||
| Total | $ | $ | ||||||||||
| Fair
Value Measurements at Reporting Date Using | ||||||||||||
| June 30 | Quoted
prices in Active Markets for Identical Assets | Significant
Other Observable Inputs | Significant Unobservable Inputs | |||||||||
| Description | 2021 | (Level 1) | (Level 2) | (Level 3) | ||||||||
| Convertible promissory notes embedded conversion option | $ | $ | ||||||||||
| Total | $ | $ | ||||||||||
The following table sets forth a summary of change in fair value of the Company’s derivative liabilities for the six months ended June 30, 2021:
| Schedule of Changes in Derivative Liabilities at Fair Value | ||||
| Beginning balance, January 1, 2021 | $ | |||
| Change in fair value of embedded conversion features of convertible promissory notes included in earnings | ||||
| Embedded conversion option liability recorded in connection with the issuance of convertible promissory notes | ||||
| Ending balance, June 30, 2021 | $ | |||
NOTE 9 – COMMITMENTS AND CONTINGENCIES
On September 23, 2020, the Company entered into a Merger Agreement and Plan of Reorganization (the “Acquisition Agreement”) with Human Brands International, Inc., a private corporation organized pursuant to the laws of the State of Nevada (“Human Brands”), pursuant to which, at the effective time, Human Brands shareholders will exchange 100% of the equity in Human Brands in exchange for a majority controlling interest in the Company. The agreement requires the Company to receive FINRA’s approval of a reverse stock split of its common stock. The agreement contains customary terms and conditions including completion of due diligence by the parties and approval by a majority of the Company’s shareholders and Human Brands shareholders.
On June 30, 2021, the Acquisition Agreement was made effective pending certain closing conditions. Under the terms of the Acquisition Agreement, the Company agreed to issue an aggregate of 45 shares of its Series D preferred stock and an aggregate of 176,771,962 shares of its common stock to acquire all of the outstanding capital stock of Human Brands.
NOTE 10 – SUBSEQUENT EVENTS
In accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2021 to the date these condensed consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these condensed consolidated financial statements, except for as follows:
On July 1, 2021, the Company issued 1,000,000 shares of common stock pursuant to subscription agreements and received proceeds of $20,000.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our unaudited consolidated financial statements and notes thereto included herein. In connection with, and because we desire to take advantage of, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we caution readers regarding certain forward-looking statements in the following discussion and elsewhere in this report and in any other statement made by, or on our behalf, whether or not in future filings with the Securities and Exchange Commission. Forward looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward looking statements.
Overview
Rogue One, Inc. (“Rogue One” or the “Company”) is a consumer products and marketing company focused on the high-margin, multi-trillion-dollar alcoholic beverages sector.
On June 27, 2017, Creative Edge Nutrition, a Nevada corporation ("CEN") and Rogue One executed an asset purchase agreement whereby the Company purchased the assets and liabilities of CEN's subsidiary, Giddy Up Energy Products, Inc. ("Giddy"). As consideration, the Company agreed to exchange 47,197,601 shares of its common stock. On January 24, 2018, the Company completed the distribution of its common shares to the CEN shareholders in order to consummate the acquisition of Giddy. On December 7, 2020, the Company and Giddy entered into a Settlement Agreement, Waiver and Release of Claims whereby each party warranted and represented that they sought to fully and mutually rescind the purchase agreement dated June 27, 2017 and, in so doing, for Giddy to acquire the assets previously sold and, at the same time, for each of the parties to waive and release all claims, both known and unknown, and to indemnify and hold all other parties harmless. In addition, the parties agreed to enter into an exclusive licensing agreement for the Giddy Up brand in the category of alcoholic beverages.
On September 23, 2020, the Company entered into a Merger Agreement and Plan of Reorganization with Human Brands International, Inc., a private corporation organized pursuant to the laws of the State of Nevada (“Human Brands”), pursuant to which, at the effective time, Human Brands shareholders will exchange 100% of the equity in Human Brands in exchange for a majority controlling interest in the Company. On June 30, 2021, the Acquisition Agreement was made effective pending certain closing conditions. Under the terms of the Acquisition Agreement, the Company agreed to issue an aggregate of 45 shares of its Series D preferred stock and an aggregate of 176,771,962 shares of its common stock to acquire all of the outstanding capital stock of Human Brands.
Human Brands operating divisions currently own and manage over 250,000 agave plants, several premium spirit brands, and hold exclusive import and export rights for a variety of spirit brands. Its core foundation is built upon its bulk tequila production operations. Human Brands currently has supply contracts with well-known tequila brands, celebrities, and athletes.
On April 7, 2021, the Company effected a 1-for-100 reverse split which as preceded by a filing of an amendment to its Articles of Incorporation that the Company completed with the Nevada Secretary of State on February 13, 2021. On April 7, 2021, the Company also amended its Articles of Incorporation to change its name to Rogue One, Inc.
