Evergreen Sustainable Enterprises, Inc. - Quarter Report: 2016 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended: June 30, 2016
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Commission File Number 000-55019
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HOME TREASURE FINDERS, INC. AND SUBSIDIARY
(Exact name of registrant as specified in its charter)
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COLORADO
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26-3119496
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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4318 Tennyson Street, Denver, Colorado
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80221
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(Address of principal executive offices)
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(Zip code)
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(720) 273-2398
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. ý Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ý Yes o No (Not required)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company ý
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ý No
As of August 15, 2016, registrant had outstanding 13,205,450 shares of common stock, no par value.
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Page
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PART I FINANCIAL INFORMATION
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Item 1. Financial Statements for the period ended June 30, 2016
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Consolidated Balance Sheets (Unaudited)
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3
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Consolidated Statements of Operations (Unaudited)
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4
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Consolidated Statements of Cash Flows (Unaudited)
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5
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Notes to Consolidated Financial Statements
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6
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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8
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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10 |
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Item 4. Controls and Procedures
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10
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Item 4T. Controls and Procedures
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10 |
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PART II OTHER INFORMATION
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Item 1. Legal Proceedings
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11
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Item 1A. Risk Factors
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11
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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11 |
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Item 3. Defaults Upon Senior Securities
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11
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Item 4. Mine Safety
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11
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Item 5. Other Information
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11
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Item 6. Exhibits
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12
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Signatures
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13
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- 2 -
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
HOME TREASURER FINDERS, INC. AND SUBSIDIARY
Consolidated Balance Sheets
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||||||||
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June 30,
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December 31,
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||||||
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2016
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2015
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||||||
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(unaudited)
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|||||||
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Assets
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||||||||
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||||||||
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Current Assets:
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||||||||
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Cash
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$
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49,402
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$
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45,210
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||||
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Rent receivable
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500
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500
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||||||
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Prepaid expenses
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5,445
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706
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||||||
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Total current assets
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55,347
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46,416
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||||||
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||||||||
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Property and equipment, net
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832,175
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843,106
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||||||
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||||||||
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Other assets:
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||||||||
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Security deposits
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1,050
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1,050
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||||||
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||||||||
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Total assets
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$
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888,572
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$
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890,572
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||||
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||||||||
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Liabilities and Shareholders' Equity (Deficit)
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||||||||
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||||||||
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Liabilities:
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||||||||
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Accounts payable
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$
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19,277
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$
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-
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||||
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Accrued wages
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18,612
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18,612
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||||||
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Accrued liabilities
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72,617
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68,187
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||||||
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Accrued interest – related party
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2,965
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2,781
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||||||
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Note payable, current portion
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11,704
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13,265
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||||||
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Related party note payable
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1,258
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9,193
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||||||
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Total current liabilities
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126,433
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112,038
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||||||
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||||||||
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Long term debt, net of current portion
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806,367
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811,654
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||||||
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Total liabilities
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932,800
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923,692
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||||||
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||||||||
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Shareholders' equity (deficit):
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||||||||
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Common stock, no par value; 100,000,000 shares authorized,
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||||||||
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13,205,450 and 13,205,450 shares issued and outstanding, respectively
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215,267
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215,267
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||||||
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Additional paid in capital
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96,476
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96,476
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||||||
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Accumulated deficit
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(355,971
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)
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(344,863
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)
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||||
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Total shareholders' equity (deficit)
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(44,228
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)
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(33,120
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)
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||||
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||||||||
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Total liabilities and shareholders' equity (deficit)
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$
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888,572
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$
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890,572
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||||
See accompanying notes to consolidated financial statements.
- 3 -
HOME TREASURER FINDERS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
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For the Three Months Ended
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For the Six Months Ended
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||||||||||||||
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June 30,
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June 30,
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||||||||||||||
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2016
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2015
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2016
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2015
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||||||||||||
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||||||||||||||||
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Commission income
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$
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72,492
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$
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56,137
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$
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120,518
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$
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73,542
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||||||||
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Rental and property and rental management income
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60,025
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58,904
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116,930
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110,742
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||||||||||||
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Revenue
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$
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132,517
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$
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115,041
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$
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237,448
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$
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184,284
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||||||||
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||||||||||||||||
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Operating expnses:
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||||||||||||||||
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Commision expense
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42,919
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27,177
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47,722
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30,417
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||||||||||||
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Professional fees
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9,939
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8,349
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26,218
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22,341
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||||||||||||
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General and administrative
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81,668
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59,994
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145,665
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123,732
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||||||||||||
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Total operating expenses
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134,526
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95,520
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219,605
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176,490
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||||||||||||
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||||||||||||||||
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Operating (loss) income
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(2,009
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)
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19,521
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17,843
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7,794
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|||||||||||
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||||||||||||||||
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Other expense
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||||||||||||||||
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Interest expense
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(14,367
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)
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(14,764
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)
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(28,951
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)
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(29,579
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)
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||||||||
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||||||||||||||||
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Total other expense
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(14,367
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)
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(14,764
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)
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(28,951
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)
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(29,579
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)
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||||||||
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||||||||||||||||
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Net income (loss) income
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$
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(16,376
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)
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$
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4,757
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$
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(11,108
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)
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$
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(21,785
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)
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|||||
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||||||||||||||||
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Basic and diluted (loss) income per share
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$
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(0.00
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)
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$
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0.00
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$
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(0.00
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)
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$
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(0.00
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)
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||||
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||||||||||||||||
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Basic and diluted weighted average
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||||||||||||||||
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common shares outstanding
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13,205,450
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13,205,450
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13,205,450
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13,205,450
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||||||||||||
See accompanying notes to consolidated financial statements.
