Evergreen Sustainable Enterprises, Inc. - Quarter Report: 2015 September (Form 10-Q)

- 6 -

---

The accompanying financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The interim financial statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of management, are necessary to present a fair statement of the results for the period.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the December 31, 2014 financial statements and notes thereto included. The results of operations for the period ended September 30, 2015, are not necessarily indicative of the operating results for the year ended December 31, 2015.

 

Note 2:  Going Concern

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.   These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

 

The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.  The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability.  The Company intends to seek additional funding through equity offerings to fund its business plan.  There is no assurance that the Company will be successful in raising additional funds.

 

Note 3:  Related Party Transactions

 

During the nine months ended September 30, 2015, the related party payable had a net increase of $1,500.  The balance of the related party payable was $10,193 and $8,693 as of September 30, 2015 and December 31, 2014, respectively.  This payable is due on demand and has an interest rate of 8%.  Accrued interest on this payable was $2,575 at September 30, 2015.  Beginning in 2013, the Company began accruing salary of $5,500 per month to the CEO for his services.  Effective April 14, 2014, the base salary to be paid to the CEO increased to $6,000 per month.  The balance accrued at September 30, 2015 was $18,612.

- 7 -

---

HOME TREASURE FINDERS, INC. AND SUBSIDIARY

The Company's capital assets consist of warehouse units, computer equipment, office furniture and leasehold improvements for the new office.  Depreciation and amortization is calculated using the straight-line method over the estimated useful life of the asset, ranging from 18 months to 39 years.  Expenditures for additions and improvements are capitalized, while repairs and maintenance costs are expensed as incurred.  The cost and related accumulated depreciation of any capital assets that are sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal.

Fixed assets and related depreciation for the nine months ended September 30, 2015 are as follows: 

 

 

Depreciation expense was $17,638 and amortization expense was $2,000 for the nine months ended September 30, 2015.

	1	First and Second year interest rate at 7% with 25 year amortization payment at $5,936.95 per month.
	2.	Third and Fourth year at 8% with 25 year amortization payment at $6,277.73 per month.
	3.	Fifth year at 9% with 25 year amortization payment at $6,639.64 per month.
	4.	Balloon payment of $777,255.49 due at end of the fifth year.

 

The note to seller is secured by the three warehouse units.

 

- 8 -

---

HOME TREASURE FINDERS, INC. AND SUBSIDIARY

Notes to Unaudited Consolidated Financial Statements

 

The following discussion should be read in conjunction with the financial statements of Home Treasure Finders, Inc. and Subsidiary (the "Company"), which are included elsewhere in this Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking information. Forward-looking information includes statements relating to future actions, future performance, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, and other such matters of the Company. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as that information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. Forward-looking information may be included in this Quarterly Report on Form 10-Q or may be incorporated by reference from other documents filed with the Securities and Exchange Commission (the "SEC") by the Company. You can find many of these statements by looking for words including, for example, "believes", "expects", "anticipates", "estimates" or similar expressions in this Quarterly Report on Form 10-Q or in documents incorporated by reference in this Quarterly Report on Form 10-Q. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

We have based the forward-looking statements relating to our operations on our management's current expectations, estimates and projections about our Company and the industry in which we operate. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In particular, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual results may differ materially from those contemplated by these forward-looking statements. Any differences could result from a variety of factors, including, but not limited to general economic and business conditions, competition, and other factors.

Financial Condition and Results of Operation

 

Home Treasure Finders, Inc. was formed on July 28, 2008. The founder, sole director and officer of our company is Corey Wiegand. On March 3, 2014 we formed a wholly owned subsidiary, HMTF Cannabis Holdings, Inc. to purchase properties that qualify for legal cultivation of cannabis. 

 

Our net loss for the nine months ended September 30, 2015 was $41,856.

 

We generated operating revenue from three sources, sales commissions, property management, and commercial real estate for legal cannabis cultivation. We manage approximately 60 rental real estate owned by non-related third parties. In comparison our net loss for the nine months ended September 30, 2014 was $134,810.

For the nine months ended September 30, 2015 the Company generated a total of $287,604 in revenues, consisting of $147,470 from sales commissions and $140,134 from rental and property management.  During the nine months ended September 30, 2014, we generated $74,964 from sales commissions and $37,961 from property management activities.  The large increase in property management revenue resulted from rental income derived from its acquired property and the increase in sales revenue resulted from the hiring and training of two new agents.