Results of Operations for the Three Months Ended June 30, 2021, and 2020
Sales
We did not record any revenues for the three months ended June 30, 2021 and 2020. We are contemplating various opportunities as a means to generate future sales revenue; however, we can provide no assurance that our efforts will successfully result in any new revenues.
Gross Profit
Gross profit is calculated by subtracting cost of goods sold from sales. Gross profit percentage is calculated by dividing gross profit by sales.
We did not record any cost of goods sold for either of the three months ended June 30, 2021 and 2020. As such, we did not realize any gross profits during either of the three-month periods ended June 30, 2021, and 2020.
Operating Expenses
Operating expenses totaled $107,742 for the three months ended June 30, 2021, compared to $40,012 in operating expenses for the three months ended June 30, 2020, or an increase of $67,730.
Our operating expenses are primarily comprised of compensation and benefits, professional fees and other general and administrative costs. The increase in operating expenses was due to increased compensation costs related to the addition of new executive management and stock-based compensation to employees and service providers. We expect our operating expenses to increase proportionally to our business activities as we begin to execute upon our business plan in future periods.
Other Income (Expense)
Net other expense totaled $353,497 for the three months ended June 30, 2021, compared to $2,876,058 in net other expense for the three months ended June 30, 2020, or a decrease of $2,522,561.
The Company has issued various convertible notes to help finance its operations, some of which have embedded derivative features. The value of these instruments will fluctuate as the trading price of our common stock changes. During the three months ended June 30, 2021, recorded an unrealized loss of $286,615 from the increase in value of these derivative features, compared to an unrealized loss of $2,706,281 from the change in the value of these derivative features during the three months ended June 30, 2020.
During the three months ended June 30, 2021, we recorded interest expense related to the amortization of debt discounts totaling $12,450, compared to $ 10,933 during the three months ended June 30, 2020. During the three months ended June 30, 2020, we accrued interest expense on convertible notes or $53,182, compared to interest expense of $55,412 during the three months ended June 30, 2020.
Net Loss
We incurred a net loss of $461,239, or $0.00 per share, for the three months ended June 30, 2021, compared to a net loss of $2,916,070, or $0.03 per share, for the three months ended June 30, 2020.
The weighted average number of basic and fully diluted shares outstanding for the three months ended June 30, 2021 was 116,934,786, compared to 96,515,927 for the three months ended June 30, 2020. There are no dilutive equivalents included in our calculation of fully diluted shares for the three months ended June 30, 2021, since their inclusion would be anti-dilutive due to our net loss per share.
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Results of Operations for the Six Months Ended June 30, 2021 and 2020
Sales
We did not record any revenues for the six months ended June 30, 2021 and 2021. While we believe that our new focus will create opportunities that will generate future revenue for the Company, we can provide no assurance that we will be successful in the execution of our business plan.
Gross Profit
We did not record any cost of goods sold for either of the six months ended June 30, 2021 and 2020. As such, we did not realize any gross profit during either of the six-month periods ended June 30, 2021 and 2020.
Operating Expenses
Operating expenses totaled $397,724 for the six months ended June 30, 2021, compared to $115,686 in operating expenses for the six months ended June 30, 2020, or an increase of $282,038.
Our operating expenses are primarily comprised of compensation and benefits, professional fees and other general and administrative costs. The increase in operating expenses was due to the timing of services rendered in relation to our financial reporting and fees incurred from various state compliance filings. We expect our operating expenses to increase proportionally to our business activities as we begin to execute upon our business plan in future periods.
Other Income (Expense)
Net other expense totaled $593,763 for the six months ended June 30, 2021, compared to $2,817,885 in net other expense for the six months ended June 30, 2020, or an increase in net other expense of $2,224,122.
The Company has issued various convertible notes to help finance its operations, some of which have embedded derivative features. The value of these instruments will fluctuate as the trading price of our common stock changes. During the six months ended June 30, 2021, we recorded an unrealized loss of $448,598 from the increase in value of these derivative features, compared to a non-cash derivative expense of $102,248 and experienced an unrealized loss of $2,592,696 from the increase in value of these derivative features during the six months ended June 30, 2020.
During the six months ended June 30, 2021, we recorded interest expense related to the amortization of debt discounts totaling $33,750, compared to $10,933 during the six months ended June 30, 2020. During the six months ended June 30, 2021, we accrued interest expense on convertible notes or $110,165, compared to interest expense of $112,031 during the six months ended June 30, 2020.
Net Loss
We incurred a net loss of $991,487, or $0.01 per share, for the six months ended June 30, 2021, compared to a net loss of $2,933,571, or $0.03 per share, for the six months ended June 30, 2020.
The weighted average number of basic and fully diluted shares outstanding for the six months ended June 30, 2021 was 109,572,911, compared to 87,098,894 for the six months ended June 30, 2020. There are no dilutive equivalents included in our calculation of fully diluted shares for the six months ended June 30, 2021 and 2020, since their inclusion would be anti-dilutive due to our net loss per share.