- 4 -
HOME TREASURER FINDERS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
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For the Six Months Ended
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|||||||
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June 30,
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|||||||
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2016
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2015
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||||||
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Cash flows from operating activities:
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||||||||
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Net loss
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$
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(11,108
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)
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$
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(21,785
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)
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Adjustments to reconcile net loss to net cash
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||||||||
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used by operating activities:
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||||||||
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Depreciation and amortization
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11,871
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13,092
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||||||
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Changes in operating assets and liabilities:
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||||||||
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Increase in rent receivable
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—
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(24,000
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)
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|||||
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Increase in prepaid expense
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(4,739
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)
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(445
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)
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||||
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Increase in accrued interest - related party
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184
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345
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||||||
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Increase in accrued liabilities
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4,430
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8,545
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||||||
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Increase in accounts payable
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19,277
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21,333
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||||||
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Net cash provided by (used in)
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||||||||
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operating activities
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19,915
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(2,915
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)
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|||||
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||||||||
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Cash flows from investing activities:
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||||||||
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Purchase of fixed assets
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(940
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)
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—
|
|||||
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Net cash used in
|
||||||||
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investing activities
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(940
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)
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—
|
|||||
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|
||||||||
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Cash flows from financing activities:
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||||||||
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Proceeds from related party payable
|
1,258
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1,500
|
||||||
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Payment of related party payable
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(9,193
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)
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-
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|||||
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Payment of long term debt
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(6,848
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)
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(6,445
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)
|
||||
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Net cash provided by (used in)
|
||||||||
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financing activities
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(14,783
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)
|
(4,945
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)
|
||||
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||||||||
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Net change in cash
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4,192
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(7,860
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)
|
|||||
|
|
||||||||
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Cash, beginning of period
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45,210
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36,848
|
||||||
|
|
||||||||
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Cash, end of period
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$
|
49,402
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$
|
28,988
|
||||
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|
||||||||
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Supplemental disclosure of cash flow information:
|
||||||||
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Cash paid during the period for:
|
||||||||
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Income taxes
|
$
|
—
|
$
|
—
|
||||
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Interest
|
$
|
28,767
|
$
|
29,235
|
||||
|
|
||||||||
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NON CASH FINANCING ACTIVITIES:
|
||||||||
See accompanying notes to consolidated financial statements.
- 5 -
HOME TREASURE FINDERS, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Note 1: Basis of Presentation
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, 2015 financial statements and notes thereto included. The results of operations for the period ended June 30, 2016, are not necessarily indicative of the operating results for the year ended December 31, 2016.
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. As shown in the accompanying financial statements, the Company has not yet generated sufficient net income. This factor, among others, indicates that there is substantial doubt that the Company will be able 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 six months ended June 30, 2016, the related party payable had a net decrease of $7,935. During the three months ended June 30, 2016 the related party payable increased by $1,258. The balance of the related party payable was $1,258 and $9,193 as of June 30, 2016 and December 31, 2015, respectively. This payable is due on demand and has an interest rate of 8%. Accrued interest on this payable was $2,965 and $2,370 at June 30, 2016 and 2015, respectively. Interest expense for the six months ended June 30, 2016 and 2015 was $184 and $345, respectively. Interest expense for the three months ended June 30, 2016 and 2015 was $13 and $174, respectively.
- 6 -
HOME TREASURE FINDERS, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
Note 4: Property and Equipment
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 are as follows:
|
|
June 30,
2016
|
December 31,
2015
|
||||||
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Computer equipment
|
$
|
5,672
|
$
|
5,672
|
||||
|
Furniture and fixtures
|
7,777
|
6,837
|
||||||
|
Leasehold improvements
|
4,000
|
4,000
|
||||||
|
Warehouse units
|
861,000
|
861,000
|
||||||
|
Accumulated amortization and depreciation
|
(46,274
|
)
|
(34,403
|
)
|
||||
|
Total fixed assets
|
$
|
832,175
|
$
|
843,106
|
||||
Depreciation and amortization expense was $11,871 and $13,092 for the six months ended June 30, 2016 and 2015, respectively. For the three months ended June 30, 2016 and 2015 depreciation and amortization expense was $5,935 and $6,546, respectively.