During the nine months ending September 30, 2015 we incurred operating expenses totaling $285,142. Such expenses consisted primarily of commissions paid on the revenue earned, general and administrative expenses and professional fees. General and administrative expenses increased primarily because of depreciation expense and property taxes on our new warehouse building.  Interest expense also increased as a result of our loan on the warehouse.  

 

During the nine months ending September 30, 2014 we incurred operating expenses totaling $250,217. Such expenses consisted primarily of commissions paid on the revenue earned, general and administrative expenses and professional fees. General and administrative expenses increased because we recruited and began training additional agents and initiated operations at our cannabis holdings subsidiary.  Expenses also increased as a result of forming and running the subsidiary HMTF Productions, LLC and also the signing of a lease for office space and costs involved in setting up the office.

 

- 10 -

---

At September 30, 2015, we had $21,873 in cash and a working capital deficit of $86,087. At December 31, 2014 we had $36,848 in cash and a working capital deficit of $53,319.

The business plan of our new subsidiary, HMTF Cannabis Holdings, Inc. is capital intensive and requires that we raise significant additional capital to acquire and improve real estate. We are negotiating with various sources for an equity infusion to match our long term capital needs.

Our Web Site Supporting Real Estate Operations

 

We operate a web site as a key aspect of our real estate sales, property management and cannabis holdings businesses. The address of our website is:  www.hometreasurefinders.com.

  

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

No response required.

 

Item 4.  Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our Chief Executive Officer has reviewed the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) within the end of the period covered by this Quarterly Report on Form 10-Q and has concluded that the disclosure controls and procedures are ineffective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner. There were no changes in our internal controls or in other factors that could materially affect these controls subsequent to the last day they were evaluated by our Chief Executive Officer, who is our principal executive officer and our principal financial officer.

 

There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

- 11 -

---

No response required.

 

Item 1A.  Risk Factors

This investment has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below. If any of the following risks actually occur, our business, operating results and financial condition could be harmed and the value of our stock could go down. This means you could lose all or a part of your investment.

Our Auditor's report states that there is substantial doubt that we will be able to continue as a going concern.

We have had substantial losses since inception and minimal cash reserves. While we are beginning to earn revenue and make a profit, our ability to continue as a going concern over the long term remains unproven. In the event that we are forced to reduce operations or seriously curtail our business, an investor will lose all money invested.

The business of our Cannabis Holdings Subsidiary is dependent on laws pertaining to the marijuana industry. 

Continued development of the cannabis industry and a successful role in that industry for our Subsidiary, HMTF Cannabis Holdings, Inc.  is dependent upon continued legislative authorization at the state level. While there may be ample public support for legislative action that favors our industry, numerous factors impact the legislative process.

 

As of January 31, 2014 and the date of this report, 21 states and  The District of Columbia allow their citizens to use medical marijuana. Additionally, voters in the states of Colorado, Washington, Oregon, Alaska and the District of Columbia have approved ballot  measures to legalize cannabis for "recreational" adult use.

 

During November of 2000 Colorado voters approved Amendment 20 to amend the State Constitution to provide for legalized use and possession of medical marijuana.

During November 2012 Colorado voters approved Amendment 64 to the State Constitution to legalize the use, possession and sale of retail marijuana. Amendment 64 also provides for the Colorado General Assembly to enact an excise tax on wholesale marijuana sales, adopt further rules to govern cultivation, processing  retail sale and finally to give cities and counties the ability to locally opt out of retail marijuana.

These state laws are in conflict with the federal Controlled Substances Act, which makes marijuana  use and possession illegal on a national level.

 

The following links may be of use to understand the details of Colorado Laws. 

http://www.colorado.gov/cs/Satellite/Rev-MMJ/CBON/1251581331216

During October, 2009 the Obama Administration ended aggressive law enforcement against medical marijuana patients and dispensaries. The Obama administration has effectively stated that it is not an efficient use of resources to prosecute those lawfully abiding by state designed laws allowing the use and distribution of medical marijuana. However, there is no guarantee that the administration will not change its stated policy regarding low-priority enforcement of laws. Additionally, any administration that follows could change this policy and decide to enforce the federal laws strongly. Any such change in the federal government's enforcement of current federal laws could cause significant financial damage to us and our shareholders.

The Marijuana Industry faces strong opposition.

