An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Offering Circular was filed may be obtained.
Preliminary Offering Circular
Subject to Completion. [Dated November __, 2016]
HempAmericana, Inc.
(Exact name of issuer as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
www.HempAmericana.com
78 Reade Street, 4F (Bell 7), New York, NY 10007
347-880-6778
(Address, including zip code, and telephone number, including area code of issuer's principal executive office)
3990 46-4816984
(Primary Standard Industrial Classification Code Number) (I.R.S. Employer Identification Number)
[Maximum offering of 1,000,000 shares ]
This is a public offering of shares of common stock of HempAmericana, Inc.
The offering will be at a fixed price to be determined at the date of qualification. The end date of the offering will be exactly 180 days from the date the Offering Circular is approved by the Attorney General of the state of New York (unless extended by the Company, in its own discretion, for up to another 90 days.
Our common stock currently trades on the OTC Pink market under the symbol HMPQ and the closing price of our common stock on November 17, 2016 was $0.0317. Our common stock currently trades on a sporadic and limited basis.
We are offering our shares without the use of an exclusive placement agent, however, we may engage various securities brokers to place shares in this offering with investors for commissions of up to 10% of the gross proceeds.
We expect to commence the sale of the shares as of the date on which the Offering Statement of which this Offering Circular is approved by the Attorney General of the state of New York.
See Risk Factors to read about factors you should consider before buying shares of common stock.
Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent determination that the securities offered are exempt from registration.
This Offering Circular is following the offering circular format described in Part II (a)(1)(ii) of Form 1-A.
Offering Circular dated _____________, 2016
TABLE OF CONTENTS
MANAGEMENTS DISCUSSION AND ANALYSIS OF FIANCIAL CONDITION AND RESULTS OF OPERATIONS
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
SHARE ELIGIBLE FOR FUTURE SALE
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this Offering Circular. You must not rely on any unauthorized information or representations. This Offering Circular is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this Offering Circular is current only as of its date.
This summary highlights information contained elsewhere in this Offering Circular. This summary does not contain all of the information that you should consider before deciding to invest in our common stock. You should read this entire Offering Circular carefully, including the Risk Factors section, our historical consolidated financial statements and the notes thereto, and unaudited pro forma financial information, each included elsewhere in this Offering Circular. Unless the context requires otherwise, references in this Offering Circular to the Company, we, us and our refer to HempAmericana, Inc.
Our Company
Hemp a product with a myriad of uses is a product of enormous potential for economic growth economic growth in the United States. HempAmericana intends to capitalize on the many uses of hemp in the health, food, construction, textiles and paper industries. HempAmericanas primary immediate purpose is to develop industrial hemp products, such as cannabinoil (CBD oil), used for its many health benefits, through developing hemp growing farms, hemp processing factories and hemp-product distribution facilities.
HempAmericana, Inc. is a developmental stage company that plans to research, develop and sell products made of industrial hemp. In essence anything that can be made with plastic can be made with industrial hemp and HempAmericana plans to fill the growing need and demand for hemp based products within the United States. Currently, the Company is in its research and development stages. The Company was incorporated under the laws of the State of Delaware on February 10, 2014.
HempAmericana currently in the beginning stages of retail and wholesale sales of two products, but does not have any material sales to date. Its first product is called Rolling Thunders smoking papers. These rolling papers produce no ash residue compared to regular tree-based smoking papers. Its second product is one of the reasons why the American market imports approximately $2 billion per year worth of hemp products it is a type of CBD oil. Under the trademarked brand Weed Got Oil, HempAmericana intends to use this and other brands to manufacture and sell CBD oil.
We began our company in 2014 with the thousands of uses for hemp in mind. We have faced challenges since our formation due to our limited capitalization and the costs associated with managing a public company. Currently, our founder, Salvador Rosillo, beneficially owns 76.28% of the company individually and through two holding companies. He effectively controls the majority of the voting shares of the Company through indirect ownership of 100% of the super-voting Class B common stock shares of the company.
We have not generated any significant revenues to date and our activities have been limited to developing our business and financial plans. We will not have the necessary capital to develop or execute our business plan until we are able to secure financing. There can be no assurance that such financing will be available on suitable terms. Even if we raise 100% of the offering, we may not have sufficient capital to begin generating substantial revenues from operations.
The companys sales of CBD oil and boxes of Rolling Thunders smoking paper are de minimis, however this is because the company has yet to begin the marketing required for sales and does not have the capital to maintain proper inventory levels for mass distribution. While the market for rolling papers is saturated and competitive, the market for CBD oil is quite and the Company has received indications of strong demand without doing any real marketing.
HempAmericana intends to use capital raised from this Offering to increase the marketing and sales of its existing products and to generate and sell new hemp-based products. Currently, the vast majority of hemp used for the manufacturing of hemp-based products is imported because hemp grown in the United States is not compliant with federal regulations. There is potential for us to grow our own hemp, in the United States where it is highly regulated if the federal law changes, or abroad where economies of scale may allow us to produce hemp for industrial processing at a preferable cost.
Revenue will be derived from the wholesale and retail sales of our hemp-based products.
Our management team is made up of two individuals including its founder, Salvador Rosillo. Future team members will include employees with experience in hemp, manufacturing, marketing and distribution.
Our principal executive offices are located at 78 Reade St Suite 4FW New York City, NY 10007. Our phone number is (212) 349-7068
We believe that if we are to raise monies up to $20,000,000 to execute our business plan over the next 12 months that we will be successful in returning value to our investors. The funds raised in this offering, even assuming we sell all the shares being offered, may be insufficient to commercialize our our business strategy, but we believe that by raising funds we will be better able to bring our existing products to market and develop new hemp-related products for which there is already demand in the marketplace.
We will receive the proceeds from the sale of the approximately 1,111,111,111 shares of our common stock and intend to use the proceeds from this offering to begin implementing the business plan of our company. The expenses of this offering, including the preparation of this prospectus and the filing of this registration statement, estimated at $102,000.00, are being paid for by us. The maximum proceeds to us from this offering ($20,000,000) will satisfy all our cash requirements for up to 24 months including legal and accounting costs associated with this offering, the costs associated with our continuous disclosure obligations, incidental expenses, and the cost of implementing the investigative aspects of our business plan, including identifying and securing additional sources of financing, consultants, operating equipment, marketing and facility. 75% of the possible proceeds from the offering by the company ($15,000,000) will satisfy all our cash requirements for up to 18 months, while 50% of the proceeds ($10,000,000) will sustain us for up to 12 months, and 25% of the proceeds ($5,000,000) will sustain us for up to eight months. Our budgetary allocations may vary, however, depending upon the percentage of proceeds that we obtain from the offering. For example, we may determine that is it more beneficial to allocate funds toward securing potential financing and business opportunities in the short terms rather than to conserve funds to satisfy continuous disclosure requirements for a longer period. We do not have adequate funds to satisfy our working capital requirements for the next twelve months unless we can raise significant monies through this offering. During the 24 months following the completion of this offering, we intend to implement our business and marketing plan.
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The Offering
| Common Stock we are offering | Up to a Maximum [xxx] of Class A shares at a price of $xxx for a sum total of $20,000,000. |
| Common Stock outstanding before this Offering | Class A: 151,560,840 common shares Class B: 108,000,000 common shares |
| Use of proceeds | The funds raised per this offering will be utilized in working capital, expanded marketing here in the Unites States as well as developing primary and secondary hemp products. See Use of Proceeds for more details. |
| Risk Factors | See Risk Factors and other information appearing elsewhere in this Offering Circular for a discussion of factors you should carefully consider before deciding whether to invest in our Class A common stock. |
This offering is being made on a self-underwritten basis without the use of an exclusive placement agent, however, we may engage various securities brokers to place shares in this offering with investors on a commission basis. The Company has entered into a Securities Purchase Agreement with Blackbridge Capital, LLC, a Delaware limited liability company, operating out of New York, New York (Blackbridge) whereby Blackbridge has agreed to purchase up to $20,000,000 worth of shares pursuant to this Offering Circular. In addition, the Company has issued a convertible promissory note pursuant to the Securities Purchase Agreement equal to $500,000 as a commitment fee (the Blackbridge Note). Per the terms of the Blackbridge Note, Blackbridge has the right to convert any or all of the Blackbridge Note into Class A common stock of the Company either as restricted stock or may exchange the underlying commitment shares for purchase of qualified shares issued per the qualified Offering Circular. As there is no minimum offering, upon the approval of any subscription to this Offering Circular, the Company shall immediately deposit said proceeds into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds.
Please note that the Securities Purchase Agreement with Blackbridge is not exclusive and does not guarantee any subscription by Blackbridge to the Offering Circular. In such case, Management will make its best effort to fill the subscription in the state of New York. However, in the event that management is unsuccessful in raising the required funds in New York, the Company may file a post qualification amendment to include additional jurisdictions that Management has determined to be in the best interest of the Company for the purpose of raising the maximum offer.
In the event that the Offering Circular is fully subscribed, any additional subscriptions shall be rejected and returned to the subscribing party along with any funds received.
In order to subscribe to purchase the shares, a prospective investor must complete a subscription agreement and send payment by check, wire transfer or ACH. Investors must answer certain questions to determine compliance with the investment limitation set forth in Regulation A Rule 251(d)(2)(i)(C) under the Securities Act of 1933, which states that in offerings such as this one, where the securities will not be listed on a registered national securities exchange upon qualification, the aggregate purchase price to be paid by the investor for the securities cannot exceed 10% of the greater of the investors annual income or net worth. In the case of an investor who is not a natural person, revenues or net assets for the investors most recently completed fiscal year are used instead.
The Company has not currently engaged any party for the public relations or promotion of this offering.
As of the date of this filing, there are no additional offers for shares, nor any options, warrants, or other rights for the issuance of additional shares except those described herein.
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Investing in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this Offering Circular, including the consolidated financial statements and the related notes, before making a decision to buy our common stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
This offering contains forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as may, will, should, expects, plans, anticipates, could, intends, target, projects, contemplates, believes, estimates, predicts, potential or continue or the negative of these terms or other similar words. These statements are only predictions. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that may cause our customers or our industrys actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements, to differ. Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and Business, as well as other sections in this prospectus, discuss the important factors that could contribute to these differences.
The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
This prospectus also contains market data related to our business and industry. This market data includes projections that are based on a number of assumptions. If these assumptions turn out to be incorrect, actual results may differ from the projections based on these assumptions. As a result, our markets may not grow at the rates projected by these data, or at all. The failure of these markets to grow at these projected rates may have a material adverse effect on our business, results of operations, financial condition and the market price of our common stock.
Risk Related to our Company and our Business
We may require additional funds in the future to achieve our current business strategy and our inability to obtain funding may cause our business to fail.
We may need to raise additional funds through public or private debt or equity sales in order to fund our future operations and fulfill contractual obligations in the future. These financings may not be available when needed. Even if these financings are available, it may be on terms that we deem unacceptable or are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our inability to obtain financing would have an adverse effect on our ability to implement our current business plan and develop our products, and as a result, could require us to diminish or suspend our operations and possibly cease our existence.
Even if we are successful in raising capital in the future, we will likely need to raise additional capital to continue and/or expand our operations. If we do not raise the additional capital, the value of any investment in our Company may become worthless. In the event we do not raise additional capital from conventional sources, it is likely that we may need to scale back or curtail implementing our business plan.
The Company, being a Developmental Stage Company, has not generated any meaningful revenues to date since our inception February 10, 2014.
We are a development stage company. Our ability to continue as a going concern is dependent upon our ability to commence a commercially viable operation and to achieve profitability. Since our inception in February 10, 2014, we have not generated any revenues, and currently have only limited operations, as we are presently in the planning stage of our business development as an exploration stage company. These factors raise substantial doubt about our ability to continue as a going concern. We may not be able to generate revenues in the future and as a result the value of our common stock may become worthless. There are no assurances that we will be successful in raising additional capital or successfully developing and commercializing our products and become profitable.
We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays that we may encounter because we are a small developing company. As a result, we may not be profitable and we may not be able to generate sufficient revenue to develop as we have planned.
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We were incorporated in Delaware on February 10, 2014. We have no significant assets or financial resources. The likelihood of our success must be considered in light of the expenses and difficulties in development of clients nationally and internationally, recruiting and keeping clients and obtaining financing to meet the needs of our plan of operations. Since we have a limited operating history we may not be profitable and we may not be able to generate sufficient revenues to meet our expenses and support our anticipated activities.
We are an early stage company with an unproven business strategy and may never be able to fully implement our business plan or achieve profitability.
We are at an early stage of development of our operations as a company. We have only recently started to operate business activities, and have not generated revenue from such operations. A commitment of substantial resources to conduct time-consuming research in many respects will be required if we are to complete the development of our company into one that is more profitable. There can be no assurance that we will be able to fully implement our business plan at reasonable costs or successfully operate. We expect it will take several years to implement our business plan fully, if at all.
Our limited operating history makes it difficult for us to accurately forecast net sales and appropriately plan our expenses.
We have a limited operating history in the hemp industry. As a result, it is difficult to accurately forecast our net sales and plan our operating expenses. We base our current and future expense levels on our operating forecasts and estimates of future net sales. Net sales and operating results are difficult to forecast because they generally depend on the volume and timing of the orders we receive, which are uncertain. Some of our expenses are fixed, and, as a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in net sales. This inability could cause our net income in a given quarter to be lower than expected.
HempAmericanas products will be shipped from overseas into the United States and any number of problems may arise during the transport.
Due to the fact that hemp is not allowed federally to be grown on American soil it must be shipped from overseas, and HempAmericana plans to do so through the use of cargo ships. This includes any number of inherent risks involved in travel. These are unlikely scenarios but the ship may lose its cargo overboard, the ship itself may be lost, storms or other factors may cause loss of or damage to the products. If our competitors are able to deliver products when we cannot, our reputation may be damaged and we may lose customers to our competitors.
We intend to use the Yasheng group of China and other international suppliers to purchase hemp oil and seeds, however it is possible that their prices, availability or any number of other factors may change.
It is possible that the Yasheng group or some of our other international suppliers or hemp and/or hemp-related secondary products, such as CBD oil, may face bankruptcy or some form of litigation in the future. Although the company has no reasonable expectation that this is the case, if such problems or any others may arise with the Yasheng group or other international suppliers then that could pose problems for HempAmericana. It is also possible that the Yasheng group or other international suppliers may, for any number of reasons, change the price of their products and thus alter the profit margins of HempAmericana. If any number of undesirable instances may occur with the Yasheng group or other international suppliers then HempAmericana may be forced to find another supplier, which would create at least a minimal delay in service. In addition, it is possible that the Yasheng group or other international suppliers may not have the necessary supply to meet the demand for HempAmericanas products. At this time we have not entered into a Supplier Agreement and we do not have a formal or informal arrangement with the Yasheng Group of China or any other international supplier to supply hemp.
Due to the Controversy over the Cannabis Plant within the United States, we face challenges getting our products into stores.
The majority of our products will be intended for industrial use although some of our products will be intended for ingestion purposes. There are many significant health benefits to consuming hemp seeds, for example, such as the ones that may be found in super markets chains like Whole Foods. Our company intends to release similar products that contain no THC that are legal for ingestion within the U.S. however, we anticipate that we face scrutiny and run into issues getting our products into stores due to hesitation by food chains to carry any product even affiliated with the cannabis plant.
Only a select few states allow for the growing of hemp, even without the budding of marijuana.