Liquidity and Capital Resources
The accompanying unaudited financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.
The Company sustained a net loss of $991,487 for the six months ended June 30, 2021. Because of the absence of positive cash flows from operations, the Company requires additional funding to execute upon its business plan. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We are presently unable to meet our obligations as they come due. As of June 30, 2021, we had cash and cash equivalents totaling $179,925 and a working capital surplus of $6,120,408. Our working capital surplus is primarily due to the merge as of June 30, 2021.
During the six months ended June 30, 2021, net cash provided in operating activities was $9,624,242, compared to $59,963 net cash used in operating activities for the twelve months ended December 31, 2020. During the six months ended June 30, 2021, net cash provided by financing activities was $1,814,904 compared, to $60,000 of cash provided by financing activities for the twelve months ended December 31, 2020.
We anticipate that our cash requirements will arise from the need to fund our growth from operations, pay current obligations and future capital expenditures. The primary sources of funding in the near term for such requirements are expected to be cash generated from raising additional funds by the issuance of convertible notes. However, we can provide no assurances that we will be able to generate sufficient cash flow or obtain additional financing on terms satisfactory to us if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. In addition, our plan for the next twelve months is to raise capital to continue to expand our operations. We are presently engaged in capital raising activities through one or more private offerings of our company’s securities. See “Note 2– Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”
Inflation
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine-month period ended June 30, 2021.
Off-Balance Sheet Arrangements
Not applicable.
Critical Accounting Estimates
Our financial statements and accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of June 30, 2021. In designing and evaluating disclosure controls and procedures, we and our management recognize that any disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective. As of June 30, 2021, based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the CEO and CFO concluded that our disclosure controls and procedures were not effective.
In light of the conclusion that our internal controls over financial reporting were ineffective as of June 30, 2021, we have applied procedures and processes as necessary to ensure the reliability of our financial reporting in regards to this quarterly report on Form 10-Q. Accordingly, management believes, based on its knowledge, that: (i) this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the periods covered by this report; and (ii) the financial statements, and other financial information included in this quarterly report, fairly present in all material respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this quarterly report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. Except as set forth above, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on April 21, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On April 14, 2021, the Company issued 4,900,000 shares of common stock to a note holder upon the conversion of $147,185 of accrued interest on a convertible note.
On April 16, 2021, the Company issued 525,714 shares of common stock pursuant to subscription agreements and received proceeds of $18,400. On April 16, 2021, the Company issued 125,000 shares of common stock pursuant to subscription agreements and received proceeds of $4,990. On April 21, 2021, the Company issued 1,275,000 shares of common stock pursuant to subscription agreements and received proceeds of $51,000.
On May 5, 2021, the Company issued 10,900,000 shares of common stock to a note holder upon the conversion of $181,003 in convertible note principal and $352,262 of accrued interest.
On May 13, 2021, the Company issued 125,000 shares of common stock pursuant to subscription agreements and received proceeds of $4,990.
On June 2, 2021, the Company issued an aggregate 1,000,000 shares of common stock pursuant to subscription agreements and received proceeds of $20,000.
On June 14, 2021, the Company issued 200,000 shares of common stock and 2 shares of Series E preferred stock pursuant to subscription agreements and received proceeds of $20,000.
The above issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe is exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder.
Item 3. Defaults upon Senior Securities
None.
Item 5. Other Information
None.
Item 6. Exhibits
| 31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer | ||
| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer | ||
| 32 | Chief Executive Officer and Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
| 101.INS | XBRL Instance Document* | ||
| 101.SCH | XBRL Schema Document* | ||
| 101.CAL | XBRL Calculation Linkbase Document* | ||
| 101.DEF | XBRL Definition Linkbase Document* | ||
| 101.LAB | XBRL Label Linkbase Document* | ||
| 101.PRE | XBRL Presentation Linkbase Document* | ||
________________
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are not deemed filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act or Section 18 of the Securities Exchange Act and otherwise not subject to liability.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunder duly authorized.
| ROGUE ONE, INC. | ||
| Date: August 8, 2022 | By: | /s/ Joe E. Poe, Jr. |
| Name: | Joe E. Poe, Jr. | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Joe E. Poe, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Rogue One, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: August 8, 2022 | /s/ Joe E. Poe |
| Joe E. Poe, Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Ryan Dolder, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Rogue One, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Dated: August 8, 2022 | /s/ Ryan Dolder |
| Ryan Dolder, Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report of Rogue One, Inc. (the “Company”) on Form 10-Q/A for the quarter ended June 30, 2021 we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:
1. The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: August 8, 2022 | /s/ Joe E. Poe |
| Joe E. Poe, Chief Executive Officer | |
| (Principal Executive Officer) |
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