It is believed by many that large well-funded businesses may have a strong economic opposition to the cannabis industry. We believe that the pharmaceutical industry clearly does not want to cede control of any product that could generate significant revenue. For example, medical marijuana will likely adversely impact the existing market for the current "marijuana pill" sold by the mainstream pharmaceutical industry, should marijuana displace other drugs or encroach upon the pharmaceutical industry's products. The pharmaceutical industry is well funded with a strong and experienced lobby that eclipses the funding of the medical marijuana movement. Any inroads the pharmaceutical could make in halting the impending cannabis industry could have a detrimental impact on our proposed business. 

Marijuana remains illegal under Federal Law

Marijuana is a schedule-1controlled substance and is illegal under federal law. Even in those states in which the use of marijuana has been legalized, its use remains a violation of federal law. Since federal law criminalizing the use of marijuana preempts state laws that legalize its use, strict enforcement of federal law regarding marijuana would likely result in our inability to proceed with the cannabis properties portion of our business plan.

Tenants of our Company owned Denver warehouse facility, and of any additional facilities of a similar nature which we may acquire in the future, may have difficulty accessing the services of banks which may make it difficult for them to operate.

Since the use of marijuana is illegal under federal law, a compelling argument has been made in the past that banks cannot accept deposit funds from businesses involved with marijuana. We believe that this argument may someday be abandoned, but there is no assurance of this. Recently the State of Colorado has organized Four Corners Credit Union which is intended to serve the banking needs of the Cannabis Industry in Colorado. However, there is no assurance that the environment for banking relationships will continue to progress favorably. In any case, inability to open conventional bank accounts may make it difficult for potential tenants of proposed facilities to operate.

 

Potential Competitors could duplicate the business model of our Subsidiary, HMTF Cannabis Holdings. Inc.

While our subsidiary has acquired, improved and leased properties suitable to legal cultivation of cannabis, there is no aspect of our business model which is protected by patents, copy writes, trademarks or trade names. As a result, potential competitors will likely duplicate our business model.

Under our present business model, a significant portion of our projected monthly cash flow derives from rental revenue which may prove to be uncollectable under lease terms.

At our Garfield Street warehouse, we are dependent on monthly cash flow from rental revenue. We hold tenant security deposits in our segregated savings account, as described in our leases and as prescribed by Colorado Law. Nonetheless, situations may arise where tenants may fail to pay rent in a timely fashion as such payments become due per lease terms. For example, the cultivation business of one or more grower tenants may not commence in a timely manner due to delays caused by regulatory or other issues. Further, the cash flow anticipated from rent collections may falter at any time for any reason, the tenant security deposits we hold are designed to act as a limited buffer against such contingencies.

- 13 -

---

Under terms of the leases now in effect, if we do not receive rent payments as such payments become due and payable under lease terms, we may first utilize the sums we hold as tenant security deposits to collect the late rent payments with penalty. Under the terms of the leases in place, tenants then are required, within five days, to replace such security deposit sums such that the full tenant security deposit is restored. There is no assurance that such replacements of deposit sums will actually occur.

In any event, if tenants do not comply with lease terms, and no workable arrangement can be achieved, we may be forced to evict one or more tenants. Unfavorable developments of this nature could contribute to or cause us to fall behind on our obligations to make monthly mortgage payments as such payments become due. While we have carefully vetted both of our tenants, and we have personal guarantees as to payment and performance under lease terms, as of the date of this report, both tenants at our Garfield Street warehouse have fallen behind on rent payments.

If we pursue an action for eviction, one or more tenants might cause physical damage our real estate and/or fight the action for eviction, and/or refuse to vacate or otherwise undertake to block and/or slow our efforts regain proper possession of our warehouse or to locate a suitable alternative tenant to re-lease our warehouse.

We believe that we have acted legally and in good faith with respect to our tenants. We further believe that our real estate is adequately insured. We plan to defend our property and related contractual rights to the fullest extent of the law. As of the date of this report, we are assisted by counsel and with such assistance from counsel we are acting to negotiate a suitable remedy to these various disputes which have only recently come to our attention. There is no present way to predict the final outcome of these issues.

A tenant, present or former, may claim to have suffered damages and in connection with that belief, may elect to initiate and thereafter pursue one or more lawsuits against the Company and/or its subsidiaries.

We believe we have acted properly in all of our dealings with tenants and otherwise. We have requested counsel to confirm the legality of our past and present agreements and actions and to advise us accordingly. In any case we plan to vigorously defend any suit brought against the Company or its subsidiaries.

