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Form 10-Q/A Rogue One, Inc. For: Jun 30

August 9, 2022 8:42 AM EDT

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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q/A

 

(Amendment No. 1) 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended June 30, 2021

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________.

 

Commission File Number 00-24723

 

ROGUE ONE, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   88-0393257

(State or other jurisdiction of

Incorporation or organization)

  (I.R.S. Employer Identification No.)

 

1023 K Street, N.W., Suite 454

Washington, DC 2005

(Address of principal executive offices)

 

(405) 733-1567

(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  ☐   No

 

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 ☐     No

 

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  ☐
  Non-accelerated filer  ☒ Smaller reporting company 
    Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 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 ☐    No ☒

 

As of August 8, 2022, the Registrant had 312,655,147 shares of Common Stock issued and outstanding.

 

 

 

THIS IS AMENDMENT NO. 1 TO THAT CERTAIN QUARTERLY REPORT ON FORM 10-Q FILED ON AUGUST 25, 2021 FOR THE THREE MONTH QUARTERLY PERIOD ENDING JUNE 30, 2021 FOR ROGUE ONE, INC., A NEVADA CORPORATION (THE “PRIOR REPORT”). THIS AMENDMENT SUPERSEDES AND REPLACES THE PRIOR REPORT IN ITS ENTIRETY.

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  $179,925   $111 
Accounts receivable   567,697       
Inventory   7,022,298       
Other assets   8,314       
Prepayment   120,000      
Fully controlled companies   8,400       
Associated companies   703,740       
Shares publicly traded - SRSG -   7,432,862       
Total current assets   16,043,235    111 
Property and equipment, net   343,015       
Intangible Assets   97,660       
Goodwill   10,818,657       
Assets pledged   246,102       
Total noncurrent assets   11,505,434       
Total assets  $27,548,670   $111 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
Accounts payable  $2,246,119   $165,466 
Other liabilities   6,955    1,555,862 
Payroll liabilities   265,043       
Related party loans   1,715,913    4,505 
Loans and Notes payable   328,794       
Notes payable related party   6,055       
Convertible notes payable   1,572,224    1,559,803 
Convertible notes payable - accrued interest -   766,205       
Derivative liabilities   2,747,418    2,298,820 
Loans payable   268,102       
Total current liabilities   9,922,828    5,583,456 
           
SBA loan   155,972       
Total liabilities   10,078,799    5,583,456 
           
Commitments and Contingencies          
Noncontrolling interest   3,408,995       
Stockholders' equity          
Preferred stock - Series A, $0.00001 par value. 69,999,990 shares authorized; 10,000,000 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively   100    100 
Preferred stock - Series D, $0.00001 par value. 1 share authorized; zero 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively            
Preferred stock - Series E, $0.00001 par value. 50 shares authorized; 50 and 20 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively            
Common stock, $0.001 par value. 1,000,000,000 shares authorized; 123,197,371 and 101,929,993 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively   123,197    101,930 
Common Stock to be Issued   176,772       
Preferred Shares Series E Conversion rights   225,000       
Preferred Series E Potential conversion into common stock   18,843,105      
Additional paid-in capital   10,354,315    8,984,752 
Accumulated other comprehensive loss   (15,661,614)   (14,670,127)
Total stockholders' equity   17,469,870    (5,583,345)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $27,548,670   $111 

       

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   57,000    15,000    114,000    30,000 
General and administrative   30,137    15,577    39,619    17,751 
Professional fees   20,605    9,435    29,105    67,935 
Stock based compensation               215,000       
Total operating expenses   107,742    40,012    397,724    115,686 
Profit (Loss) from operations   (107,742)   (40,012)   (397,724)   (115,686)
Derivative liability expense         (102,248)         (102,248)
Loss on change in value of derivative liabilities   (286,615)   (2,706,281)   (448,598)   (2,592,696)
Interest expense   (66,882)   (67,529)   (145,165)   (122,941)
Total others   (353,497)   (2,876,058)   (593,763)   (2,817,885)
Net profit (loss)   (461,239)   (2,916,070)   (991,487)   (2,933,571)
                     
Net profit (loss) attributable to common shareholders   (461,239)   (2,916,070)   (991,487)   (2,933,571)
                     
Net income (loss) per share applicable to common stockholders - basic  $(0.00)  $(0.03)  $(0.01)  $(0.03)
                     
Net income (loss) per share applicable to common stockholders - diluted  $(0.00)  $(0.03)  $(0.01)  $(0.03)
                     
