Evergreen Sustainable Enterprises, Inc. - Quarter Report: 2019 June (Form 10-Q)

Washington D.C.  20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

(Exact name of registrant as specified in its charter)

(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 issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     NO o

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(Section 232.405 of this chapter) during the preceding 12 months(or such shorter period that the registrant was required to submit and post 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 the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company", in Rule 12b-2 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 o     No  þ

Securities registered pursuant to Section 12(b) of the Act:

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 Act). ☐ Yes   ý No

As of August 14, 2019, registrant had outstanding 13,279,332 shares of common stock, no par value.

Index

PART I FINANCIAL INFORMATION Item 1.  Financial Statements

HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

 Condensed Consolidated Balance Sheets

See accompanying notes to unaudited condensed consolidated financial statements.

HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

 Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders' Deficit

See accompanying notes to unaudited condensed consolidated financial statements.

HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

Statements of Cash Flows

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1:  Basis of Presentation

The accompanying condensed consolidated 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, 2018 financial statements and notes thereto included. The results of operations for the period ended June 30, 2019, are not necessarily indicative of the operating results for the year ended December 31, 2019.

Note 2:  Nature of Operations

Home Treasure Finders, Inc. (the "Company") was initially incorporated on July 28, 2008 in the State of Colorado.  

The Company is in the business of operating a real estate business and operates in Colorado as a State Licensed "Employing Broker" number 100005455 issued on July 1, 2006.

Effective April 1, 2013, all property management activities, revenues and expenses in connection with CW Properties, a property management company owned by the CEO, were transferred to a wholly owned subsidiary of Home Treasure Finders, Inc.  All net revenue earned by CW Properties has been booked as consolidated revenue of Home Treasure Finders, Inc.  

On March 3, 2014 the Company formed a wholly subsidiary, HMTF Cannabis Holdings, Inc. The purpose of the subsidiary is to purchase Colorado properties that qualify for legal cultivation of cannabis. The properties will then be improved and leased to licensed third party growers.

The Company generates income from its real estate holdings.  On September 15, 2014 the Company acquired a vacant warehouse property in Denver zoned for cannabis cultivation. On November 5 and December 1, 2014 the Company leased the warehouse to unrelated licensed grower. The Company's tenant invested cash to improve their respective leaseholds per lease terms utilizing architectural and engineering documents we procured and provided.

Note 3:  Going Concern

The accompanying unaudited condensed consolidated 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. 

 HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 4:  Recently Adopted Accounting Pronouncements

In February 2016, the FASB (Federal Accounting Standards Board) issued ASU 2016-02, “Leases” which was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in ASU 2016-02 are effective for our six months ended June 30, 2019 and have been incorporated into these financial statements.

Note 5:  Related Party Transactions

During the six months ended June 30, 2019, the related party payable had a net decrease of $295.  The balance of the related party payable was $1,425 and $1,720 as of June 30, 2019 and December 31, 2018, respectively.  This payable is due on demand and has an interest rate of 8%.  Accrued interest on this payable was $1,369 and $1,289 at June 30, 2019 and December 31, 2018, respectively.  Interest expense for the six months ended June 30, 2019 and 2018 was $80 and $84, respectively.  Interest expense for the three months ended June 30, 2019 and 2018 was $43 and $6, respectively.

Note 6:  Property and Equipment, Net

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.

Property and equipment and related depreciation are as follows: 

 Depreciation and amortization expense was $10,993 and $10,993 for the six months ended June 30, 2019 and 2018, respectively.  Depreciation and amortization expense was $5,496 and $5,496 for the three months ended June 30, 2019 and 2018, respectively.

HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 7:   Long-Term Debt

On September 15, 2014, the Company entered into a promissory note for $840,000 on the purchase of 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:

As of June 30, 2019 the balance of the note was $785,395.

LEASE TERMS OF WAREHOUSE UNITS

During the six months ended June 30, 2019, the prior lessee vacated the building and terminated the lease agreement. Effective June 16, 2019, the three warehouse units are being leased to one tenant under a two year lease starting June 16, 2019 through June 3, 2021. The tenant shall have the right to renew the term for an additional one year term. The tenant also has the right to purchase the building under the following terms:

The base rent payment each month is $6,338 plus additional rent each month to cover property taxes and property insurance. For the six months ending June 30, 2019, the Company received rental income of $82,507. For the three months ending June 30, 2019, the Company received rental income of $48,919

 HOME TREASURE FINDERS, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Note 8:  Convertible Note

On May 31, 2019, the Company issued a $20,000 convertible note which bears interest at 10% per annum. The maturity date of the note is May 31, 2021 and is convertible on or after 90 days of the date of issuance into the Company’s common stock at a rate of $.05 of principal and/or interest per share. The Company has determined the note to contain a beneficial conversion feature valued as $13,360 based on the intrinsic per share value of the conversion feature. This beneficial conversion feature is recorded as a discount to the debt agreement. The balance of the note, net of the discount is $6,640 at June 30, 2019.

Note 9:  Commitments

Starting May 1, 2018, the Company entered into a contract to lease its premises. The contract is effective until April 30, 2021 and is for $1,822 per month during the first year with a 3 percent increase each year thereafter. ASU 2016-02 was adopted in the quarter ended March 31, 2019.

The following are the future minimum lease payments at June 30, 2019:

Note 10:  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.

 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, 2019 was $16,402.  We generated operating revenue from three sources, sales commissions, property management, and commercial real estate for legal cannabis cultivation. We manage approximately 162 rental real estate owned by non-related third parties. In comparison our net loss for the six months ended June 30, 2018 was $17,566.

For the six months ended June 30, 2019 the Company generated a total of $300,988 in revenues, consisting of $101,822 from sales commissions and $199,166 from rental and property management.  During the six months ended June 30, 2018 we generated a total of $271,125 in revenues, consisting of $128,042 from sales commissions and $143,083 from rental and property management.  Commission income decreased over prior year due to decrease in real estate closings in a declining sales market.  The increase in rental and property management is the result of an increase in the number of rentals we manage and greater emphasis on increasing revenue in our property management division.

During the six months ending June 30, 2019 we incurred operating expenses totaling $281,852. 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, 2018 we incurred a total of $256,667 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 an increase in audit and legal fees.  Also, property management expenses increased with the increase in the number of rental units we manage.

Our net income (loss) for the three months ended June 30, 2019 and 2018 was $3,184 income and ($6,202) loss, respectively.  For the three months ended June 30, 2019 the Company generated a total of $138,391 in revenues, consisting of $25,735 from sales commissions and $112,656 from rental and property management.  During the three months ended June 30, 2018 we generated a total of $152,214 in revenues, consisting of $80,038 from sales commissions and $72,176 from rental and property management

During the three months ending June 30, 2019 we incurred operating expenses totaling $117,459. 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, 2018 we incurred a total of $142,469 of operating expenses consisting primarily of commissions paid on the revenue earned, general and administrative expenses and professional fees.  The decrease in expenses over prior year was primarily related to decrease in commission expense as a result of the decrease in sales commission and other administrative expenses.

Liquidity and Capital Resources

At June 30, 2019, we had $108,900 in cash and working capital deficit of $840,583.  At December 31, 2018 we had $63,704 in cash and a working capital deficit of $880,229.

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.

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.

None.

Item 4 -  Submission of Matters to a Vote of Security Holders.

None.

Item 5 -  Other Information.

None.

Item 6 - Exhibits and Reports on Form 8-K.

(a)       Exhibits:

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.