A mechanics lien could be filed against our real estate.

Our tenants have hired a contractor to bring their units under lease at our Garfield Street warehouse up to the Occupancy Permit standards of City and County of Denver. Recently their contactor has phoned management to report that all required work has been completed and the property is ready for final inspection. The contractor further states that the invoices sent to our tenants for the work totaled approximately $200,000, but that only approximately $160,000 has been received in payment from our tenants. The contractor informed us that he has completed all the remodel work ordered by our tenants and that he believes that the standards required for an Occupancy Permit have been met. The contractor has further reported that various of the final invoices for the work he has completed, invoices totaling approximately $40,000, are overdue and that our tenants are refusing to make their final payment.  Under the terms of leases in effect, and further in accordance with the terms of the contractors agreements with our tenants, our tenants are responsible to pay these invoices. In the event that our tenants continue to refuse to make final payments in full, there is a risk that the contractor will elect to file one or more mechanics liens against our real estate. If mechanics liens are filed, this alone will place our tenants in default on their leases. In connection with such default we may have legal cause to evict the tenants and to pursue various additional actions against our tenants. As of the date of this report, we are attempting to resolve these issues but are unable to predict the outcome.

- 14 -

---

A revision or reversal of the Federal policies which presently allow Colorado and various other states to pursue legalized marijuana would likely cause widespread financial difficulties to the cannabis business nationally.

The 2016 National elections could install a presidential administration having an intolerant policy toward Marijuana Legalization.  If such a political reversal were to occur, the thriving legalized Colorado Cannabis Industry could be at increased risk of vigorous enforcement of Federal Laws which prohibit Cannabis cultivation, sale and consumption.

We have a limited operating history. 

Our ability to achieve profitability depends upon the continued service of Corey Wiegand, our founder, who has to date been our primary source of commission revenue. During 2013 our revenues accelerated and we are no longer considered a development stage company.   We may incur significant operating losses in the future, primarily due to the expansion of our operations. Our business plan provides that we will grow rapidly and ultimately deliver professional services to would be buyers through licensed REALTORS acting as listing agents and buyer agents rather than primarily through commissions earned by our founder. To actualize this goal, we plan to market our advanced sales techniques to established realtors that wish to earn more commissions from buyer transactions. We are working to recruit buyer agents to sign our master referral agreements, graduate from our workshops and respond to our IVR leads.  As of the date of this report, we are training six buyer agent two of whom are yet to pass the exam and become licensed. We have leased office space where we plan to aggressively expand our professional staff.

Our real estate sales business plan provides that we will grow rapidly and ultimately deliver professional services to would be buyers through "buyer agents" rather than primarily through our founder. To actualize this goal, we plan to market our advanced sales techniques to established realtors that wish to earn more commissions from buyer transactions. We are working to actualize our plan to recruit buyer agents to sign our master referral agreements, graduate from our workshops and respond to our IVR leads.  As of the date of this report, we have five active licensed REALTORS and we are training an additional three agents. All our trainees are either presently licensed or enrolled in courses operated by third party REALTOR schools. All of our trainees pay their own expenses for the classes. We offer  newly hired REALTORS a bonus plan which awards shares of our common stock which vest over a one year period assuming  productivity goals are achieved by each agent as expressed in the Broker Relationship Agreement signed by each new hire.

 

We may be unable to manage our growth or implement our expansion strategy. 

We have taken over the operations of CW Properties which currently manages approximately 45 rental units and has shown net revenue from management fees. Therefore, in the future we will need to undertake additional activities in property management as well as those in connection with our ongoing business plan.

 

As a public company, our expenses include, but are not limited to, annual audits, legal costs, SEC reporting costs, costs of a transfer agent and the costs associated with fees and compliance. Further, our management will need to invest significant time and energy to stay current with the public company responsibilities of our business and will therefore have diminished time available to apply to other tasks necessary to our survival and growth. It is therefore possible that the financial and time burdens of operating as a public company will cause us to fail to achieve profitability.  If we exhaust our funds, our business will fail and our investors will lose all money invested in our stock. 