Weighted average number of common shares outstanding - basic   116,934,786    96,515,927    109,572,911    87,098,894 
                     
Weighted average number of common shares outstanding - diluted   116,934,786    96,515,927    109,572,911    87,098,894 

 

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     10,000,000     $ 100       1     $ -       12     $ -       86,386,660     $ 86,387     $ 8,894,467     $ -     $ -     $ (14,121,407 )   $ (5,140,453 )
Net loss             -                                                                -        -        (2,916,070 )     (2,916,070 )
Conversion of Series D preferred stock for common stock                     (1 )     -       -       -       870,000       8,700       (8,700 )                             -  
Issuance of Series E preferred stock to an officer as compensation                                     8       -                       17,500                               17,500  
BALANCE, June 30, 2020     10,000,000     $ 100     $ -     $ -       20     $ -       87,256,660     $ 95,087     $ 8,903,267     $ -       -      $ (17,037,477 )   $ (8,039,023 )
                                                                                                         
BALANCE, March 31, 2021     10,000,000     $ 100       -     $ -       48     $ -       104,146,658     $ 104,147     $ 9,573,536       -        -      $ (15,200,375 )     (5,522,592 )
Net loss             -                -                -                                                (461,239 )     (461,239 )
Human Brands International, Inc - Merge                                                                           $ 3,408,995     $ 19,244,877               22,653,872  
Issuance of Series E preferred stock in connection with sales made under private or public offerings                                     2                               20,000                               20,000  
Issuance of common stock in connection with sales made under private or public offerings                                                     3,250,714       3,250       96,130                               99,380  
Conversion of convertible debentures and accrued interest into common stock                                                     15,800,000       15,800       664,649                               680,449  
BALANCE, June 30, 2021     10,000,000     $ 100       -     $ -       50     $ -       123,197,372     $ 123,197     $ 10,354,315     $ 3,408,995     $ 19,244,877     $ (15,661,614 )   $ 17,469,870  
                                                                                                         

 

 

 

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   10,000,000   $100    1   $      12   $      86,386,660   $86,387    8,894,467   $     $     $(14,103,906)  $(5,122,952)
                                                                  
Net loss        -          -          -                    -     -     (2,933,571)   (2,933,571)
Conversion of Series D preferred stock for common stock             (1                   870,000     870,000     (8,700                      
                                                                  
Issuance of Series E preferred stock to an officer as compensation                       8                    17,500                    17,500   
                                                                  
Balance, June 30, 2020   10,000,000   $100         $      20   $      87,256,660   $95,087   $8,903,267   $     $     $(17,037,477)  $(8,039,023)
                                                                  
Balance December 31, 2020   10,000,000   $100    -    $      -    $      101,929,993   $101,930   $8,984,752   $     $     $(14,670,127)  $(5,583,345)
                                                                  
Net loss        -          -                                        (991,487)   (991,487)
Conversion of Series E preferred stock for common stock                       (3)         1,200,000    1,200    (1,200)                     
Issuance of Series E preferred stock in connection with sales made under private or public offerings                       4                    60,000                    60,000   
                                                                  
Issuance of Series E preferred and common stock in lieu of cash for accrued compensation to employees, officers and/or directors                       6          100,000    100    89,900                   90,000 
Issuance of Series E preferred and common stock as compensation to employees, officers and/or directors                       15          250,000     250     224,750                    225,000  
                                                                  
Issuance of Series E preferred stock in exchange for fees and services rendered                       4                    125,000                    125,000  
                                                                  
Issuance of common stock in connection with sales made under private or public offerings                                 4,917,381     4,917     194,463                    199,380   
                                                                  
Return of common stock issued in connection with the acquisition of a business                                 (2,000,000    (2,000    2,000                       
                                                                  
Conversion of convertible debentures and accrued interest into common stock                                 16,799,999     16,800     674,650                    691,450   
                                                                  
Human Brands International, Inc - Merge                                                3,408,995    19,244,877         22,653,872 
Balance June 30, 2021   10,000,000   $100         $      50   $      123,197,372   $123,197   $10,354,315   $3,408,995   $19,244,877   $(15,661,614)  $17,469,870 

 

 