Note 5: Long-Term Debt
On September 15, 2014, the Company entered into a promissory note for $840,000 on the purchase three warehouse units known as 4420, 4430 and 4440 Garfield Street, Denver, Colorado. The Company is leasing each of the three separate units to licensed third party growers for cannabis cultivation. The terms of the variable interest 25 year amortization note carried by the seller of the property call for payments to seller as follows:
| 1 | First and Second year interest rate at 7% with 25 year amortization payment at $5,937 per month. |
| 2. | Third and Fourth year at 8% with 25 year amortization payment at $6,278 per month. |
| 3. | Fifth year at 9% with 25 year amortization payment at $6,640 per month. |
| 4. | Balloon payment of $777,255 due at end of the fifth year. |
- 7 -
HOME TREASURE FINDERS, INC. AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
The note to seller is secured by the three warehouse units.
As of June 30, 2016, the balance of the note was $818,071 and the annual maturities of the long-term debt were:
|
Year Ending December 31,
|
||||
|
2016
|
$
|
6,417
|
||
|
2017
|
10,790
|
|||
|
2018
|
11,090
|
|||
|
2019
|
789,774
|
|||
|
|
||||
|
|
$
|
818,071
|
||
Note 6: Subsequent Events
The Company has evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no events that require disclosure as of the date of issuance.
- 8 -
Part I. Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations
Forward-looking statements
The following discussion should be read in conjunction with the financial statements of Home Treasure Finders, Inc. and Subsidiaries (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 six months ended June 30, 2016 was $11,108. 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 six months ended June 30, 2015 was $21,785.
For the six months ended June 30, 2016 the Company generated a total of $237,448 in revenues, consisting of $120,518 from sales commissions and $116,931 from rental and property management. During the six months ended June 30, 2015 we generated a total of $184,284 in revenues, consisting of $73,542 from sales commissions and $110,742 from rental and property management.
During the six months ending June 30, 2016 we incurred operating expenses totaling $219,605. Such expenses consisted primarily of commissions paid on the revenue earned, general and administrative expenses and professional fees. During the six months ended June 30, 2015 we incurred a total of $176,490 of operating expenses consisting primarily of commissions paid on the revenue earned, general and administrative expenses and professional fees. The increase in expenses over prior year was primarily related to increase in audit and legal fees and increase in property management expenses and other administrative expenses.
Our net loss for the three months ended June 30, 2016 was $16,376. For the three months ended June 30, 2015 we had net income of $4,757. For the three months ended June 30, 2016 the Company generated a total of $132,517 in revenues, consisting of $72,492 from sales commissions and $60,025 from rental and property management. During the three months ended June 30, 2015 we generated a total of $115,041 in revenues, consisting of $56,137 from sales commissions and $58,904 from rental and property management.
During the three months ending June 30, 2016 we incurred operating expenses totaling $134,526. Such expenses consisted primarily of commissions paid on the revenue earned, general and administrative expenses and professional fees. During the three months ended June 30, 2015 we incurred a total of $95,520 of operating expenses consisting primarily of commissions paid on the revenue earned, general and administrative expenses and professional fees. The increase in expenses over prior year was primarily related to increase in commissions paid and increase in property management expenses and other administrative expenses.
- 9 -
Liquidity and Capital Resources
At June 30, 2016, we had $49,402 in cash and working capital deficit of $71,086. At December 31, 2015 we had $45,210 in cash and a working capital deficit of $65,622.
The business plan of our 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No response required.
Item 4. Controls and Procedures
Evaluation of Disclosure 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.
Item 4T. Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
- 10 -
Part 2. Other Information
Item 1 - Legal Information.
No response required.
Item 1A. Risk Factors
No response required.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3 - Defaults Upon Senior Securities.
No response required.
Item 4 - Mine Safety.
No response required.
Item 5 - Other Information.
No response required.
- 11 -
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibits:
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
|
|
31.1
|
|
Certification of CEO/CFO pursuant to Sec. 302
|
|
|
32.1
|
|
Certification of CEO/CFO pursuant to Sec. 906
|
|
| 99.1 |
Settlement Agreement And Mutual Release
|
||
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
101SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
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(b) Reports on Form 8-K:
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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HOME TREASURE FINDERS, INC. AND SUBSIDIARY
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(Registrant)
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DATE: August 15, 2016
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BY:
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/s/ Corey Wiegand
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Corey Wiegand
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President
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