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It is currently very difficult to grow hemp in the United States. Despite several new state laws it is still not legal, on a federal level, to grow hemp on American soil. This means that the acquisition of hemp is more difficult and it must be shipped from foreign countries. Essentially there is a period between when an order is placed and when the product arrives from overseas. It is possible that there may be a greater demand than there is a supply from HempAmericanas overseas contacts and thus a backlog may develop. This is not expected or anticipated, but it is a remote possibility. At this time we do not have plans to grow hemp in the United States.
The U.S. laws pertaining to the importation and exportation of hemp based products may adversely affect our ability to fully implement our business plan.
In the United States today the U.S. Customs Service has a zero tolerance standard for the importation of industrial hemp. What this means is that a product cannot have any potentially dangerous substances contained in it or it will be considered adulterated and unfit for human consumption, and thus illegal to possess or use per U.S. Federal Law. In 2001 the DEA elaborated on this and clarified that any product with any quantity of THC in it at all cannot be imported into the United States. Since no hemp based products containing THC are legally permitted in the United States such products with THC are not allowed to be exported out of the United States either. Because of the strict laws that exist with the U.S. importation and exportation of industrial hemp products our business could be adversely affected. In addition, we have no system in place for evaluating THC levels in our products prior to delivery.
We operate in a highly competitive environment, and if we are unable to compete with our competitors, our business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.
We operate in a highly competitive environment. Our competition includes all other companies that are in the business of distributing or reselling hemp based products for personal use or consumption. A highly competitive environment could materially adversely affect our business, financial condition, results of operations, cash flows and prospects.
Because we are small and do not have much capital, our marketing campaign may not be enough to attract sufficient clients to operate profitably. If we do not make a profit, we will suspend or cease operations.
Due to the fact we are small and do not have much capital, we must limit our marketing activities and may not be able to make our product known to potential customers. Because we will be limiting our marketing activities, we may not be able to attract enough customers to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.
We expect our quarterly financial results to fluctuate.
We expect our net sales and operating results to vary significantly from quarter to quarter due to a number of factors, including changes in:
Demand for our products;
Our ability to obtain and retain existing customers or encourage repeat purchases;
Our ability to manage our product inventory;
General economic conditions;
Advertising and other marketing costs;
Costs of creating and expanding product lines.
As a result of the variability of these and other factors, our operating results in future quarters may be below the expectations of public market analysts and investors.
Our future success is dependent, in part, on the performance and continued service of Salvador Rosillo, our President and CEO. Without his continued service, we may be forced to interrupt or eventually cease our operations.
We are presently dependent to a great extent upon the experience, abilities and continued services of Salvador Rosillo, our President and CEO. We currently have an employment agreement with Mr. Rosillo through January 2019. The loss of his services would delay our business operations substantially.
Our current officers and sole director do not have experience in the trade business.
Although our officers and sole director have extensive business experience, they do not have extensive experience in the Hemp based product business or retail business. Therefore, without industry-specific experience, their business experience may not be enough to effectively start-up and maintain a Hemp based product company. As a result, the implementation of our business plan may be delayed, or eventually, unsuccessful.
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Because our current President has other business interests, he may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail.
Salvador Rosillo, our president and director, currently devotes approximately forty hours per week providing management services to us. While he presently possesses adequate time to attend to our interest, it is possible that the demands on him from other obligations could increase, with the result that he would no longer be able to devote sufficient time to the management of our business. The loss of Salvador Rosillo to our company could negatively impact our business development.
If Salvador Rosillo, our President and Director, should resign or die, we will not have a Chief Executive Officer that could result in our operations suspending. If that should occur, you could lose your investment.
We are extremely dependent on the services of our president and director, Salvador Rosillo, for the future success of our business. The loss of the services of Salvador Rosillo could have an adverse effect on our business, financial condition and results of operations. If he should resign or die we will not have a chief executive officer. If that should occur, until we find another person to act as our chief executive officer, our operations could be suspended. In that event it is possible you could lose most if not all of your entire investment.
If we cannot effectively increase and enhance our sales and marketing capabilities, we may not be able to increase our revenues.
We need to further develop our sales and marketing capabilities to support our commercialization efforts. If we fail to increase and enhance our marketing and sales force, we may not be able to enter new or existing markets. Failure to recruit, train and retain new sales personnel, or the inability of our new sales personnel to effectively market and sell our products, could impair our ability to gain market acceptance of our products.
Our current Chief Executive Officer and President, Salvador Rosillo, beneficially owns approximately or has the right to vote on 76.28% of our outstanding Class A and Class B common stock. As a result, he has a substantial voting power in all matters submitted to our stockholders for approval including:
Election of our board of directors;
Removal of any of our directors;
Amendment of our Certificate of Incorporation or bylaws;
Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.
As a result of his ownership and position, he is able to substantially influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, the future prospect of sales of significant amounts of shares held by him could affect the market price of our common stock if the marketplace does not orderly adjust to the increase in shares in the market and the value of your investment in our company may decrease. Mr. Rosillo's stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Our growth will place significant strains on our resources.
The Company is currently in the exploration stage, with only limited operations, and has not generated any revenue since inception in February 2014. The Company's growth, if any, is expected to place a significant strain on the Company's managerial, operational and financial resources. Moving forward, the Company's systems, procedures or controls may not be adequate to support the Company's operations and/or the Company may be unable to achieve the rapid execution necessary to successfully implement its business plan. The Company's future operating results, if any, will also depend on its ability to add additional personnel commensurate with the growth of its operations, if any. If the Company is unable to manage growth effectively, the Company's business, results of operations and financial condition will be adversely affected.
The recently enacted JOBS Act will allow the Company to postpone the date by which it must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC.
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The recently enacted JOBS Act is intended to reduce the regulatory burden on emerging growth companies. The Company meets the definition of an emerging growth company and so long as it qualifies as an emerging growth company, it will, among other things:
-be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
-be exempt from the "say on pay provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;
-be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act) and instead provide a reduced level of disclosure concerning executive compensation; and
-be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board (the PCAOB) requiring mandatory audit firm rotation or a supplement to the auditors report on the financial statements.
Although the Company is still evaluating the JOBS Act, it currently intends to take advantage of all of the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an emerging growth company. The Company has elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)(1) of the JOBS Act. Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an emerging growth company, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an emerging growth company, the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. As a result, investor confidence in the Company and the market price of its common stock may be adversely affected.
Notwithstanding the above, we are also currently a smaller reporting company, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a smaller reporting company, at such time are we cease being an emerging growth company, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an emerging growth company or a smaller reporting company. Specifically, similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being required to provide only two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an emerging growth company or smaller reporting company may make it harder for investors to analyze the Companys results of operations and financial prospects.
We are an emerging growth company under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.
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We will remain an emerging growth company for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.
As a publicly reporting company, we will continue to incur significant costs in staying current with reporting requirements. Salvador Rosillo will be required to devote substantial time to compliance initiatives. Additionally, the lack of an internal audit group may result in material misstatements to our financial statements and ability to provide accurate financial information to our shareholders.
Salvador Rosillo and other future personnel will need to devote a substantial amount of time to compliance initiatives to maintain reporting status. Moreover, these rules and regulations, that are necessary to remain as an OTCMarkets alternative reporting Company, will be costly as an external third party consultant(s), attorney, or firm, may have to assist in some regard to following the applicable rules and regulations for each filing on behalf of the company.
We currently do not have an internal audit group, and we will eventually need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to have effective internal controls for financial reporting. Additionally, due to the fact that we only have two officers and one Director, who have minimal experience as officers or directors of a reporting company, such lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders.
Moreover, if we are not able to comply with the requirements or regulations as an SEC reporting company, in any regard, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Our officers and sole director lack experience in and with the reporting and disclosure obligations of publicly-traded companies.
While we rely heavily on Salvador Rosillo, he lacks experience in and with the reporting and disclosure obligations of publicly-traded companies and with serving as an officer or Director of a publicly-traded company. Such lack of experience may impair our ability to maintain effective internal controls over financial reporting and disclosure controls and procedures, which may result in material misstatements to our financial statements and an inability to provide accurate financial information to our stockholders. Consequently, our operations, future earnings and ultimate financial success could suffer irreparable harm due to our officer and directors ultimate lack of experience in our industry and with publicly-traded companies and their reporting requirements in general. Additionally, due to the fact that our sole officer and director is lacking experience with companies in our industry, we may be unable to successfully implement our business plan, and/or manage our future growth if any. Our two officers and one director do not currently believe that his outside employment affects the day to day operations of the Company. While the Company believes that the time and resources that our sole officer and director is able to provide to the Company, and/or which they may be willing to provide to us in the future is sufficient, our operations and growth (if any) may be adversely affected by the fact that our sole officer and director is only able to provide a limited number of hours of service to the Company per week and/or his outside employment.
Risks Relating to the Companys Securities
We may never have a public market for our common stock or may never trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock.
There is no established public trading market for our securities. Our shares are not and have not been listed or quoted on any exchange or quotation system.
In order for our shares to be quoted, a market maker must agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Bulletin Board. In addition, it is possible that such application for quotation may not be approved and even if approved it is possible that a regular trading market will not develop or that if it did develop, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.
We may in the future issue additional shares of our common stock, which may have a dilutive effect on our stockholders.
Our Certificate of Incorporation authorizes the issuance of 1,892,000,000 shares of Class A common stock, of which 151,560,840 shares are issued and outstanding, and 108,000,000 shares of Class B common stock, of which 108,000,000 shares are issued and outstanding, each as of November 17, 2016. The future issuance of our Class A common shares may result in substantial dilution in the percentage of our common shares held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
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We do not currently intend to pay dividends on our common stock and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
State Securities Laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell Shares.
Secondary trading in our common stock may not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock cannot be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted.
Investors cannot withdraw funds once invested and will not receive a refund.
Investors do not have the right to withdraw invested funds. Subscription payments will be paid to HEMPAMERICANA, INC. and held in our corporate bank account if the Subscription Agreements are in good order and the Company accepts the investors investment. Therefore, once an investment is made, investors will not have the use or right to return of such funds.
Our President, Salvador Rosillo does not have substantial prior experience conducting a best effort offering, and our best effort offering does not require a minimum amount to be raised. As a result, we may not be able to raise enough funds to commence and sustain our business and our investors may lose their entire investment.
Salvador Rosillo does not have any experience conducting a best-effort offering. Consequently, we may not be able to raise the funds needed to commence business operations. Also, the best effort offering does not require a minimum amount to be raised. If we are not able to raise sufficient funds, we may not be able to fund our operations as planned, and our business will suffer and your investment may be materially adversely affected. Our inability to successfully conduct a best-effort offering could be the basis of your losing your entire investment in us.
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The trading in our shares will be regulated by the Securities and Exchange Commission Rule 15G-9 which established the definition of a Penny Stock.
Based on the expected offering price, the shares being offered are defined as a penny stock under the Securities and Exchange Act of 1934, as amended (the Exchange Act), and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $4,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 ($300,000 jointly with spouse), or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and must deliver certain disclosures required by the Commission. Consequently, the penny stock rules may make it difficult for you to resell any shares you may purchase.
We are selling the shares of this offering without an underwriter and may be unable to sell any shares.
This offering is self-underwritten, that is, we are not going to engage the services of an underwriter to sell the shares; we intend to sell our shares through our President, who will receive no commissions. There is no guarantee that he will be able to sell any of the shares. Unless he is successful in selling all of the shares of our Companys offering, we may have to seek alternative financing to implement our business plan.
Our officers and sole director have no experience managing a public company, which is required to establish and maintain disclosure controls and procedures and internal control over financial reporting.
Salvador Rosillo, our officer and director, has no experience managing a public company, which is required to establish and maintain disclosure controls and procedures and internal control over financial reporting. As a result, we may not be able to operate successfully as a public company, even if our operations are successful. We plan to comply with all of the various rules and regulations, which are required for a public company. However, if we cannot operate successfully as a public company, your investment may be materially adversely affected. Our inability to operate as a public company could be the basis of your losing your entire investment in us.
Our management has a limited experience operating a public company and is subject to the risks commonly encountered by early-stage companies.
Although HempAmericana, Inc. has some experience in operating small companies, current management has not had to manage expansion while being a public company. Many investors may treat us as an early-stage company. In addition, management has not overseen a company with large growth. Because we have a limited operating history, our operating prospects should be considered in light of the risks and uncertainties frequently encountered by early-stage companies in rapidly evolving markets. These risks include:
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These risks are described in more detail below. Our future growth will depend substantially on our ability to address these and the other risks described in this section. If we do not successfully address these risks, our business would be significantly harmed.
We have a history of operating losses and we may need additional financing to meet our future long term capital requirements.
We have a history of losses and may continue to incur operating and net losses for the foreseeable future. As of August 31, 2016, we had a working capital deficit of $-460,382. We incurred a net loss of $12,886 for the six months ended August 31, 2016 and a net loss of $49,619 for the year ended February 28, 2016 As of September 30, 2016, our accumulated deficit was $577,930. We have not achieved profitability on an annual basis. We may not be able to reach a level of revenue to achieve profitability. If our revenues grow slower than anticipated, or if operating expenses exceed expectations, then we may not be able to achieve profitability in the near future or at all, which may depress our stock price.
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We may need significant additional capital, which we may be unable to obtain.
We may need to obtain additional financing over time to fund operations. Our management cannot predict the extent to which we will require additional financing, and can provide no assurance that additional financing will be available on favorable terms or at all. The rights of the holders of any debt or equity that may be issued in the future could be senior to the rights of common shareholders, and any future issuance of equity could result in the dilution of our common shareholders proportionate equity interests in our company. Failure to obtain financing or an inability to obtain financing on unattractive terms could have a material adverse effect on our business, prospects, results of operation and financial condition.
Our resources may not be sufficient to manage our potential growth, and failure to properly manage our potential growth would be detrimental to our business.
We may fail to adequately manage our potential future growth. Any growth in our operations will place a significant strain on our administrative, financial and operational resources, and increase demands on our management and on our operational and administrative systems, controls and other resources. We cannot assure you that our existing personnel, systems, procedures or controls will be adequate to support our operations in the future or that we will be able to successfully implement appropriate measures consistent with our growth strategy. As part of this growth, we may have to implement new operational and financial systems, procedures and controls to expand, train and manage our employee base, and maintain close coordination among our technical, accounting, finance, marketing and sales staff. We cannot guarantee that we will be able to do so, or that if we are able to do so, we will be able to effectively integrate them into our existing staff and systems. To the extent we acquire businesses, we will also need to integrate and assimilate new operations, technologies and personnel. If we are unable to manage growth effectively, such as if our sales and marketing efforts exceed our capacity to install, maintain and service our products or if new employees are unable to achieve performance levels, our business, operating results and financial condition could be materially and adversely affected.
We will need to increase the size of our organization, and we may be unable to manage rapid growth effectively.
Our failure to manage growth effectively could have a material and adverse effect on our business, results of operations and financial condition. We anticipate that a period of significant expansion will be required to address possible acquisitions of business, products, or rights, and potential internal growth to handle licensing and research activities. This expansion will place a significant strain on management, operational and financial resources. To manage the expected growth of our operations and personnel, we must both improve our existing operational and financial systems, procedures and controls and implement new systems, procedures and controls. We must also expand our finance, administrative, and operations staff. Our current personnel, systems, procedures and controls may not adequately support future operations. Management may be unable to hire, train, retain, motivate and manage necessary personnel or to identify, manage and exploit existing and potential strategic relationships and market opportunities.
Our ability to protect our intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, which would have a material and adverse effect on us.