 

 

 

 

 

 

 

- 16 -

---

In the past, the Company has issued shares for cash and services at prices which were solely determined by Corey Wiegand. At that time, Mr. Wiegand made a determination of both the value of services exchanged for our shares, and, as well, the price per share used as compensation.   Transactions of this nature were not made at arm's length and were made without input from a knowledgeable and non-interested third party.  Future transactions of a like nature could dilute the percentage ownership of the company owned by a given investor. While the company believes its past transactions were appropriate, and plans to act in good faith in the future, an investor in our shares will have no ability to alter such transactions as the may occur in the future and, further, will not be consulted by the company in advance of any such transactions. An investor who is unwilling to endure such potential dilution should not purchase our shares.

Recently, Mr. Wiegand contributed his property management entity known as CW Properties. 

We have limited financial resources to take advantage of advertising opportunities as they may arise.  

         

The inability to pay for press releases, investor road shows or other events intended to expose our shares to institutional investors, could adversely affect our ability to generate investor support for our common shares.

Our operating results will be subject to fluctuations and our stock price may decline significantly. 

Our quarterly revenue and operating results from commissions, management fees and lease revenues, if any, will be difficult to predict from quarter to quarter. We derive relatively stable revenue from our property management operations. Nonetheless, it is possible that our net operating results in some quarters will fall below our expectations. Our quarterly operating results will be affected by a number of factors, including: 

If revenue for a particular quarter is lower than we expect, we likely will be unable to proportionately reduce our operating expenses for that quarter, which would harm our operating results for that quarter. If we fail to meet investor expectations or our own future guidance, even by a small amount, our stock price could decline, perhaps substantially.  

- 17 -

---

Existing real estate laws, regulations, land use codes and policies, the rules promulgated by the State of Colorado's Marijuana Enforcement authorities and changes to these regulations and policies may present technical, regulatory and economic barriers to potential buyers and to our tenants at the Company's Garfield Street warehouse. 

The market for homes is influenced by U.S. federal, state and local government regulations and policies concerning the real estate industry, as well as policies promulgated by local real estate boards. These regulations and policies often relate to realtor compensation, and pricing. In the U.S. and in a number of other countries, these regulations and policies are being modified and may continue to be modified. Investment in the real estate could be deterred by these regulations and policies, which could result in a significant reduction in the potential demand for our services. For example, loss of favorable tax treatment, certain government buyer incentive programs, and or government subsidized or backed loan programs may result in loss of sales which would likely harm our financial performance.  

We anticipate that our mentor services and their perceived customer value will be subject to oversight and regulation in accordance with national and local ordinances relating to real estate sales laws. Any new government regulations could cause a significant reduction in demand for our mentor services. 

The reduction or elimination of government and economic incentives could cause our revenue to decline.   

Today, we believe consumer confidence is slowly recovering. However buyers are finding it very difficult to qualify for loans.  As a result, federal, state and local government bodies in many states have provided incentives in the form of rebates, tax credits and other incentives to buyers that are willing to purchase real estate. For example, an eight thousand dollar first time home buyer tax credit was offered and thereafter the credit offering expired.  Future government economic incentives, if any, could be reduced or eliminated altogether. Such home buyer incentives expire, decline over time, are limited in total funding or require renewal of authority. Reductions in, or eliminations or expirations of, governmental incentives could result in decreased demand for our services.

Changes in tax laws or fiscal policies may decrease the return on investment for customers of our business which could decrease demand for our services and harm our business. 

We anticipate that a portion of our future revenues will be derived from commissions in connection with the sale of single family residences to individual homebuyers. In deciding whether to purchase or to rent, prospective customers may evaluate their projected return on investment. Such projections are based on current and proposed federal, state and local laws, particularly tax legislation. Changes to these laws, including amendments to existing tax laws or the introduction of new tax laws, tax court rulings as well as changes in administrative guidelines, ordinances and similar rules and regulations could result in different tax assessments and may adversely affect a homeowner's projected return on investment, which could have a material adverse effect on our business and results of operations.

 

Problems with service quality or individual buyer agent performance may include agent error, agent negligence or problems within the mentoring services we plan to provide. The result would likely be fewer customers, reduced revenue, unexpected expenses and loss of market share. 

In the future, should we become significantly reliant on abilities and skills of other agents at arm's length, we may fall victim to unexpected agent errors or omissions.  If we deliver mentor services provided by third party agents our credibility and the market acceptance of our mentor services could be harmed.  