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   $ (991,487 )   $ (2,933,571 )
Biological Assets Remeasurement                
Adjustments to reconcile net loss to net cash used in operating activities:                
Amortization of debt discount     35,000       10,933  
Preferred stock issued as compensation to employees, officers and/or directors     90,000           
Preferred stock issued in exchange for fees and services     125,000           
Derivative expense              102,248  
Loss on change in value of derivative liabilities     448,598       2,592,696  
Changes in operating assets and liabilities                
Prepaid expenses and other current assets     (145,000 )         
Accounts payable     (59,600 )     162,807  
Related party loans              4,924  
 Other liabilities     114,514          
Payroll liabilities     109,652          
Net cash used in operating activities     (273,325 ))     (59,963 )
Cash flows from investing activities:                
Cash received from merger transaction     179,709           
Net cash provided by investing activities     179,709           
Cash flows from financing activities:                
Proceeds from issuance of common stock     199,380           
Proceeds from issuance of preferred stock     60,000           
Related party loans     1,550           
Proceeds from short term loans     12,500           
Proceeds from promissory note              60,000  
Net cash provided by financing activities     273,430       60,000  
Net increase (decrease) in cash and cash equivalents     179,815       37  
Cash and cash equivalents, beginning of period     111       19  
Cash and cash equivalents, end of period   $ 179,925     $ 56  
Supplemental Cash Flow Information                
Cash paid for interest   $       $    
Non-Cash Investing and Financing Activities                
Common stock issued to reduce convertible promissory notes payable   $ 691,450     $ 17,500  
Series E preferred stock issued in lieu of cash for accrued officer compensation   $ 225,000     $  
Common stock issued in connection with the acquisition of a business   $ 8,467,377     $  
Preferred stock issued in connection with the acquisition of a business   $ 10,777,500     $  
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 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.

 

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 $250,000. At June 30, 2021 and December 31, 2020, the Company did not have bank balances exceeding the FDIC insurance limit. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

 

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 Common Share

 

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 71,418,784 and 356,568,069 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.

 

Share-Based Compensation

 

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

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 $991,487 for the six months ended June 30, 2021. As a consequence of 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., the Company changed from a working capital deficit to a working capital positive of $6,120,408 as of June 30, 2021. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

 

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 $179,925 and $111 as of December 31, 2020.

 

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 $567,697 and $0 as of December 31, 2020. The Company is not expecting any credit losses.

 

 

 

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  $33,502             $33,502 
Tequila Armero S.A de CV        97,412         97,412 
Industrias Naturales de Tequilas S.A de CV             5,673,176    5,673,176 
Sobre Todo Alimentacion   7,948              7,948 
Turaso S de PR de RL             1,210,260    1,210,260 
   $41,450   $97,412   $6,883,435   $7,022,298 

 

 

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 
Spirits Time International, Inc. (a.k.a. Sears Oil and Gas, Corporation)  SRSG    3,203,846   $1.23   $3,942,362   $1.000   $3,203,846 
Rogue Baron, Plc.  SHNJF    36,247,500    0.096    3,490,500   $0.216    7,829,460 
Total:   $7,432,862        $11,033,306 

 

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 $ 343,015 and $ 0 as of June 30, 2021 and December 31, 2020 respectively in Property, Plant and Equipment, all as a consequence of the business combination, and such assets were valued as fair market value, starting in service for the Company as of July 1, 2021, therefore no depreciation has been calculated.

 

Other Noncurrent Assets

 

On June 30, 2021, and December 31, 2020, other noncurrent assets were $0 and $145,000. The current balance of $0 compared to the balance of $145,000 as of December 31, 2020, is because the Company applied ASC-850-10-05-4, based on the “Amended and Restated Merger Agreement and Plan of Reorganization” dated on June 30, 2021, and then intercompany transactions are offset in both companies, Rogue One, Inc., and Human Brands International, Inc.

 

 

 

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  $655,719 
Tequila Armero S.A de CV   568,998 
Tequila Copter S.A de CV   814,000 
Mazcal Arte   294,118 
Turaso S de PR de RL   2,058,884 
Sub-Total  $4,391,718 
Human Brands International, Inc   6,426,939 
Total  $10,818,657 

 

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  $144,118 
Industrias Naturales de Tequilas S.A de CV   519,185 
Tequila Armero S.A de CV   418,719 
Sobre Todo Alimentacion S.A de CV   228,515 
Tequila Copter S.A de CV   365,767 
Turaso S de PR de RL   1,732,692 
Total:  $3,408,995 

 

 

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  $1,070,830   $1,878,805   $- 
CapCity Beverages, LLC   215,913    52,498    110,244 
Sobre Todo Alimentacion S.A de CV   18,184    -    - 
Turaso S de PR de RL   335,026    -    - 
   $1,639,953   $1,931,303   $110,244 

  

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   176,771,962