Our success depends significantly on our ability to protect our proprietary rights to the technologies used in our products. We currently do not have any patents pending, thus we cannot assure you that we will be able to control all of the rights for all of our intellectual property. If we rely on patent protection, as well as a combination of copyright, trade secret and trademark laws and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology, including our licensed technology. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Both the patent application process and the process of managing patent disputes can be time-consuming and expensive. Competitors may be able to design around our patents or develop products which provide outcomes which are comparable or even superior to ours. Steps that we have taken to protect our intellectual property and proprietary technology, including entering into confidentiality agreements and intellectual property assignment agreements with some of our officers, employees, consultants and advisors, may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States.
In the event a competitor infringes upon our licensed or pending patent or other intellectual property rights, enforcing those rights may be costly, uncertain, difficult and time consuming. Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time consuming and could divert our managements attention. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents rights against a challenge. The failure to obtain patents and/or protect our intellectual property rights could have a material and adverse effect on our business, results of operations and financial condition.
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We may become subject to claims of infringement or misappropriation of the intellectual property rights of others, which could prohibit us from developing our products, require us to obtain licenses from third parties or to develop non-infringing alternatives and subject us to substantial monetary damages.
Third parties could, in the future, assert infringement or misappropriation claims against us with respect to products we develop. Whether a product infringes a patent or misappropriates other intellectual property involves complex legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property rights of others. Our potential competitors may assert that some aspect of our product infringes their patents. Because patent applications may take years to issue, there also may be applications now pending of which we are unaware that may later result in issued patents upon which our products could infringe. There also may be existing patents or pending patent applications of which we are unaware upon which our products may inadvertently infringe.
Any infringement or misappropriation claim could cause us to incur significant costs, place significant strain on our financial resources, divert managements attention from our business and harm our reputation. If the relevant patents in such claim were upheld as valid and enforceable and we were found to infringe them, we could be prohibited from selling any product that is found to infringe unless we could obtain licenses to use the technology covered by the patent or are able to design around the patent. We may be unable to obtain such a license on terms acceptable to us, if at all, and we may not be able to redesign our products to avoid infringement. A court could also order us to pay compensatory damages for such infringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could be substantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarily or permanently enjoin us and our customers from making, using, or selling products, and could enter an order mandating that we undertake certain remedial activities. Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties
We may not be successful in the implementation of our business strategy or our business strategy may not be successful, either of which will impede our development and growth.
Our business strategy involves the procurement of raw hemp and the sale of hemp based products, which are heavily legally regulated. Our ability to implement this business strategy is dependent on our ability to:
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We do not know whether we will be able to continue successfully implementing our business strategy or whether our business strategy will ultimately be successful. In assessing our ability to meet these challenges, a potential investor should take into account our limited operating history and brand recognition, our managements relative inexperience, the competitive conditions existing in our industry and general economic conditions. Our growth is largely dependent on our ability to successfully implement our business strategy. Our revenues may be adversely affected if we fail to implement our business strategy or if we divert resources to a business that ultimately proves unsuccessful.
We have limited existing brand identity and customer loyalty; if we fail to market our brand to promote our service offerings, our business could suffer.
Because of our limited operating history, we currently do not have strong brand identity or brand loyalty. We believe that establishing and maintaining brand identity and brand loyalty is critical to attracting customers to our program. In order to attract copyright holders to our program, we may be forced to spend substantial funds to create and maintain brand recognition among consumers. We believe that the cost of our sales campaigns could increase substantially in the future. If our branding efforts are not successful, our ability to earn revenues and sustain our operations will be harmed.
Promotion and enhancement of our services will depend on our success in consistently providing high-quality services to our customers. Since we rely on technology partners to provide portions of the service to our customers, if our suppliers do not send accurate and timely data, or if our customers do not perceive the products we offer as superior, the value of our brand could be harmed. Any brand impairment or dilution could decrease the attractiveness of our services to one or more of these groups, which could harm our business, results of operations and financial condition.
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A competitor with a stronger or more suitable financial position may enter our marketplace.
To our knowledge, there are currently more than 60 companies in the United States that deal in hemp and hemp products. The success of our company primarily depends on the interest of industrial, commercial and household consumers in purchasing our products, as opposed to a similar products offered by a competitor. If a direct competitor arrives in our market, achieving market acceptance for our products may require additional marketing efforts and the expenditure of significant funds, the availability of which we cannot be assured, to create awareness and demand among customers. We have limited financial, personnel and other resources to undertake additional marketing activities. Accordingly, no assurance can be given that we will be able to win business from a stronger competitor.
A significant portion of our current limited revenue is dependent upon a small number of retailers and the loss of any one of these retailers would negatively impact our revenues and our results of operations.
There are currently only a few retail stores who sell Rolling Thunders papers. The company does not currently have a distributor for the papers and while the company at one point had 63 retail stores selling the papers, the Company has had problems with meeting supply demands from retail consumers because of inventory issues.
Our current inventory is extremely limited due to lack of working capital.
We only have 160 boxes of papers and a few bottles of CBD oil currently in stock. The company currently does not have adequate working capital and therefore cannot order more production of its products. This severely impacts our revenue potential since without adequate working capital, we are unable to meet inventory requirements for the mass-sale of our products.
Our products are currently manufactured abroad and therefore there are significant political, legal and other risks.
Our rolling papers are currently manufactured in China. Our CDB oil is currently bottled by a Colorado company that sources its oil before reformulation in Europe. Dealing with non-US based companies involve challenges in communications, shipping and compliance with laws in jurisdictions with which our Company is not familiar.
Our exposure to outside influences beyond our control, including new legislation or court rulings could adversely affect our enforcement activities and results of operations.
Our enforcement activities are subject to numerous risks from outside influences, including the following:
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The occurrence of any one of the foregoing could significantly damage our business and results of operations.
Product defects or errors in our products could harm our reputation, result in significant costs to us and impair our ability to sell our products, which would harm our operating results.
Our products may contain undetected defects or problems when first introduced or as new products are released, which could materially and adversely affect our reputation, result in significant costs to us and impair our ability to sell our products in the future. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating results.
Litigation may harm our business.
Substantial, complex or extended litigation could cause us to incur significant costs and distract our management. For example, lawsuits by employees, stockholders, collaborators, distributors, customers, competitors or others could be very costly and substantially disrupt our business. Disputes from time to time with such companies, organizations or individuals are not uncommon, and we cannot assure you that we will always be able to resolve such disputes or on terms favorable to us. Unexpected results could cause us to have financial exposure in these matters. We currently do not have any financial reserves or insurance coverage. Any litigation could require us to provide additional reserves to address these liabilities, therefore impacting profits.
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If we fail to develop new products successfully, our business could be adversely affected.
We depend on our founder to develop new products, control our manufacturing processes, process orders, manage inventory, process and bill shipments and collect cash from our customers, respond to customer inquiries, contribute to our overall internal control processes, maintain records of our property, plant and equipment, and record and pay amounts due vendors and other creditors. If we were to experience a prolonged disruption in our information systems that involve interactions with customers and suppliers, it could result in the loss of sales and customers and/or increased costs, which could adversely affect our overall business operation.
We may be subject to Government laws and regulations particular to our operations with which we may be unable to comply.
We may not be able to comply with all current and future government regulations which are applicable to our business. Our business operations are subject to all government regulations normally incident to conducting business (e.g., occupational safety and health acts, workmen's compensation statutes, unemployment insurance legislation, income tax, and social security laws and regulations, environmental laws and regulations, consumer safety laws and regulations, etc.) as well as to governmental laws and regulations applicable to small public companies and their capital formation efforts and further restrictions imposed upon Industrial Hemp within the United States. Although we will make every effort to comply with applicable laws and regulations, we can provide no assurance of our ability to do so, nor can we predict the effect of those regulations on our proposed business activities. Our failure to comply with material regulatory requirements would likely have an adverse effect on our ability to conduct our business and could result in our cessation of active business operations.
The U.S. laws pertaining to the importation and exportation of hemp based products may adversely affect our ability to fully implement our business plan.
In the United States today the U.S. Customs Service has a zero tolerance standard for the importation of industrial hemp. What this means is that a product cannot have any potentially dangerous substances contained in it or it will be considered adulterated and unfit for human consumption, and thus illegal to possess or use per U.S. Federal Law. In 2001 the DEA elaborated on this and clarified that any product with any quantity of THC in it at all cannot be imported into the United States. Since no hemp based products containing THC are legally permitted in the United States such products with THC are not allowed to be exported out of the United States either. Because of the strict laws that exist with the U.S. importation and exportation of industrial hemp products our business could be adversely affected.
Any failure to maintain adequate general liability, commercial and service liability insurance could subject us to significant losses of income.
We do not currently carry general liability, service liability and commercial insurance, and therefore, we have no protection against any general, commercial and/or service liability claims. Any general, commercial and/or service liability claims will have a material adverse effect on our financial condition. There can be no assurance that we will be able to obtain insurance on reasonable terms when we are able to afford it.
Our revenue growth rate depends primarily on our ability to execute our business plan.
We may not be able to identify and maintain the necessary relationships within our industry. Our ability to execute our business plan also depends on other factors, including the ability to:
1. Negotiate and maintain contracts and agreements with acceptable terms;
2. Hire and train qualified personnel;
3. Maintain marketing and development costs at affordable rates; and,
4. Maintain an affordable labor force.
A decline in general economic condition could lead to reduced consumer traffic and could negatively impact our business operation and financial condition, which could have a material adverse effect on our business, financial condition and results of operations.
Our operating and financial performance may be adversely affected by a variety of factors that influence the general economy. Consumer spending habits, including chiefly the demand for industrial hemp products, are affected by, among other things, prevailing economic conditions, levels of unemployment, salaries and wage rates, prevailing interest rates, income tax rates and policies, consumer confidence and consumer perception of economic conditions. In addition, consumer purchasing patterns may be influenced by consumers disposable income. In the event of an economic slowdown, consumer spending habits could be adversely affected and we could experience lower net sales than expected on a quarterly or annual basis which could have a material adverse effect on our business, financial condition and results of operations.
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The companys ability to expand its operations will depend upon the companys ability to raise significant additional financing as well as to generate income.
Developing our business may require significant capital in the future. To meet our capital needs, we expect to rely on our cash flow from operations and, potentially, third-party financing. Third-party financing may not, however, be available on terms favorable to us, or at all. Our ability to obtain additional funding will be subject to various factors, including market conditions, our operating performance, lender sentiment and our ability to incur additional debt. These factors may make the timing, amount, terms and conditions of additional financings unattractive. Our inability to raise capital could impede our growth.
If we fail to maintain the value of our brand, our sales are likely to decline.
Our success depends on the value created by HempAmericana. Maintaining, promoting and positioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality customer experience. Our brand could be adversely affected if we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative publicity. Any of these events could result in a decrease in sales and market share.
Any acquisitions that we make could disrupt our business and harm our financial condition.
We expect to evaluate potential strategic acquisitions of complementary businesses, products or technologies from time to time. We may also consider joint ventures and other collaborative projects. We may not be able to identify appropriate acquisition candidates or strategic partners of any businesses, products or technologies. Furthermore, the integration of any acquisition and management of any collaborative project may divert managements time and resources from our core business and disrupt our operations. If we decide to expand our product offerings beyond our current products, we may spend time and money on projects that do not increase our sales. Any cash acquisition we pursue would diminish the cash available to us for other uses, and any stock acquisition would dilute our stockholders ownership. While we, from time to time, evaluate potential collaborative projects and acquisitions of businesses, products and technologies, and anticipate continuing to make these evaluations, we have no present understandings, commitments or agreements with respect to any future acquisitions or collaborative projects.
Strong competition in the hemp industry could decrease our market share.
The hemp industry is highly competitive. We compete with various corporations and business entities with business plans comparable to our own. In addition, some of our competitors may have substantially greater name recognition and financial and other resources than we have, which may enable them to compete more effectively for the available market share. We also expect to face increased competition as a result of new entrants to the hemp industry, we may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect our business or results of operations.
Risks Related to the Securities Markets and Ownership of our Equity Securities
The Common Stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
The Common Stock has historically been sporadically traded on the OTC PinkSheets, meaning that the number of persons interested in purchasing our shares at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.
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The market price for the common stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of revenue, which could lead to wide fluctuations in our share price. The price at which you purchase our shares may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.
The market for our shares of common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our shares are sporadically traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our shares is sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative investment due to, among other matters, our limited operating history and lack of revenue or profit to date, and the uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the securities of a seasoned issuer. The following factors may add to the volatility in the price of our shares: actual or anticipated variations in our quarterly or annual operating results; acceptance of our inventory of games; government regulations, announcements of significant acquisitions, strategic partnerships or joint ventures; our capital commitments and additions or departures of our key personnel. Many of these factors are beyond our control and may decrease the market price of our shares regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our shares will be at any time, including as to whether our shares will sustain their current market prices, or as to what effect the sale of shares or the availability of shares for sale at any time will have on the prevailing market price.
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.
The market price of our common stock may be volatile and adversely affected by several factors.
The market price of our common stock could fluctuate significantly in response to various factors and events, including, but not limited to:
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In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. Issuers using the Alternative Reporting standard for filing financial reports with OTC Markets are often subject to large volatility unrelated to the fundamentals of the company.
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Our officers and directors beneficially own approximately 80.17% of our outstanding shares of common stock as of the date of this offering and our founder controls more than a majority of the votes associated with our common stock.
Our officers and directors beneficially own approximately 80.17% of our outstanding shares of Class A and Class B common stock as of the date of this prospectus. Through his ownership of 100% of the Class B shares, our founder has the ability to solely influence all matters submitted to our shareholders for approval and to control our management and affairs, including extraordinary transactions such as mergers and other changes of corporate control, including going private transactions.
Our issuance of additional shares of Common Stock, or options or warrants to purchase those shares, would dilute your proportionate ownership and voting rights.
We are entitled under our articles of incorporation to issue up to 1,892,000,000 shares of Class A common stock. We have issued and outstanding, as of the date of this prospectus, 151,560,840 shares of Class A common stock. In addition, we are entitled under our articles of incorporation to issue up to 108,000,000 shares of class B common stock, the entirety of which is issued and outstanding and being held by our founder through his holding company. Our board may generally issue shares of common stock, preferred stock or options or warrants to purchase those shares, without further approval by our shareholders based upon such factors as our founder may deem relevant at that time. It is likely that we will be required to issue a large amount of additional securities to raise capital to further our development. It is also likely that we will issue a large amount of additional securities to future additional directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our stock plans. We cannot give you any assurance that we will not issue additional shares of common stock, or options or warrants to purchase those shares, under circumstances we may deem appropriate at the time.
The elimination of monetary liability against our directors, officers and employees under our Articles of Incorporation and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.
Our Articles of Incorporation contains provisions that eliminate the liability of our directors for monetary damages to our company and shareholders. Our bylaws also require us to indemnify our officers and directors. We may also have contractual indemnification obligations under our agreements with our directors, officers and employees. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors, officers and employees that we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors, officers and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors, officers and employees even though such actions, if successful, might otherwise benefit our company and shareholders.
Anti-takeover provisions may impede the acquisition of our company.
Certain provisions of the Delaware Revised Statutes have anti-takeover effects and may inhibit a non-negotiated merger or other business combination. These provisions are intended to encourage any person interested in acquiring us to negotiate with, and to obtain the approval of, our board of directors in connection with such a transaction. However, certain of these provisions may discourage a future acquisition of us, including an acquisition in which the shareholders might otherwise receive a premium for their shares. As a result, shareholders who might desire to participate in such a transaction may not have the opportunity to do so.