- 18 -

---

The Realtors we plan to recruit may not deliver consistent and professional mentor and "buyer agent" services and thus our business plan may not gain market acceptance, which would prevent us from achieving sales and market share 

The development of a successful market for the mentor services we intend to deliver may be adversely affected by a number of factors, some of which are beyond our control, including: 

If the services we intend to offer fail to gain market acceptance, we will be unable to achieve significant sales and market share.

If refinements in phone or web technology cause the services we intend to deliver to become uncompetitive or obsolete that could prevent us from achieving market share and sales. The real estate industry is rapidly evolving and highly competitive. A variety of competing lead generation technologies may be under development or available now that could result in lower buyer agent costs or higher conversion rates than those lead generation technologies selected by us. These development efforts may render obsolete the lead generation services we have selected to offer. 

Existing telephone and web advertising regulations and changes to such regulations may present regulatory and economic barriers to the purchase of real estate lead generation services, which may significantly reduce demand for our services. 

The market for lead generation services is heavily influenced by federal, state and local government regulations and policies concerning the tech based marketing industry, as well as internal policies and regulations promulgated by "national do not call lists." These regulations and policies often relate to public privacy. In the United States these regulations and policies are being modified and may continue to be modified. We anticipate that our lead generation channels will be subject to oversight and regulation in accordance with national and local ordinances relating to privacy protection, and related matters.  Any new government regulations or utility policies pertaining to our lead generation services may result in significant additional expenses to us and as a result, could cause a significant reduction in sales referrals. 

- 19 -

---

If our mentoring services are not suitable for widespread adoption, or a sufficient demand for trained buyer agents or leads does not develop, or takes longer to develop than we anticipate, we would be unable to achieve sales. 

The market for residential real estate is rapidly evolving and its future is uncertain. If real estate proves unsuitable for widespread ownership or if demand for our mentoring services fails to develop sufficiently, we would be unable to achieve sales and market share. In addition, demand for real estate mentoring in the markets and geographic regions we target may not develop or may develop more slowly than we anticipate. Many factors will influence the widespread adoption of real estate mentoring including: 

 

The reduction in home loan availability could prevent us from achieving sales and market share. 

The reduction or elimination of government lending incentives may adversely affect the growth of this market or result in increased price competition, which could prevent us from achieving sales and market share. 

 

Today, over 70% of home loans are insured by the federal housing administration (FHA loans). These loans are popular because they have lower down payment requirements and lower credit score requirements.  Should FHA raise their down payment or credit requirements the result could be reduced home purchases which would significantly harm our business.  

We face intense competition from other real estate brokerages and other real estate mentoring companies. If we fail to compete effectively, we may be unable to increase our market share and sales. 

Most of our competitors are substantially larger than we are, have longer operating histories and have substantially greater financial, technical, marketing and other resources than we do. Our competitors' greater sizes in some cases provides them with competitive advantages with respect to marketing costs due to their ability to allocate fixed costs across a greater volume of marketing channels and purchase signs and services at lower prices. They also have far greater name recognition, an established network of past customers. In addition, many of our competitors have well-established relationships with current and potential home sellers. As a result, our competitors will be able to devote greater resources to the prospecting, relationship development, and promotion and may be able to respond more quickly to evolving industry standards and changing customer requirements than we can. 

A substantial number of our issued shares are, or are being made available for sale on the open market. The resale of these securities might adversely affect our stock price. 

The sale of a substantial number of shares of our common stock, or the market's anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

Availability of these shares for sale in the public market could also impair our ability to raise capital by selling equity securities.

- 20 -

---

There is presently a limited trading market for our shares. This is a recent development.  Presently an investment in our shares is no longer totally illiquid; however, and investor purchasing our shares may be unable to resell their shares if the market for our shares rapidly declines. There can be no assurance that present market interest in our shares will continue. Therefore, investors who purchase our shares could lose their entire investment.

 

Even if significant trading activity involving our shares continues, the volume of trading may be small and on some days the volume may be zero. Our share price will likely be volatile and will likely fall rapidly should an investor attempt to liquidate even as significant number of shares. These conditions are likely to persist and could prevent resale of our shares on desirable terms.  

We are subject to corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business. 

We face new corporate governance requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC and the Public Company Accounting Oversight Board. These laws, rules and regulations continue to evolve and may become increasingly stringent in the future. In particular, under new SEC rules we will be required to include management's report on internal controls as part of our annual report pursuant to Section 404 of the Sarbanes-Oxley Act. Furthermore, under the proposed rules, an attestation report on our internal controls from our independent registered public accounting firm will be required as part of our annual report. We are in the process of evaluating our control structure to help ensure that we will be able to comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules and regulations is expected to be substantial. We cannot assure you that we will be able to fully comply with these laws, rules and regulations that address corporate governance, internal control reporting and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition and the value of our securities. 

Demand for our mentoring services is affected by general economic conditions. 

The United States and international economies have recently experienced a period of reduced economic growth. A sustained economic recovery is uncertain. In particular, terrorist acts and similar events, continued turmoil in the Middle East or war in general could contribute to a slowdown of the market demand for real estate investments that require significant initial capital expenditures, including demand for fix and flips, rental properties, and new residential and commercial buildings. In addition, increases in interest rates may increase financing costs to customers, which in turn may decrease demand for real estate investment. If the economic recovery slows as a result of the recent economic, political and social turmoil, or if there are further terrorist attacks in the United States or elsewhere, we may experience decreases in the demand for our mentoring services.

Compliance with real estate law and local regulations can be expensive, and non-compliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines for us 

The Company as well as its tenants must comply with all foreign, U.S. federal, state and local laws and regulations regarding licensing and insurance requirements. In addition, under some statutes and regulations, a government agency, or other parties, may seek recovery and response costs from an agent where warrantees have been made, even if the agent was not responsible for such a warrantee or is otherwise at fault. In the course of future business we may inadvertently refer business to an agent who does not comply with local laws and regulations.  Any failure by us to shift responsibility onto that agent, and thus restrict our liability in connection with the incident, could subject us to potentially significant monetary damages and fines or suspensions in our business operations. In addition, if more stringent laws and regulations are adopted in the future, the costs of compliance with these new laws and regulations could be substantial. If we fail to comply with present or future real estate laws and regulations we may be required to pay substantial fines, suspend, or cease operations.

- 21 -

---

There are restrictions on the transferability of the securities. 

Until registered for resale, investors must bear the economic risk of an investment in the Shares for an indefinite period of time. Rule 144 promulgated under the Securities Act ("Rule 144"), which provides for an exemption from the registration requirements under the Securities Act under certain conditions, requires, among other conditions, a nine month holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Securities Act There can be no assurance that we will fulfill any reporting requirements in the future under the Exchange Act or disseminate to the public any current financial or other information concerning us. 

If the Company uses its stock in acquisitions of other entities there may be substantial dilution at the time of a transaction. 

The offering price of the common stock we sold under our prospectus, and more recently as a private placement of restricted shares of our common stock, to raise working capital was arbitrarily set. The price did not bear any relationship to our assets, book value, earnings or net worth and it is not an indication of actual value. You may also suffer additional dilution in the future from the sale of additional shares of common stock or other securities or if the Company's shares are issued to purchase other assets or to raise additional working capital. 

The laws which govern merger transactions provide that since our sole director and officer owns over 50% of our outstanding shares, we may enter into a share exchange, reverse merger or other similar transaction with a private company in an unrelated business without the prior approval of unaffiliated shareholders. 

The various securities laws applicable to our company provide that our management may elect to enter and consummate a transaction to enter new or additional businesses. In that event, our shareholders might receive only an information statement with certain disclosures as required by law and would likely not be in a position to approve or disapprove the transaction. Investors who are unwilling to accept the uncertainty of new management, a new business plan, likely dilution and all the numerous related uncertainties that may materialize in the event such a transaction is consummated should not purchase our shares. 

There is presently a very limited market for our common stock.  Failure to maintain a trading market could negatively affect the value of our shares and make it difficult or impossible for you to sell your shares.

As of the date of this report, our common stock has been assigned a trading symbol, "HMTF." Our common shares are quoted on the OTCBB and OTCQB. While trading activity in our shares has recently accelerated, here can be no assurance as to the liquidity of any markets for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock. 

 

Failure to maintain an active trading market could negatively affect the value of our shares and make it difficult for you to sell your shares or recover any part of your investment in our shares. The market price of our common stock may be highly volatile.  In addition to the uncertainties relating to our future operating performance and the profitability of our operations, factors such as variations in our interim financial results, or various, and as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.

 

- 22 -

---

Our common stock is still presently subject to the "Penny Stock" rules of the SEC.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:

 

In order to approve a person's account for transactions in penny stocks, the broker or dealer must:

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:

 

- 23 -

---

- 24 -

---