Our financials are not independently audited, which could result in errors and/or omissions in our financial statements if proper standards are not applied.
Although the Company is confident its accounting firm, we are not required to have our financials audited by a certified Public Company Accounting Oversight Board (PCAOB). As such, our accountants do not have a third party reviewing the accounting. Our accountants may also not be up to date with all publications and releases put out by the PCAOB regarding accounting standards and treatments. This could mean our financials may not properly reflect up to date standards and treatments resulting misstated financials statements.
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We may become involved in securities class action litigation that could divert managements attention and harm our business.
The stock market in general, and the shares of early stage companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance. In the past, following periods of volatility in the market price of a particular companys securities, securities class action litigation has often been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then we may become involved in this type of litigation, which would be expensive and divert managements attention and resources from managing our business.
As a public company, we may also from time to time make forward-looking statements about future operating results and provide some financial guidance to the public markets. Our management has limited experience as a management team in a public company and as a result, projections may not be made timely or set at expected performance levels and could materially affect the price of our shares. Any failure to meet published forward-looking statements that adversely affect the stock price could result in losses to investors, stockholder lawsuits or other litigation, sanctions or restrictions issued by the SEC.
Our common stock is currently deemed a penny stock, which makes it more difficult for our investors to sell their shares.
The SEC 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, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a persons account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a persons account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination, and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the penny stock rules. This may make it more difficult for investors to dispose of our common stock if and when such shares are eligible for sale and may cause a decline in the market value of its stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.
As an issuer of penny stock, the protection provided by the federal securities laws relating to forward-looking statements does not apply to us.
Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.
As an issuer not required to make reports to the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, holders of restricted shares may not be able to sell shares into the open market as Rule 144 exemptions may not apply.
Under Rule 144 of the Securities Act of 1933 holders of restricted shares, may avail themselves of certain exemption from registration is the holder and the issuer meet certain requirements. As a company that is not required to file reports under Section 13 or 15(d) of the Securities Exchange Act, referred to as a non-reporting company, we may not, in the future, meet the requirements for an issuer under 144 that would allow a holder to qualify for Rule 144 exemptions. In such an event, holders of restricted stock would have to utilize another exemption from registration or rely on a registration statement to be filed by the Company registered the restricted stock. Currently, the Company has no plans of filing a registration statement with the Commission.
Securities analysts may elect not to report on our common stock or may issue negative reports that adversely affect the stock price.
At this time, no securities analysts provide research coverage of our common stock, and securities analysts may not elect not to provide such coverage in the future. It may remain difficult for our company, with its small market capitalization, to attract independent financial analysts that will cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect the stocks actual and potential market price. The trading market for our common stock may be affected in part by the research and reports that industry or financial analysts publish about our business. If one or more analysts elect to cover our company and then downgrade the stock, the stock price would likely decline rapidly. If one or more of these analysts cease coverage of our company, we could lose visibility in the market, which, in turn, could cause our stock price to decline. This could have a negative effect on the market price of our common stock.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements under the Summary, Risk Factors, Business, Managements Discussion and Analysis of Financial Condition and Results of Operations and in other sections of this Offering Circular. In some cases, you can identify these statements by forward-looking words such as may, might, should, expect, plan, anticipate, believe, estimate, predict, potential or continue, and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under Risk Factors.
While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this Offering Circular describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this Offering Circular to conform our prior statements to actual results or revised expectations, and we do not intend to do so.
Forward-looking statements include, but are not limited to, statements about:
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We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this Offering Circular.
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HempAmericana, Inc. plans to use the proceeds from this offering to grow its business. The company intends to use the proceeds to acquire licenses domestically (when and if available) for the growing of hemp, acquire licenses internationally (when and if available) for the growing of hemp, product research and development, the purchase of inventory (CBD oil, rolling papers and new products), website development, marketing, operating capital, hiring staff and offering expenses. The more we are able to raise, the more we will be able to invest in these opportunities. Since Blackbridge is offering to buy our securities on a best efforts basis, the amount of securities we sell is uncertain, therefore our use of proceeds will depend on how much we are able to raise under this offering. We intend to use the proceeds generally so as to provide the most value to our investors by growing sales of our existing products and entering markets with new products we are able to successfully develop.
Laws with respect to hemp production and sales are changing rapidly. Our plan of operations is such that it impossible to determine at this time whether the best uses of our capital will be geared towards developing vertically integrated products (purchase of land and machinery) or to partner with existing operating companies to develop our hemp-based secondary products.
The company owes our founder approximately $102,000 for expenses incurred with the companys initial public offering and operations to date. The company will use the proceeds to repay our founder for these expenses, which have operated as a de facto loan.
The company owes its attorney approximately $50,000 for corporate law work and work related to this offering.
We reserve the right to change the use of proceeds based on changes to applicable law, such as the current federal restriction on the domestic production of hemp. If hemp production is allowed by the federal government, the company would prefer to source hemp domestically and produce hemp-based products domestically.
The table below represents our estimates of how we will allocate the monies raised from this offering, depending on the amount of funds we are able to successfully raise. The amounts below could change based on market conditions or other factors, such as demand for our products.
| Net Proceeds (assumption): | $5,000,000 | $10,000,000 | $15,000,000 | $20,000,000 |
| Planned Uses | | | | |
| Marketing and marketing staff | $500,000 | $1,000,000 | $1,500,000 | $2,000,000 |
| Sales and sales staff | $500,000 | $1,000,000 | $2,000,000 | $3,000,000 |
| Inventory | $1,000,000 | $2,000,000 | $3,000,000 | $4,000,000 |
| Distribution warehouse | $2,000,000 | $3,000,000 | $3,000,000 | $3,000,000 |
| Factory | - | - | $2,500,000 | $3,000,000 |
| Equipment and machinery | - | - | $500,000 | $1,000,000 |
| Additional employees | - | - | $1,500,000 | $2,000,000 |
| Investments in hemp-related going concerns | $1,000,000 | $3,000,000 | $1,000,000 | $2,000,000 |
Notes:
The foregoing represents our best estimate of the allocation of the proceeds of this offering based on planned use of funds for the our operations and current objectives.
Under Net Proceeds, we have based our calculations and division of funds on the current needs of the Company. However, our market place is constantly changing. Management may, depending on circumstances, be required to divert funds from one source to another as the business demands. For example, a removal of the restriction on domestic hemp production would make us interested in producing hemp here in the United States. Likewise, if our marketing efforts are less fruitful than anticipated for a particular hemp-based product, we may divert funds to improving the underlying product.
Under Net Proceeds, Marketing and Sales will largely be related to the hiring and payment of a human sales team as well as advertising costs associated with online advertising platforms such as Google Adwords and Facebook, as well as paying directly to websites per their ad and affiliate programs.
Increases with the success of our offering, will increase the corporations activities, which will result in a greater number of expenses.
Inventory refers to our existing Rolling Thunders hemp papers, as well as CBD oil products and other hemp-related products we believe we will be able to market successfully and achieve solid sales results.
Factory, Equipment and Machinery and Additional Employees refers to our desire to manufacture our own hemp-based products. As a business strategy, however, we will only do this if we raise the necessary capital, but also only in the event that we deem it in the best interest of the company (i.e., we will continue to invest in sales and marketing of our existing products if we believe that this will yield our investors a higher yield on their capital). A factory could use to process raw hemp and turn it into consumer friendly products, such as food or clothing products. Machinery would include decortication machine(s) and other machines necessary for the manufacturing of hemp-based products.
Investments in Hemp-related going concerns refers to our willingness to enter into joint-venture or make equity or similar types of investments in existing hemp-related businesses where we can achieve economies of scale for our products (e.g. investing in hemp processing plants) and allow our company to access new markets.
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We have not declared or paid any dividends on our common stock. We intend to retain earnings for use in our operations and to finance our business. Any change in our dividend policy is within the discretion of our board of directors and will depend, among other things, on our earnings, debt service and capital requirements, restrictions in financing agreements, if any, business conditions, legal restrictions and other factors that our board of directors deems relevant.
Purchasers of our common stock in this offering will experience an immediate dilution of net tangible book value per share from the public offering price. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasers of shares of common stock and the net tangible book value per share immediately after this Offering. It is not possible to calculate the net dilution because we cannot determine the exact size of the offering, however, below we have provided an estimation based on an offering price of $0.02 per share.
| | | | 25% | 50.0% | 75% | 100% |
| Net Value | | | $5,011,255.25 | $10,011,255.25 | $15,011,255.25 | $20,011,255.25 |
| # Total Shares | | 401,560,840 | 651,560,840 | 901,560,840 | 1,151,560,840 | |
| Net Book Value Per Share | $0.0125 | $0.0154 | $0.0167 | $0.0174 | ||
| Increase in NBV/Share | $0.0124 | $0.0153 | $0.0166 | $0.0173 | ||
| Dilution to new shareholders | $0.0075 | $0.0046 | $0.0033 | $0.0026 | ||
| % Dilution to new shareholders | 37.60% | 23.17% | 16.75% | 13.11% | ||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FIANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes thereto of the Company, as well as the financial statements and the notes thereto of HempAmericana, Inc., included in this Offering Circular. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See Risk Factors and Cautionary Note Regarding Forward-Looking Statements above.
Overview
HempAmericana, Inc. was incorporated on February 10, 2014 and commenced operations immediately thereafter. We are still in the research development stage of our business, aiming to develop and sell hemp-related products. We currently only have two products, Rolling Thunders hemp-based rolling papers and Weed Got Oil CBD oil.
Recent Developments
On February 1, 2016 we amended our certificate of incorporation to create two classes of common stock. All existing shares of common stock were converted on a 1-to-1 basis to Class A common shares. The amendment also created a Class B common stock. The Class A and Class B common stock are equal in economic rights, but the Class B common stock has super-voting rights granting their holder 108 votes per share. All 108,000,000 shares of the Class B common stock were immediately issued to 864, Inc., a Delaware corporation wholly-owned by Salvador Rosillo. This was done as part of Mr. Rosillos total compensation from the company on a pro forma basis, but primarily done to provide strategic protection to the Company so that control of the company remained with our founder.
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Our founder, Salvador Rosillo, has worked without compensation, except for his initial allotment of shares, since the companys inception. He was granted 45,215,533 shares of common stock for his first year of service to the company through February 10, 2015. On January 27, 2016, he entered into an employment agreement with the company that paid him for the period of February 11, 2015 to January 27, 2016, 45,000,000 shares of common stock (5,000,000 shares to him and 40,000,000 shares to Africement, Inc., a Delaware corporation wholly-owned by Salvador Rosillo as his designee), which gave him effective control of the company. This agreement was amended as of February 9, 2016 (after the amendment to our certificate of incorporation) so that compensation could be granted to Salvador Rosillo for the following three years. It was determined to be in the best interests of shareholders to have a strategic investor hold the Class B shares, and therefore the total of authorized Class B shares (108,000,000) were issued to 864, Inc., a wholly-owned designee of Mr. Rosillo, as part of Mr. Rosillos total compensation.
Additionally, on February 9, 2016 for her past services to the company as secretary, and for the following three years of service, the company entered into an employment agreement with Nieves Rosillo, which granted her 10,000,000 shares of our Class A common stock. Nieves Rosillo is a New York, New York resident and the sister of our founder and CEO, Sal Rosillo.
Revenue
We generated total gross revenues of $1,300 during the year ended February 29, 2016. We do not have a comparable revenue during the year ended February 28, 2015, as we were in our early stages of our current business and did not have annual financials prepared for such period. For the six months ended August 31, 2016 we generated total gross revenues of $720. There were no revenues books for the six months ended August 31, 2015.
Cost of Revenue
Direct cost of revenues during the year ended February 29, 2016 amounted to $46,919 compared to $380 for the year ended February 28, 2015. For the six months ended August 31, 2016, our direct cost of revenues amounted to $13,606 compared to the six months ended August 31, 2015 where our direct cost of revenues was $4,067. Cost of revenues mainly includes payments to taxing authorities, attorneys and other professionals, expenses which are in the normal course of business for listing as a public company.
Net loss
As a result of the foregoing, during the year ended February 29, 206, we recorded a net loss of $45,619 compared to $380 for the year ended February 28, 2015.. Our net loss for the six months ended August 31, 2016 was $12,866 compared to $4,067 for the six months ended August 31, 2015.
Liquidity and Capital Resources
As of February 29, 2016, the Company had cash on hand of $807. We may be required to raise additional funds, particularly if we are unable to generate positive cash flow as a result of our operations. We estimate that based on current plans and assumptions, that our cash will not be sufficient to satisfy our cash requirements under our present operating expectations, without further financing, for up to 12 months. In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Managements plans to continue as a going concern include raising additional capital through borrowings and the sale of common stock. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of an equity financing.
Operating Activities
During the year ended February 29, 2016, we used $7,845 of cash in operating activities.
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Investing Activities
During the year ended February 29, 2016, we incurred website development cost in the aggregate amount of $2,048. We had no investing activities for the year ended February 29, 2016.
Financing Activities
During the year ended February 29, 2016, financing activities provided $9,347. We received proceeds from advances from our founder of $9,347.
Critical Accounting Policies and Estimates
Use of estimates
The preparation of the unaudited financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
INDUSTRY OVERVIEW
This Prospectus includes market and industry data that we have developed from publicly available information; various industry publications and other published industry sources and our internal data and estimates. Although we believe the publications and reports are reliable, we have not independently verified the data. Our internal data, estimates and forecasts are based upon information obtained from trade and business organizations and other contacts in the market in which we operate and our managements understanding of industry conditions.
As of the date of the preparation of this Prospectus, these and other independent government and trade publications cited herein are publicly available on the Internet without charge. Upon request, the Company will also provide copies of such sources cited herein.
Hemp Industry
Hemp is one of the earliest domesticated plants on the planet. Its use can be dated back to the fifth century B.C. The United States has the largest amount of hemp imported but it is one of the few countries that does not allow it to be grown under the Controlled Substance Act. The reasoning behind this is because the federal government does not distinguish between the various strains of cannabis such as those that are grown exclusively for the durability of hemp material. It should be noted that recently a number of states have begun to enact state laws that allow for the growth of hemp, but the federal law still remains in effect. This hemp material goes into food, health products, rope, fabric, textiles and even concrete.
Despite the historically negative stigma associated with hemp it is in fact one of the most environmentally friendly crops requiring few, if any, pesticides and is also biodegradable. Most of the negative stigma associated with cannabis is due to the fact that it can bud Δ9-tetrahydrocannabinol (THC).
Industrial hemp material generally contains less than 0.3% of THC while cannabis grown for marijuana use sometimes contains upwards of 20%. Ingestion or use of industrial hemp based products does not have psychoactive effects due to the very low quantity of THC, if there is any at all. This makes it legal for sale within the United States so long as it follows certain regulations and laws.
According to the Congressional Research Service there are over 25,000 products on the global market that are derived from hemp. It is estimated that in the United States the market for hemp based products may be 500,000,000 million dollars per year, although an exact number has not been determined. Between 156 and 171 million dollars of this market is made up of body care items and food based supplements. 100 million is associated with hemp based clothing and textiles. The remaining balance is associated with an array of various other hemp based goods.
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Our Business
HempAmericana, Inc. (the Company) was incorporated with the state of Delaware on February 10, 2014 under the name HempAmericana, Inc.
The Company remained a reporting Company until, on June 12, 2015, the Company filed a Form 15-12G, voluntarily terminating registration of the Companys equity with the Commission. In 2015, the Company applied to file with OTC Markets, Inc. on their PinkSheet exchange under Alternative Reporting approved by the Commission, providing unaudited financial statements. The Company has never been deemed a shell company as defined under Rule 144 of the Securities Act of 1933, as amended.
The primary business of the Company has been to develop hemp-based products and bring them to market. The Company currently wholesales and retails two products that it has developed, but does not have the capital required to implement a marketing and sales plan. The Company plans to develop further secondary hemp-based products, such as health products and construction materials, but to do this it must first raise the necessary capital for product development, marketing and sales.
The Company ideally on a long-term basis intends to find appropriate locales where it can begin a hemp farm, together with the appropriate machinery for its harvesting, but this is subject to U.S. laws that restrict the production of Hemp in the United States. The Company also intends to invest in factories that use decorticators, machines designed to strip the fibers from the hemp plant, as well as other machines that can produce the valuable CBD oil from the hemp plant. This will all require capital investment so that we can be a vertically integrated company. If the company is unable to raise sufficient capital, it will instead partner with going concerns to bring to market the most profitable hemp-based products, such as CBD oil.
The Companys pricing model will be based on market demand. However, it is believed that by the Company investing in hemps primary production, it can become a market leader in the sale of secondary products, such as CBD oil.
The Companys revenue is to be derived from the wholesale and retail sales of secondary hemp-based products.
Strategy and 12 Month Outlook
Assuming we raise less than half of the value of this offering, our focus will be to develop and sell our existing hemp rolling papers and CBD oils, together with potentially other hemp-related products, both on a wholesale and retail basis. Assuming we are able to raise at least more than half the funds under this Offering Circular, the Company plans to use the funds raised to invest in a hemp processing factory. This will give us a presence for the growing global demand for hemp-based products. We aim to do this for CBD oil, which in our view has the highest margin for hemp-based products. We will hire additional staff to help manage the production process. Additional staff will also allow us to scale our operations and sell more wholesale and retail CBD oil as well as continue expanding development of our other hemp-based products. If the Company is able to either raise the entirety of the Offering or generate substantial revenues from our growth, we will begin to set up additional factories for the decortication process of hemp, which will allow us to sell hemp fibers to secondary-product producers that rely on hemp fibers for their products. Again, this provides the Company with more additional revenue. Expansion into raw hemp processing has additional benefits as well. First, and most importantly, it allows the Company to achieve economies of scale with its hemp-based products. Secondly, since hemp production is not legal in the United States under current U.S. federal law, we have no other choice but to import our hemp from abroad. Generally, it will be most cost-effective for us to have a hemp-processing factory in a location where shipping costs for raw hemp is the least expensive. Therefore, it is possible that we will establish our hemp processing plant abroad. Ultimately our goal is market and sell our existing products and develop new hemp-based products. We believe that raising more funds will increase the likelihood that it will make economic sense to begin a vertically integrated model where we are able to turn raw hemp into consumer, commercial and even industrial products.
Competition
Currently, there are a number of other companies that are in the cannabis or hemp industry, all of which we consider to be our competition. Many of these companies provide hemp based products. One such competitor is Bambu that provides rolling papers made from hemp based material. In addition, the principal competitor that HempAmericana recognizes is Hemp Inc. Hemp Inc. is pursuing the potential uses of industrial hemp in much the same ways as HempAmericana. They also see the future possibilities of industrial hemp and will most likely be our primary competition for some time.
In the future, HempAmericana fully expects that other companies will recognize the value of hemp and enter into the marketplace as competitors.
Currently, there are numerous major competitors in the CBD oil business. Endoca is a company based in Copenhagen, Denmark that wholesales CBD oil and claims it is the worlds leading producer of CBD oil. Bluebird Botanicals, a company in Colorado, USA, is a private company that claims to be one of the leaders in the industry. There is also Isodiol that claims it is a group of companies that together, grow & harvest hemp on an industrial scale, and then process it to extract the cannabidiol (CBD) to the highest available purity for worldwide distribution. There are numerous other wholesalers and retailers of CBD oil. However, we believe we can continue to distinguish ourselves by our vertical integration to produce hemp and then process it into CBD oil.
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Market
Currently, there are no reliable resources for measuring the market for our specific products and services. However, there are several ongoing trends that directly impact our business and the market for our products. Firstly, hemp is becoming socially recognized as a useful product, and hemp-based products have already found their way into stores such as Whole Foods. HempAmericana needs only to capture a percentage of this market to be successful.
Regulation
Our business relies heavily on interpreting and complying with rules and regulations pertaining to the importation of hemp. Any changes to the laws or the enforcement of the same would be detrimental to our business.
Employees
As of September 27, we have one full time employee and one part- time employee.
General
The Company is currently headquartered in 78 Reade St Suite 4FW, New York, NY 10007 . The Company's shares of common stock are publicly traded on the OTC Pinksheets under the symbol "HMPQ".
Directors of the corporation are elected by the stockholders to a term of one year and serve until a successor is elected and qualified. Officers of the corporation are appointed by the Board of Directors to a term of one year and serves until a successor is duly appointed and qualified, or until he or he is removed from office. The Board of Directors has no nominating, auditing or compensation committees. The Board of Directors also appointed our officers in accordance with the Bylaws of the Company, and per employment agreements negotiated between the Board of Directors and the respective officer. Currently, there are two such employment agreements. Officers listed herein are employed at the whim of the Directors and state employment law, where applicable.
The name, address, age and position of our officer and director is set forth below:
| Name | | Age | | First Year as Director or Offier | | Position |
| Salvador Rosillo |
| 80 |
| 2014 |
| Director, CEO, President |
| Nieves Rosillo | | 75 | | 2014 | | Secretary |
The term of office of each director of the Company ends at the next annual meeting of the Company's stockholders or when such director's successor is elected and qualifies. No date for the next annual meeting of stockholders is specified in the Company's bylaws or has been fixed by the Board of Directors. The term of office of each officer of the Company ends at the next annual meeting of the Company's Board of Directors, expected to take place immediately after the next annual meeting of stockholders, or when such officer's successor is elected and qualifies.
Directors are entitled to reimbursement for expenses in attending meetings but receive no other compensation for services as directors. Directors who are employees may receive compensation for services other than as director. No compensation has been paid to directors for services.
Biographical Information
Salvador Rosillo Director, Chief Executive Officer, President
Salvador Rosillo is a US Army veteran. Rosillo served as an artillery surveyor, forward observer. He served from 1960 to 1966 (active 2 and ½ years and the remainder in the Reserve). He graduated from Columbia University with an M.F.A. in 1976. He also has a B.A. in anthropology from Columbia University in 1974. He studied anthropology for a total of ten years. He is a published author, poet and painter. He practices Buddhism, Taoism, Tai Chi and is an active swimmer and biker. During the 2000s, he ran a gold mining concession and mineral exploration company in Mali, West Africa.
28
Nieves Rosillo Secretary
Nieves Rosillo is the sister of Salvador Rosillo. Ms. Rosillo provides part time secretarial duties for the Company. She currently works with Grupa Exporta as their New York Representative providing sales and public relations support. She attended the Marketing and Advertising Institute of Mexico City has been schooled as a professional chef, attending several renowned cooking institutions. Ms. Rosillo has worked as an executive assistant for Mexican petroleum and construction companies and the casting and photography director for Nobles & Associates Advertising Company.
Executive Compensation
The table below summarizes all compensation awarded to, earned by, or paid to our Officers and Directors who occupied such position as of the date of this Offering Circular, for all services rendered in all capacities to us for the period for the past 2 years. The Company has employment agreements with the persons named below. Their salary is nul, but their compensation was granted stock. We do not currently have any benefits, such as health or life insurance, available to our employees.
| Name and |
| Year |
|
| Salary |
|
| Bonus |
|
| Stock |
|
|
|
|
|
|
|
| All other |
|
| Total | |
|
|
|
|
| ||||||||
| Salvador Rosillo |
|
| 2014 |
|
|
| -0- |
|
|
| -0- |
|
|
| -see below- |
|
|
|
|
|
| -0- |
|
|
| -see below- |
|
|
|
| |||||||
| | | | 2015 | | | | -0- |
|
|
| -0- |
|
|
| -see below- |
|
|
|
|
|
| -0- |
|
|
| -see below- |
|
|
|
| |||||||
| Nieves Rosillo Secretary | | | 2014 | | | | -0- |
|
|
| -0- |
|
|
| -see below- |
|
|
|
|
|
| -0- |
|
|
| -see below- |
|
|
|
| |||||||
| | | | 2015 | | | | -0- |
|
|
| -0- |
|
|
| --see below- |
|
|
|
|
|
| -0- |
|
|
| -see below- |
|
|
|
| |||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||
*Salvador Rosillo is the sole director of the company.
Our founder, Salvador Rosillo, has worked without compensation, except for his initial allotment of shares, since the companys inception. He was granted 45,215,533 shares of common stock for his first year of service to the company through February 10, 2015. On January 27, 2016, he entered into an employment agreement with the company that paid him for the period of February 11, 2015 to January 27, 2016, 45,000,000 shares of common stock (5,000,000 shares to him and 40,000,000 shares to Africement, Inc., a Delaware corporation wholly-owned by Salvador Rosillo as his designee), which gave him effective control of the company. This agreement was amended as of February 9, 2016 (after the amendment to our certificate of incorporation) so that compensation could be granted to Salvador Rosillo for the following three years. It was determined to be in the best interests of shareholders to have a strategic investor hold the Class B shares, and therefore the total of authorized Class B shares (108,000,000) were issued to 864, Inc., a wholly-owned designee of Mr. Rosillo, as part of Mr. Rosillos total compensation.
Additionally, on February 9, 2016 for her past services to the company as secretary, and for the following three years of service, the company entered into an employment agreement with Nieves Rosillo, which granted her 10,000,000 shares of our Class A common stock.
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Salvador and Nieves Rosillo are brother and sister.
864, Inc., which owns 108,000,000 shares of our Class B common stock, is wholly-owned by Salavador Rosillo.
Africement, Inc., which owns 80,920,000 shares of Class A common stock, is wholly-owned by Salvador Rosillo.
29
The following table sets forth information as to the shares of common stock beneficially owned as of Novenber 17, 2016 by (i) each person known to us to be the beneficial owner of more than 5% of our common stock; (ii) each Director; (iii) each Executive Officer; and (iv) all of our Directors and Executive Officers as a group. Unless otherwise indicated in the footnotes following the table, the persons as to whom the information is given had sole voting and investment power over the shares of common stock shown as beneficially owned by them. Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act, which generally means that shares of common stock subject to options currently exercisable or exercisable within 60 days of the date hereof are considered to be beneficially owned, including for the purpose of computing the percentage ownership of the person holding such options, but are not considered outstanding when computing the percentage ownership of each other person. The footnotes below indicate the amount of unvested options for each person in the table. None of these unvested options vest within 60 days of the date hereof.
| Title of Class | Name of Beneficial Owner | Amount and Nature of Beneficial Ownership | Voting Percentage | * | | Voting Percentage* After Offering | | |||||
|
|
| | | | ||||||||
| Class A Common Stock | Salvador Rosillo | 90,000,000 | 0.76 | % | | ** | % | |||||
| Class A Common Stock | Nieves Rosillo | | | 10,108,000 | | | | 0.09 | % | | ** | % |
| Class B Common Stock | Salvador Rosillo | | | 108,000,000 | | | | 98.72 | % | | ** | % |
| All Officers and Directors (2 persons) | Class A Shares | | | 100,108,000 | | | | 0.85 | % | | ** | % |
| All Officers and Directors (1 person) | Class B Shares | | | 108,000,000 | | | | 98.72 | | | | |
*Voting percentage in the above table are calculated by combining the voting power of Class A and Class B shares, as if voting together as a single class.
**Voting percentages after this offering will depend on the success of the offering. Since the overwhelming majority of voting rests with our founder through his Class B common stock, the voting percentages in the above table will not change materially in that so long as our founder holds the Class B common stock, he will maintain voting control of the Company.
The following summary is a description of the material terms of our capital stock and is not complete. You should also refer to our articles of incorporation, as amended and our bylaws, as amended, which are included as exhibits to the registration statement of which this Offering Circular forms a part.
We are authorized to issue up to 1,892,000,000 shares of Class A common stock, par value $0.001 per share, and 108,000,000 shares of Class B common stock, $0.001 value per share.
As of the date of this offering, we have 151,560,840 shares of Class A common stock and 108,000,000 shares of Class B common stock outstanding.
Common Stock
Voting
Each holder of our Class A common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Each holder of our Class B common stock is entitled to 108 votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Any action at a meeting at which a quorum is present will be decided by a majority of the votes cast.
Dividends
Holders of our Class A and Class B common stock are entitled to receive dividends when, as and if declared by our Board of Directors out of funds legally available for payment, subject to the rights of holders, if any, of our preferred stock. Any decision to pay dividends on our common stock will be at the discretion of our Board of Directors. Our Board of Directors may or may not determine to declare dividends in the future. See Dividend Policy. The Boards determination to issue dividends will depend upon our profitability and financial condition, and other factors that our Board of Directors deems relevant.
Liquidation Rights
In the event of a voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of our Class A and Class B common stock will be entitled to share ratably on the basis of the number of shares held in any of the assets available for distribution after we have paid in full all of our debts and after the holders of all outstanding preferred stock, if any, have received their liquidation preferences in full.
30
Preferred Stock
We are currently not authorized to issue any preferred stock.
Limitations on Liability and Indemnification of Officers and Directors
Delaware law authorizes corporations to limit or eliminate (with a few exceptions) the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors fiduciary duties as directors. Our articles of incorporation and bylaws include provisions that eliminate, to the extent allowable under Delaware law, the personal liability of directors or officers for monetary damages for actions taken as a director or officer, as the case may be. Our articles of incorporation and bylaws also provide that we must indemnify and advance reasonable expenses to our directors and officers to the fullest extent permitted by Delaware law. We are also expressly authorized to carry directors and officers insurance for our directors, officers, employees and agents for some liabilities. We currently do not maintain directors and officers insurance covering certain liabilities that may be incurred by directors and officers in the performance of their duties
The limitation of liability and indemnification provisions in our articles of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to the indemnification provisions in our articles of incorporation and bylaws.
There is currently no pending litigation or proceeding involving any of directors, officers or employees for which indemnification is sought.
Transfer Agent
The transfer agent for our common stock is Olde Monmouth Stock Transfer.
SHARE ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities. We are unable to estimate the number of shares of common stock that may be sold in the future.
Upon the completion of this offering, we will have _____________________ outstanding shares of common stock if we complete the maximum offering hereunder. All of the shares sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by one of our affiliates as that term is defined in Rule 144 under the Securities Act, which generally includes directors, officers or 5% stockholders.
Rule 144
Shares of our common stock held by any of our affiliates, as that term is defined in Rule 144 of the Securities Act, may be resold only pursuant to further registration under the Securities Act or in transactions that are exempt from registration under the Securities Act. In general, under Rule 144 as currently in effect, any of our affiliates would be entitled to sell, without further registration, within any three-month period a number of shares that does not exceed the greater of:
|
| |
| 1% of the number of shares of common stock then outstanding, which will equal about ______________________ shares immediately after this offering, assuming minimum offering size; or |
|
| |
| the average weekly trading volume of the unrestricted common stock during the four calendar weeks preceding the filing of a Form 144 with respect to the sale. |
Sales under Rule 144 by our affiliates will also be subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
31
The Offering will be sold by our officers and directors.
This is a self-underwritten offering. This Offering Circular is part of an exemption under Regulation A that permits our officers and directors to sell the Shares directly to the public in those jurisdictions where the Offering Circular is approved, with no commission or other remuneration payable for any Shares sold. There are no plans or arrangements to enter into any contracts or agreements to sell the Shares with a broker or dealer. The Company has already entered in a Securities Purchase Agreement with Blackbridge Capital Fund, LLC, which gives Blackbridge Capital Fund, LLC the option to purchase up to $20,000,000 of the offering. The Securities Purchase Agreement is not exclusive, and after the qualification by the Commission and acceptance by those states where the offering will occur, the Officer and Directors intends to advertise through personal contacts, telephone, and hold investment meetings in those approved jurisdiction only. We do not intend to use any mass-advertising methods such as the Internet or print media. Officers and Directors will also distribute the prospectus to potential investors at meetings, to their business associates and to his friends and relatives who are interested the Company as a possible investment, so long as they offering is an accordance with the rules and regulations governing the offering of securities in the jurisdictions where the Offering Circular has been approved. In offering the securities on our behalf, the Officers and Directors will rely on the safe harbor from broker dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934.
Terms of the Offering
The Company is offering on a best-efforts, self-underwritten basis a maximum of _____________________shares of its common stock.
The Company is offering, on a best-efforts, self-underwritten basis, a maximum of _____________________shares of its common stock at a fixed price of $xxx per share. The price of $xxx per share is fixed for the duration of the offering. There is no minimum investment required from any individual investor. The shares are intended to be sold directly through the efforts of our officers and directors. The shares are being offered for a period not to exceed 360 days. The offering will terminate on the earlier of: (i) the date when the sale of all _________________________shares is completed, or (ii) 360 days from the effective date of this document. For more information, see the section titled Plan of Distribution and Use of Proceeds herein.
In the event that the offering price, determined upon approval of the Attorney General of the state of New York, is such that to fulfill the Offering the Company will be required to increase the number of authorized Class A common stock, the Board has been authorized to file the appropriate filings with the state of Delaware.
The validity of the securities offered hereby will be passed upon by Eilers Law Group, P.A.
None.
As a Tier 1, Regulation A filer, we are not required to file any reports.
32
FOR YEAR ENDED FEBRUARY 28, 2015
AND
FOR YEAR ENDED FEBRUARY 29, 2016
| | Condensed Balance Sheet at February 28, 2015 and February 29, 2016 (Unaudited) | F-2 |
| Condensed Statements of Operations for year ended February 28, 2015 and February 29, 2016 (Unaudited) | F-3 | |
| | Condensed Statement of Changes in Stockholders Deficit for the year ended February 28, 2014 and February 28, 2015 (Unaudited) | F-4 |
| Condensed Statement of Cash Flows for year ended February 28, 2015 and February 29, 2016 (Unaudited) | F-5 | |
| Notes to Unaudited Condensed Financial Statements | F-6 |
F-1
| HempAmericana, Inc. (A Development Stage Company) Balance Sheet | |||||||
|
|
|
|
|
|
|
|
|
|
| |
|
| February 29 2016 |
| February 28, 2015 |
|
|
|
|
|
| (unaudited) |
| (unaudited) |
|
| ASSETS |
| ||||||
|
|
|
|
| |
|
|
|
|
| Current Assets |
|
| |
|
|
|
|
| Cash |
| $ | 807 |
| 233 |
|
|
| Inventory |
|
| 10,928 |
| 7,556 |
|
|
|
|
|
| |
| |
|
|
|
|
|
| |
| |
|
|
| Total Current Assets |
|
| 11,735 |
| 7,789 |
|
|
|
|
|
| |
| |
|
|
| TOTAL ASSETS |
| $ | 11,735 |
| 7,789 |
|
|
|
|
|
| |
| |
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
| LIABILITIES & STOCKHOLDERS (DEFICIT) |
| ||||||
|
|
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts Payable-Related Party |
| $ | 480 |
| 480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Current Liabilities |
|
| 480 |
| 480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES |
|
| 480 |
| 480 |
|
|
|
|
|
| |
|
|
|
|
| Stockholders Equity (Deficit) |
|
| |
|
|
|
|
| Class A Common stock ($.001 par value, 1,000,000,000 shares authorized, 11,860,840 shares issued and outstanding as of February 28, 2015 and 630,840 as of February 28, 2016) |
|
| 75,142 |
| 40,000 |
|
| | | | | | | | |
| | Class B Common stock ($.12 par value, 125,284 shares authorized, 125,284 shares issued and outstanding as of February 28, 2015 and 0 as of February 28, 2014) | | | - | | 15,034 | |
| | | | | | | | |
|
| Additional paid-in capital |
|
| 1,157 |
| 26,894 |
|
|
| Deficit accumulated during development stage |
|
| (65,044) |
| (45,999) |
|
|
|
|
|
| |
| |
|
|
| Total Stockholder's (Equity/ Deficit) |
|
| (460,382) |
| 7,789 |
|
|
| TOTAL LIABILITIES & STOCKHOLDERS (EQUITY/ DEFICIT) |
| $ | 11,735 |
| 7,789 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-2
Hemp Americana, Inc. (A Development Stage Company) Statements of Operations For the period February 10, 2014 Through February 28, 2015 | |||||
|
|
|
|
| |
|
|
|
|
| | | February 10, 2014 |
|
|
|
| | | (Inception) |
|
|
|
| Year Ended | | Through |
|
|
|
| February 29, 2016 | | February 28, 2015 |
|
| |
| (unaudited) | | (unaudited) |
|
| Net Revenues |
|
| |
|
|
| Revenues from sales |
| - | | 1,300 |
|
|
|
|
| |
|
|
| Total Revenues |
| - | | 1,300 |
| | | | | | |
| | Cost and Operating Expenses | | | | |
|
| Cost of Goods Sold |
| - | | 940 |
|
| General & Administrative Expenses |
| 7,845 | | 45,979 |
|
| Organization and related expenses |
| - | | 380 |
|
|
|
|
| |
|
|
|
|
|
| |
|
|
| Total Cost and Operating Expenses |
| 7,845 | | 46,919 |
|
|
|
|
| |
|
|
|
|
|
| |
|
|
| Net Loss | | (7,845) | | (45,619) |
|
|
|
|
| |
|
|
| Basic loss per share |
| (0.01) | | (0.00) |
|
|
|
|
| |
|
|
| Weighted average number of common shares outstanding |
| 460,834 | | 15,233,303 |
| | | | | | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-3
| HempAmericana, Inc. (A Development Stage Company) Statement of Changes in Stockholders (Deficit) For the period February 10, 2014 Through February 28, 2015 | ||||||||||||
|
|
|
|
| Deficit |
| |||||||
|
|
|
|
| Accumulated |
| |||||||
|
|
| Common | Additional | During |
| |||||||
|
| Common | Stock | Paid-in | Development |
| |||||||
|
| Stock | Amount | Capital | Stage | Total | |||||||
|
|
|
|
|
|
| |||||||
| February 10, 2014 (inception) | - | - | - | - | - | |||||||
| Balances, February 28, 2014 | 40,000,000 | 40,000 | (40,000) | (380) | (380) | |||||||
| Issuance of 45,000,000 restricted shares of common stock | 45,000,000 | $45,000 | - | - | 45,000 | |||||||
| Issuance of 125,283 shares of common stock | 125,283 | 15,034 | | | 15.034 | |||||||
| Issuance of 1,080,000 | 108,000 | 108 |
| 108 |
| |||||||
| Shares issued to founder, February 25, 2014 | 40,000,000 | $40,000 | (40,000) |
| - | |||||||
| Cancellation of 70,000,000 restricted shares of common stock | (70,000,000) | (70,000) |
|
|
|
| ||||||
| | | | | | | |||||||
| Net loss, February 28, 2014 | - | - | - | ($380) | (380) | |||||||
| Net loss, February 28, 2015 | - | - | 66,090 | (45,619) | 20,471 | |||||||
| Balance, February 28, 2014 | 40,000,000 | $40,000 | (40,000) | ($380) | (380) | |||||||
| Balance, February 28, 2015 | 15,233,283 | $30,142 | 26,090 | (45,999) | 10,233 | |||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-4
| HempAmericana, Inc. (A Development Stage Company) Statements of Cash Flows For the year ended February 28, 2015 And Year ended February 29, 2016 | ||||||
|
|
|
|
|
|
| |
|
|
|
| | | Inception | |
|
|
|
| Year Ended | | Through | |
|
|
|
| February 28, | | February 28, | |
|
|
|
| 2015 | | 2014 | |
|
|
|
| (unaudited) | | (unaudited) | |
|
|
|
|
| |
| |
|
| CASH FLOWS FROM OPERATING ACTIVITIES |
|
| |
| |
|
|
|
|
| |
| |
|
| Net (loss) | $ | (7,845) | | (45,619) | |
|
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: |
|
| |
| |
|
| Changes in Assets and Liabilities: |
| - | | - | |
|
| Accounts Payable - Related Party |
| - | | (480) | |
| | Inventory | | (928) | | (10,000) | |
| | | | | | | |
| | Financing Activities: | | | | | |
| | Expenses paid on behalf of company by shareholder | | - | | 66,090 | |
| | | | | | | |
| | Common Stock | | 9,347 | | (9,858) | |
|
| Net cash used by operating activities |
| 9,347 | | 133 | |
|
| Net increase (decrease) in cash |
| 574 | | 100 | |
|
|
|
|
| |
| |
|
| Cash at beginning of year |
| 233 | | 100 | |
|
|
|
| | |
| |
|
| Cash at end of year | $ | 807 | | 233 | |
|
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
| |
| |
| | Interest paid | $ | - | | - | |
|
| Income taxes paid | $ | - | | - | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-5
HempAmericana, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM February 10, 2014 (INCEPTION) TO February 28, 2014
Note 1 Organization and Description of Business
HempAmericana, Inc. (the Company), is a development stage company, incorporated under the laws of the State of Delaware on February 10, 2014. The Company intends to explore the industry of hemp based products and unveil their own products to the general public for sale.
The Company has elected February 28th as its year end.
Note 2 Going Concern
The Companys financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established any source of revenue to cover its operating costs. These conditions raise substantial doubt about the companys ability to continue as a going concern Company will engage in very limited activities without incurring any liabilities that must be satisfied in cash until a source of funding is secured. The Company will offer noncash consideration and seek equity lines as a means of financing its operations. If the Company is unable to obtain revenue producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.
Note 3 Summary of Significant Accounting Policies
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (GAAP) of the United States (See Note 2) regarding the assumption that the Company is a going concern.
Development Stage Company
The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is still devoting substantially all of its efforts on establishing the business. Its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Companys development stage activities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates.
Cash Equivalents
HempAmericana, Inc. considers all highly liquid investments with maturities of three months or less to be cash equivalents. At February 28, 2015, the Company had $233 of cash. The Company has no cash equivalents at either date.
The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at February 29, 2016 was $807. HempAmericana, Inc. considers all highly liquid investments with maturities of three months or less to be cash equivalents.
Inventories
Inventories consist of rolling papers. At February 28, 2015, the Company had $7,556 of product inventory on hand. At February 29, 2016, the Company had $10,928 of product inventory on hand.
F-6
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Basic Earnings (Loss) Per Share
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
Fair Value of Financial Instruments
The Companys balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
The Company follows FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| · | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| · | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| · | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of February 28, 2015. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued expenses. The fair value of the Companys notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of August 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued expenses. The fair value of the Companys notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.
F-7
Share Based Expenses
ASC 718 Compensation Stock Compensation prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
The Company had no stock-based compensation plans as of February 29, 2016. The Company had two stock issuances to its founder in the amount of 40,045,000 restricted class A common shares and 108,000,000 restricted class B common shares which were considered to be of nominal value through February 29, 2016."
Related Parties
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Related party transactions for the period ended February 29, 2016 totaled $480 and were comprised solely of accounts payable.
Recently Issued Accounting Pronouncements
Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification (ASC) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.
We have reviewed the FASB issued Accounting Standards Update (ASU) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporations reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Note 4 Stockholders Deficit
On February 25, 2014, the Company issued 40,000,000 of its $0.001 par value common stock at $0.001 per share to the founder of the Company in exchange for developing the Companys business concept and plan. The value was considered nominal at inception due to lack of assets and operations.
The stockholders equity section of the Company contains the following classes of capital stock as of February 27, 2016:
|
| - | Class A Common stock, $ 0.001 par value: 1,000,000,000 shares authorized; 630,840 shares issued and outstanding -Class B Common Stock, $0.001 par value: 108,000,000 authorized; 108,000,000 issued and outstanding |
| | | |
Note 5 Related-Party Transactions
At February 29, 2016 he company had a related-party payable in the amount of $480 to its sole officer and shareholder.
Note 6 - Subsequent Events
Management has evaluated the subsequent events through the date of this report and has concluded that there are no known subsequent events to report.
F-8
INDEX TO FINANCIAL STATEMENTS
FOR YEAR SIX MONTHS ENDED AUGUST 31, 2016
| | Condensed Balance Sheet at August 31, 2016 and August 31, 215 (Unaudited) | F-10 |
| Condensed Statements of Operations for the six months ended August 31, 2016 and 2015 (Unaudited) | F-11 | |
| Condensed Statement of Cash Flows for the six months ended August 31, 2016 and 2015(Unaudited) | F-12 | |
| Notes to Unaudited Condensed Financial Statements | F-13 |
F-9
| HempAmericana, Inc. (A Development Stage Company) Balance Sheet | |||||||
|
|
|
|
|
|
|
|
|
|
| |
|
| August 31, 2016 |
| August 31, 2015 |
|
|
|
|
|
| (unaudited) |
| (unaudited) |
|
| ASSETS |
| ||||||
|
|
|
|
| |
|
|
|
|
| Current Assets |
|
| |
|
|
|
|
| Cash |
| $ | 28,359 | $ | 319 | |
|
| Inventory |
|
| 11,504 |
| 10,000 |
|
|
| Furniture & equipment |
|
| 235 |
| - |
|
|
|
|
|
| |
|
|
|
|
| Total Current Assets |
|
| 39,863 |
| 10,319 | |
|
|
|
|
| |
|
|
|
|
| TOTAL ASSETS |
| $ | 40,098 | $ | 10,319 |
|
|
|
|
|
| |
| |
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
| LIABILITIES & STOCKHOLDERS (DEFICIT) |
| ||||||
|
|
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts Payable-Related Party |
| $ | 480 | $ | 480 | |
|
| Convertible Note Payable |
|
| 500,000 |
| - |
|
|
|
|
|
|
|
|
|
|
|
| Total Current Liabilities |
|
| 500,480 |
| 480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES |
| $ | 500,480 | $ | 480 |
|
|
|
|
|
| |
|
|
|
|
| Stockholders Equity (Deficit) |
|
| |
|
|
|
|
| Class A Common stock ($.001 par value, 1,000,000,000 shares authorized, 151,560,840 shares issued and outstanding as of August 31, 2016 and 54,800,840 as of August 31, 2015) |
|
| 111,142 |
| 75,142 |
|
| | | | | | | | |
| | Class B Common stock ($.001 par value, 108,000,00 shares authorized, 108,000,000 shares issued and outstanding as of August 31, 2016 and 0 as of August 31, 2015) | | | - | | - | |
| | | | | | | | |
|
| Additional paid-in capital |
|
| 6,406 |
| (5,010) |
|
|
| Deficit accumulated during development stage |
| $ | (577,930) | $ | (60,293) |
|
|
|
|
|
| |
| |
|
|
| Total Stockholder's (Equity/ Deficit) |
|
| 40,098 |
| 10,319 |
|
|
| TOTAL LIABILITIES & STOCKHOLDERS (EQUITY/ DEFICIT) |
| $ | 40,098 | $ | 10,319 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-10
| Hemp Americana, Inc. (A Development Stage Company) Statements of Operations For the six months ended August 31, | |||||
|
|
|
|
| |
|
|
|
|
| | | |
|
|
|
| | | |
|
|
|
| | | |
|
|
|
| 2016 | | 2015 |
|
| |
| (unaudited) | | (unaudited) |
|
| Net Revenues |
|
| |
|
|
| Revenues from sales | $ | 720 | $ | - |
|
|
|
|
| |
|
|
| Total Revenues |
| 720 | | - |
| | | | | | |
| | Cost and Operating Expenses | | | | |
|
| General & Administrative Expenses |
| 13,606 | | 4,067 |
|
|
|
|
| |
|
|
| Total Cost and Operating Expenses | $ | 13,606 | $ | 4,067 |
|
|
|
|
| |
|
|
|
|
|
| |
|
|
| Net Loss | $ | (12,886) | $ | (4,067) |
|
|
|
|
| |
|
|
| Basic loss per share |
| (0.00) | | (0.00) |
|
|
|
|
| |
|
|
| Weighted average number of common shares outstanding |
| 150,201,642 | | 35,578,193 |
| | | | | | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-11
| HempAmericana, Inc. (A Development Stage Company) Statements of Cash Flows For the six months ended August 31, | ||||||
|
|
|
|
|
|
| |
|
|
|
| | | | |
|
|
|
| | | | |
|
|
|
| | | | |
|
|
|
| 2016 | | 2015 | |
|
|
|
| (unaudited) | | (unaudited) | |
|
|
|
|
| |
| |
|
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
| |
| |
|
|
|
|
| |
| |
|
| Net (loss) | $ | (12,886) | | (4,067) | |
|
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: |
|
| |
| |
| | Inventory | | (576) | | 940 | |
| | Net cash (used in) provided by operating activities | | (13,462) | | (3,127) | |
| | | | | | | |
| | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | |
| | Proceeds from issuance of Common Stock | | 41,249 | | 3,460 | |
|
| Net cash provided by financing activities |
| 41,249 | | 3,460 | |
|
| |
| - | | | |
| | CASH FLOWS (USED IN) INVESTMENT ACTIVITIES: | | | | | |
| | Fixed assets acquired | | (235) | | - | |
|
| Net cash (used in) provided by investing activities |
| (235) | | - | |
| | | | | | | |
| | Net increase in cash and cash equivalents | | 27,552 | | 333 | |
|
| Cash at beginning of period |
| 807 | | (14) | |
|
| Cash at end of period | $ | 28,359 | | 319 | |
| | | | | | | |
|
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
| |
| |
| | Interest paid | $ | - | | - | |
|
| Income taxes paid | $ | - | | - | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-12
HempAmericana, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2016
Note 1 Organization and Description of Business
HempAmericana, Inc. (the Company), is a development stage company, incorporated under the laws of the State of Delaware on February 10, 2014. The Company intends to explore the industry of hemp based products and unveil their own products to the general public for sale.
The Company has elected February 28th as its year end.
Note 2 Going Concern
The Companys financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established any source of revenue to cover its operating costs. These conditions raise substantial doubt about the companys ability to continue as a going concern Company will engage in very limited activities without incurring any liabilities that must be satisfied in cash until a source of funding is secured. The Company will offer noncash consideration and seek equity lines as a means of financing its operations. If the Company is unable to obtain revenue producing contracts or financing or if the revenue or financing it does obtain is insufficient to cover any operating losses it may incur, it may substantially curtail or terminate its operations or seek other business opportunities through strategic alliances, acquisitions or other arrangements that may dilute the interests of existing stockholders.
Note 3 Summary of Significant Accounting Policies
Basis of Presentation
The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (GAAP) of the United States (See Note 2) regarding the assumption that the Company is a going concern.
Development Stage Company
The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. The Company is still devoting substantially all of its efforts on establishing the business. Its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Companys development stage activities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at August 31, 2016 and August 31, 2015 were $28,359 and $333 respectively.
HempAmericana, Inc. considers all highly liquid investments with maturities of three months or less to be cash equivalents.
Inventories
Inventories consist of rolling papers. At August 31, 2016, the Company had $11,504 of product inventory on hand.
F-13
Income Taxes
The Company accounts for income taxes under ASC 740 Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Basic Earnings (Loss) Per Share
The Company computes basic and diluted earnings per share amounts in accordance with ASC Topic 260, Earnings per Share. Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
Fair Value of Financial Instruments
The Companys balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
The Company follows FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entitys own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| · | Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| · | Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| · | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. |
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of August 31, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, accrued compensation and accrued expenses. The fair value of the Companys notes payable is estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value.
F-14
Share Based Expenses
ASC 718 Compensation Stock Compensation prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
The company had no stock-based compensation plans as of August 31, 2016. The Company had one stock issuance to its founder in the amount of 40,000,000 restricted common shares to the founder which were considered to be of nominal value through August 31, 2016.
Related Parties
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Related party transactions for the period ended August 31, 2016 totaled $480 and were comprised solely of accounts payable.
Recently Issued Accounting Pronouncements
Except for rules and interpretive releases of the SEC under authority of federal securities laws and a limited number of grandfathered standards, the FASB Accounting Standards Codification (ASC) is the sole source of authoritative GAAP literature recognized by the FASB and applicable to the Company.
We have reviewed the FASB issued Accounting Standards Update (ASU) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporations reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.
Note 4 Stockholders Deficit
On February 25, 2014, the Company issued 40,000,000 of its $0.001 par value common stock at $0.001 per share to the founder of the Company in exchange for developing the Companys business concept and plan. The value was considered nominal at inception due to lack of assets and operations.
The stockholders equity section of the Company contains the following classes of capital stock as of August 31, 2016:
|
| - | Class A Common stock, $ 0.001 par value: 1,000,000,000 shares authorized; 151,860,540 shares issued and outstanding -Class B Common Stock, $0.001 par value: 108,000,000 authorized; 108,000,000 issued and outstanding |
| | | |
Note 5 Related-Party Transactions
At August 31, 2016 the company had a related-party payable in the amount of $480 to its sole officer and shareholder.
Note 6 - Subsequent Events
Management has evaluated the subsequent events through the date of this report and has concluded that there are no known subsequent events to report.
F-15
EXHIBIT INDEX
| Exhibit Number | | Description |
| 1.1 | | Securities Purchase Agreement with Blackbridge Capital, LLC |
| 2.1 | | Articles of Incorporation* |
| 2.2 | | Bylaws* |
| 2.3 | | Articles of Amendment |
| 6.1 | | Convertible Promissory Note held by Blackbridge Capital, LLC |
| 11.1 | | Consent of Eilers Law Group, P.A. (Included in 12.1) |
| 12.1 | | Opinion of Eilers Law Group, P.A. regarding legality of the securities covered in this Offering |
*Filed with Form S-1 on April 7, 2014
Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this amendment to Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on November 18, 2016.
HempAmericana, Inc.
By:
/s/ Salvador Rosillo
Salvador Rosillo
Chief Executive Officer
33
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement" ), dated as of March 25, 2016 by and between HempAmericana, Inc., a Delaware corporation, with headquarters located at 78 Reade St, Suite 4FW, New York, NY, 10007 (the "Company"), and Blackbridge Capital, LLC, a Delaware limited liability company, with its address at 450 7th Ave, Suite 609, New York, NY 10123 (the "Buyer").
WHEREAS:
A.
Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement up to Twenty Million Dollars ($20,000,000.00) of the Companys C l a s s A common stock (the "Securities" or Shares), $0.001 par value per share, of the Company (the "Common Stock"), upon the terms and subject to the limitations and conditions set forth in this Agreement.
B.
The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Securities as is set forth immediately below its name on the signature pages hereto; and
NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1.
Purchase and Sale of Securities.
a.
Purchase of Securities, Draw Down. During the Term of this Agreement (as defined in Section 1.f. below), the Company may sell the Buyer up to $20,000,000.00 worth of shares of its class A common stock (a Reg A Purchase). In no event may any Reg A Purchase be in an amount that would result in the beneficial ownership of more than 9.99% of the outstanding common stock of the Company by Buyer (such calculation taking into account as the denominator for such calculation, the entire issued common stock of the Company, which includes both the Common Stock and the Class B common stock of the Company).
b.
Maximum Reg A Purchase. The maximum Reg A Purchase allowed under this Agreement shall be equal to the lesser of $250,000.00 or 200% of the average daily trading volume for the ten (10) trading days immediately preceding the Reg A Purchase Notice Date, multiplied by the lowest trading price for the Companys Common Stock over the ten (10) trading days immediately preceding the day that the Company requests the Buyer make a Reg A Purchase. (a Reg A Purchase Notice Date).
c.
Form of Payment, Purchase Price. The Purchase Price for each Reg A Purchase Notice shall be equal to a price to be determined by the Buyer and the Company upon the effectiveness of the Regulation A Offering Circular.
d.
Commitment Fee. Upon the execution of this Agreement, the Company shall issue to Buyer a Commitment Fee of a Convertible Promissory Note in the amount of $500,000.00 (the Note Commitment); and $500,000.00 (the Share Commitment) worth of restricted shares of Common Stock (the Commitment Shares), calculated as follows, the Initial Commitment Shares means such number of shares of Common Stock (rounded up to the nearest whole share) equal to the sum of the quotient obtained by dividing (x) $500,000.00, representing the Share Commitment, by (y) 85% of the lowest trading price of the Common Stock in the ten days prior to execution of the Agreement. If, at any time during the Term of this Agreement, and upon the Regulation A Offering being qualified by the Commission, the Buyer may exchange the Commitment Shares and Commitment Note as subscription payment toward purchase of those shares offered for resale per the Reg A Offering. In the event that Buyer elects to exchange the Commitment Shares for purchase of shares from the Reg A Offering, said shares shall be issued free of restrictive legend and will be deemed qualified shares.
In the event that the total Commitment Shares issued or to be issued to the Buyer represents more than 9.99% of the outstanding stock of the Company, the Buyer has the right to have the Commitment Shares delivered in multiple issuances. For the avoidance of doubt, all of the Commitment Shares and Commitment Note shall be fully earned as of the Closing Date, regardless of whether any Reg A Purchases are issued by the Company or settled hereunder. Buyers Commitment shares shall be issued in such amount to the Company such that the Company may still make sales to the Buyer under the Reg A Offering without the Buyer holding more than 9.99% of the outstanding common stock of the Company.
In the event that the Regulation A Offering is not declared Effective by the SEC within six months of the date of the this Agreement for whatever reason (the Effective Deadline), the Buyer will forgive and retire the Share Commitment and return the Commitment Shares to be retired by the Company. The Buyer will also automatically extinguish $300,000 worth of principal of the Note Commitment if the Regulation A Offering is not declared effective by the Effective Deadline, effectively leaving $200,000 of principal plus accrued but unpaid interest as the Note Commitment.
e.
Closing Date. The initial Closing Date shall be the date of execution of this Agreement, at which time the Commitment Fee shall become due and payable, regardless of whether any Reg A Purchases are issued by the Company or settled hereunder (subject to Section 1.d. above). All Reg A Purchases shall be considered subsequent Closing Dates.
f.
Term. The term of this Agreement shall expire two (2) years from the date on which the Companys FORM 1-A Registration Statement becomes effective (the Term). The Company may terminate this Agreement prior to the expiration, but only if the Company must terminate this Agreement as a condition of a transaction to Up-List the Company to a higher tier of the OTC Markets, NASDAQ, or NYSE. (an Up-Listing Transaction) .
g.
Registration of Securities. Buyer shall have registration rights with respect to all Securities underlying this Agreement, which are issuable upon the Reg A Purchase of all $20,000,000.00 of the Companys Common Stock. The Company shall file a Form FORM 1-A Offering Circular within four (4) months of the execution of this Agreement, in order to register all Common Shares underlying this Agreement. If such FORM 1-A Offering Circular is not filed within four (4) months of the execution of this Agreement, Buyer, in its sole discretion, may terminate this Agreement. In addition, if the FORM 1-A Offering Circular does not become effective within six (6) months from its initial filing date, Buyer may, in its sole discretion, terminate this Agreement. There shall be no cost or expense on behalf of Buyer related to the registration of the shares underlying this Agreement. The Company must ensure that the Offering Circular, once effective, remains effective at all times, not subject to any actual or threatened stop order or suspension. If the effectiveness of the Offering Circular lapses for any reason at any time, Buyer, in its sole discretion, may terminate this Agreement.
2. Buyer's Representations and Warranties. The Buyer represents and warrants to the Company that:
a.
Investment Purpose. As of the date hereof, the Buyer is purchasing the Securities for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided , however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to an Offering Circular or an exemption under the 1933 Act.
b.
Accredited Investor Status. The Buyer is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D (an "Accredited Investor").
c.
Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer's compliance with, the representations , warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d.
Information. The Buyer and its advisors, if any, have been , and for so long as the Securities remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been reasonably requested by the Buyer or its advisors . The Buyer and its advisors, if any, have been, and for so long as the Securities remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representative s shall modify, amend or affect Buyer 's right to rely on the Company's representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein. The Buyer is aware that the Companys stock currently trades on the OTC with a stop sign, but that the Company is taking steps with its accountant to have this sign removed by providing the OTC with updated financial information.
e.
Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.
f.
Transfer or Re-sale. The Buyer understands that (i) the sale or re- sale of the Securities has not been, at the time of execution of this Agreement, registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective Offering Circular under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration , which opinion shall be accepted by the Company, subject to reasonable review and objection by Companys counsel , (c) the Securities are sold or transferred to an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) ("Regulation S"), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company, subject to reasonable review and objection by Companys counsel; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder ; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.
g.
Legends. The Buyer understands that the Securities and, until such time as the Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Shares may bear a restrictive legend in substantially the following form (and a stop- transfer order may be placed against transfer of the certificates for such Securities):
"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions , to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company, subject to reasonable review and objection by Companys counsel, so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Securities.
h.
Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i.
Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer's name on the signature pages hereto.
3.
Representations and Warranties of the Company. The Company represents and warrants to the Buyer that, to its knowledge:
a.
Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. "Material Adverse Effect" means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith, which cannot be cured in a reasonable amount of time.
b.
Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Securities and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Securities by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by the Company's Board of Directors and no further consent or authorization of the Company, its Board of Directors, is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Securities, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of: (i) 1,892,000,000 shares of of Class A Common Stock, $0.001 par value per share, of which
151,560,840 shares were issued and outstanding as of March 15, 2016 and (i) 108,000,000
shares of Class B Common Stock, $0.001 par value per share, of which 108,000,000 shares were issued and outstanding as of March 15,2016. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non- assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement, (i) there are no outstanding options, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company, or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company, (ii) there are no agreements or arrangements under which the Company is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Securities. The Company has furnished to the Buyer true and correct copies of the Company 's Certificate of Incorporation as in effect on the date hereof ("Certificate of Incorporation") , the Company's By-laws, as in effect on the date hereof (the "By-laws"), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall, upon request by the Buyer, provide the Buyer with a written update of this representation signed by the Company 's Chief Executive on behalf of the Company as of the Closing Date.
c.
Issuance of Shares. The Shares are duly authorized and reserved for issuance and, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
d.
Acknowledgment of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Shares. The Company further acknowledges that its obligation to issue the Shares in accordance with this Agreement, and the issuance of such Shares is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
e.
No Conflicts. The execution, delivery and performance of this Agreement , the Securities by the Company and the consummation by the Company of the transaction s contemplated hereby and thereby will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination , amendment, acceleration or cancellation of, any agreement , indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults, terminations , amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). The Company is not in violation of its Certificate of Incorporation , By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company is a party or by which any property or assets of the Company is bound or affected , except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity except for such violation that would not cause a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement , the Securities in accordance with the terms hereof or thereof or to issue and sell the Securities in accordance with the terms hereof and to issue the Shares. All consents, authorizations , orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the Counter Bulletin Board (the "OTCBB") and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. If any Material Adverse Event takes place during the Term of this Agreement, no Reg A Purchase Notice may be delivered by Company to Buyer, and Buyer may, in its sole discretion, terminate this Agreement.
f.
SEC Documents; Financial Statements. The Company has, or once it becomes a public entity will, timely file all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein , being hereinafter referred to herein as the "SEC Documents") unless not required to because of an applicable exemption. All SEC Documents of the Company are publicly available on the website http://SEC.gov. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein , in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as disclosed on Schedule 3(i), the Company has no liabilities, contingent or otherwise , other than (i) liabilities incurred in the ordinary course of business subsequent to March 15, 2016, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company.
g.
Absence of Certain Changes. Since the date of this Agreement, there have been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company.
h.
Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened against or affecting the Company, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(h) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company, without regard to whether it would have a Material Adverse Effect. The Company are unaware of any facts or circumstances which might give rise to any of the foregoing.
i.
Patents, Copyrights, etc. The Company owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how , trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights ("Intellectual Property") necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company's knowledge threatened, which challenges the right of the Company with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company's knowledge, the Company's current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person ; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.
j.
No Materially Adverse Contracts, Etc. The Company is not subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company's officers has or is expected in the future to have a Material Adverse Effect. The Company is not a party to any contract or agreement which in the judgment of the Company's officers has or is expected to have a Material Adverse Effect.
k.Certain Transactions. Except as disclosed on Schedule 3(k), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company (other than for services such as consulting arrangements, or as employees, officers and directors), including any contract , agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. In addition, Company agrees that during the Term of this Agreement, it shall not enter into a similar financing arrangement with any other individual or entity.
l.
Disclosure. All information relating to or concerning the Company set forth in this Agreement and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or its business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed (assuming for this purpose that the Company 's reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the 1933 Act).
m.
Acknowledgment Regarding Buyers Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm's length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer ' purchase of the Securities. The Company further represents to the Buyer that the Company's decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
n. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company's securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.
o.
No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby except in accordance with this Agreement.
p.
Permits; Compliance. The Company is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted, except as would not cause a Material Adverse Effect (collectively, the "Company Permits"), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. The Company is not in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Since September 30, 2013, neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.
q.
Environmental Matters.
(i)
There are, to the Company's knowledge , with respect to the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment, actions, actlv1t1es, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and the Company has not received any notice with respect to any of the foregoing, nor is any action pending or, to the Company's knowledge, threatened in connection with any of the foregoing. The term "Environmental Laws" means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, "Hazardous Materials") into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment
, storage, disposal, transport or handling of Hazardous Materials , as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments , licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
(ii)
Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property currently owned, leased or used by the Company, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company 's business.
(iii)
There are no underground storage tanks on or under any real property owned, leased or used by the Company that are not in compliance with applicable law.
r.
Title to Property. The Company has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(t) or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.
s.
Internal Accounting Controls. As is customary for a company of its size, the Company maintains a system of internal accounting controls sufficient, in the judgment of the Company's board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability , (iii) access to assets is permitted only in accordance with management's general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
t.
Foreign Corrupt Practices. Neither the Company, nor any of its Subsidiaries, nor any director , officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution , gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
u.
Solvency. The Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e., its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature.
v.
No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an "investment company" required to be registered under the Investment Company Act of 1940 (an "Investment Company"). The Company is not controlled by an Investment Company.
w.
Breach of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3 that causes a Material Adverse Effect, and in addition to any other remedies available to the Buyer pursuant to this Agreement , it will be considered an Event of default.
2.
Covenants.
a.
Best Efforts. The parties shall use their commercial best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.
b.
Use of Proceeds. The Company shall use the proceeds for general working capital purposes.
c.
[Reserved].
d.
Financial Information. Upon written request the Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities (if such of the following are available): (i) within ten (10) days after the filing with the OTC Markets, a copy of its Annual Report, its Quarterly Reports, and any Current Reports; (ii) within two (2) days after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders.
e.
Listing. The Company shall promptly secure the listing of the Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Shares from time to time issuable upon future Closings. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB or any equivalent replacement quotation service, and will comply in all respects with the Company's reporting , filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority ("FINRA") and such exchange, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCBB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.
f.
Corporate Existence. So long as the Buyer beneficially owns any Securities, the Company shall maintain its corporate existence.
g.
No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
h.
Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default.
i.
Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Securities, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.
j.
Trading Activities. Neither the Buyer nor its affiliates has an open short position in the Common Stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the Common Stock of the Company.
k.
Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Shares in such amounts as specified from time to time by the Buyer to the Company (the "Irrevocable Transfer Agent Instructions"). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof, will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Shares to be issued to the Buyer pursuant to this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Shares issued to the Buyer pursuant to this Agreement. Nothing in this Section shall affect in any way the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements , if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer , promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.
l.
Conditions to the Company's Obligation to Sell. The obligation of the Company hereunder to issue and sell the Shares to the Buyer at each Closing is subject to the satisfaction, at or before each Closing Date of each of the following conditions thereto, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion:
i.
The Buyer shall have executed this Agreement and delivered the same to the Company.
ii.
The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of each Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to each Closing Date.
iii.
No litigation, statute, rule, regulation , executive order, decree, ruling or injunction shall have been enacted, entered , promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
m.
Conditions to The Buyers Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Securities at each Closing is subject to the satisfaction, at or before each Closing Date of each of the following conditions, provided that these conditions are for the Buyer 's sole benefit and may be waived by the Buyer at any time in its sole discretion:
i.
The Company shall have executed this Agreement and delivered same to the Buyer.
ii.
The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed , satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company 's Certificate of Incorporation, By-laws and Board of Directors' resolutions relating to the transactions contemplated hereby.
iii.
No litigation , statute, rule, regulation , executive order, decree, ruling or injunction shall have been enacted, entered , promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
iv.
No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.
vi.
The Shares shall have been authorized for quotation on the OTCBB
(or any equivalent replacement quotation service) and trading in the Common Stock on the OTCBB shall not have been suspended by the SEC, FINRA, or OTC Markets.
vii.
The Buyer shall have received an officer's certificate described in Section 3(c) above, dated as of the initial Closing Date.
viii.
The bid price of the Companys stock via the OTC Markets online quotation system is at least $0.005 for the five days prior to a Reg A Purchase.
1.
Governing Law; Miscellaneous.
a.
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b.
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.
c.
Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
d.
Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
e.
Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested , postage prepaid , (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be :
If to the Company, to: HempAmericana,
Inc. 78 Reade St Suite 4FW
New York, NY, 10007
If to the Buyer: Blackbridge Capital, LLC 450 7th Avenue, STE 609 New York, NY 10123
Each party shall provide notice to the other party of any change in address.
g.
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other, provided, however, the Company may assign this Agreement in the event of a change of control of the Company whereby the Company either sells a majority of its assets or a majority of the voting control of its outstanding common stock (taking into account the voting rights of both the Class A and the Class B common stock). Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its "affiliates," as that term is defined under the 1934 Act, without the consent of the Company.
h.
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i.
Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Publicity. The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCBB or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided , however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, OTCBB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof and be given an opportunity to comment thereon).
k.
Further Assurances. Each party shall do and perform , or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
l.
No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
HempAmericana, Inc.
By: Salvador Rosillo Title: CEO
Blackbridge Capital, LLC
By: Alexander Dillon Title: Managing Partner
CORPORATE RESOLUTION OF THE BOARD OF DIRECTORS OF HEMPAMERICANA, INC.
We, the undersigned, do hereby certify that at a meeting of the Board of Directors of HempAmericana, Inc., a Delaware corporation organized under the laws of the State of Delaware (the Corporation), duly held on March 15, 2016 at the offices of the Corporation, which said meeting all directors of the Corporation were present and voting throughout, the following resolution, upon motions made, seconded and carried, was duly adopted and is now in full force and effect:
WHEREAS, the Board of Directors of the Corporation deem it in the best interests of the Corporation to enter into the Securities Purchase Agreement March 25, 2016 (the Agreement), in connection with the issuance of a convertible note of the Corporation, in the aggregate principal amount of $500,000.00 (the Note), convertible into shares of Class A common stock, par value $0.001 per share, of the Company (the Common Stock), upon the terms and subject to the limitations and conditions set forth in such Note, along with an irrevocable letter agreement with Mountain Share Transfer, the Corporations transfer agent, with respect to the reserve of shares of Common Stock of the Corporation to be issued upon any conversion of the Note; the issuance of such shares of Common Stock in connection with a conversion of the Note; and the indemnification of Mountain Share Transfer for all loss, liability, or expense in carrying out the authority and direction contained in the irrevocable letter agreement (the Letter Agreement);
NOW, THEREFORE, BE IT:
RESOLVED, that the Corporation is hereby authorized to enter into the Agreement, the Note and the Letter Agreement which provides in pertinent part: (i) reserve shares of Common Stock of the Corporation to be issued upon any conversion of the Note; (ii) issue such shares of Common Stock in connection with a conversion of the Note (issuance upon receipt of a notice of conversion of the holder of the Note) without any further action or confirmation by the Corporation; (iii) hereby authorizes the issuance of such number of shares as will be necessary to fully convert the note under its terms and any such shares shall be considered fully paid and non-assessable at the time of their issuance and (iv) the Corporation indemnifies Mountain Share Transfer for all loss, liability, or expense in carrying out the authority and direction contained in the Letter Agreement:
RESOLVED, that any executive officer of the Corporation be, and hereby is, authorized, empowered and directed, from time to time, to take such additional action and to execute, certify and deliver to the transfer agent of the Corporation, as any appropriate or proper to implement the provisions of the foregoing resolutions:
The undersigned, do hereby certify that we are members of the Board of Directors of the Corporation; that the attached is a true and correct copy of resolutions duly adopted and ratified at a meeting of the Board of Directors of the Corporation duly convened and held in accordance with its by- laws and the laws of the State of Delaware, as transcribed by us from the minutes; and that the same have not in any way been modified, repealed or rescinded and are in full force and effect.
IN WITNESS WHEREOF, We have hereunto set our hands as President/CEO and Members of the Board of Directors of the Corporation.
Dated:
Members of the Board: Salvador Rosillo, Director
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT) OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE NOR ANY INTEREST THEREIN NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.
CONVERTIBLE PROMISSORY NOTE
Principal Amount: $500,000.00
Issue Date: March 25, 2016 Maturity Date: March 25, 2017
For good and valuable consideration, HempAmericana, Inc. a Delaware corporation (Maker), hereby makes and delivers this Promissory Note (this Note) in favor of Blackbridge Capital, LLC, or its assigns (Holder), and hereby agrees as follows:
ARTICLE I. PRINCIPAL AND INTEREST
Section 1.1 For value received, Maker promises to pay to Holder at such place as Holder or its assigns may designate in writing, in currently available funds of the United States, the principal sum of Five Hundred Thousand, Dollars. Makers obligation under this Note shall accrue interest at the rate of Five percent (5.0%) per annum from the date hereof until paid in full. Interest shall be computed on the basis of a 365-day year or 366-day year, as applicable, and actual days lapsed. Accrual of interest shall commence on the first business day to occur after the Issue Date and continue until payment in full of the principal sum has been made or duly provided for.
Section 1.2
a.
All payments shall be applied first to interest, then to principal and shall be credited to the Maker's account on the date that such payment is physically received by the Holder.
b.
All principal and accrued interest then outstanding shall be due and payable by the Maker to the Holder on or before March 25, 2017 (the Maturity Date).
c.Maker shall have no right to prepay all or any part of the principal under this Note.
d.
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Maker and will not impose personal liability upon the holder thereof.
e.
In the event the Company is unable to pay back the Note in cash, the Holder may elect to convert the note into shares pursuant to its right under Section 2.1
Section 1.3
This Note is issued as the Commitment Fee pursuant to Section 1. f of Securities Purchase Agreement dated March 25, 2016, and attached below.
ARTICLE II.
CONVERSION RIGHTS; CONVERSION PRICE
Section 2.1
Conversion. The Holder or its assigns shall have the right, from time to time, commencing on the Issuance Date of this Note, to convert any part of the outstanding interest or Principal Amount of this Note into fully paid and non-assessable shares of Class A Common Stock of the Maker (the Conversion Stock) at the Conversion Price determined as provided herein. Promptly after delivery to Maker of a Notice of Conversion of Convertible Note in the form attached hereto as Exhibit 1, properly completed and duly executed by the Holder or its assigns (a Conversion Notice), the Maker shall issue and deliver to or upon the order of the Holder that number of shares of C l a s s A Common Stock for the that portion of this Note to be converted as shall be determined in accordance herewith.
No fraction of a share or scrip representing a fraction of a share will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. The date on which Notice of Conversion is given (the Conversion Date) shall be deemed to be the date on which the Holder faxes or emails the Notice of Conversion duly executed to the Maker. Certificates representing C l a s s A Common Stock upon conversion will be delivered to the Holder within two (2) trading days from the date the Notice of Conversion is delivered to the Maker. Delivery of shares upon conversion shall be made to the address specified by the Holder or its assigns in the Notice of Conversion.
Section 2.2. Conversion Price. Upon any conversion of this Note, the Conversion Price shall equal to Eighty Percent (80%) of the lowest Trading Price (defined below) during the Valuation Period (defined below), and the Conversion Amount shall be the amount of principal or interest electively converted in the Conversion Notice. The total number of shares due under any conversion notice (Notice Shares) will be equal to the Conversion Amount divided by the Conversion Price.
On the date that a Conversion Notice is delivered to Holder, the Company shall deliver an estimated number of shares (Estimated Shares) to Holders brokerage account equal to the Conversion Amount divided by the product of (i) Eighty Percent (80%) and (ii) the lowest trading price in the twenty trading days prior to the day the Holder requests conversion.
The Valuation Period shall mean twenty (20) Trading Days, commencing on the first Trading Day following delivery and clearing of the Notice Shares in Holders brokerage account, as reported by Holder (Valuation Start Date). If at any time, one or multiple times, during the Valuation Period the sum of Estimated Shares and Additional Shares already delivered to Holder is less than the Notice Shares, the company must immediately deliver enough shares equal to the difference (Additional Shares). A Conversion Amount will not be considered fully converted until the end of the Valuation Period for that Conversion Amount, as decreases in the Conversion Price would require the issuance of more Additional Shares, and thereby the issuance of more Notice Shares.
Trading Price means, for any security as of any date, any trading price on the OTC Bulletin Board, or other applicable trading market (the OTCBB) as reported by a reliable reporting service (Reporting Service) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal securities exchange or trading market where such security is listed or traded. Trading Day shall mean any day on which the Class A Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Class A Common Stock is then being traded.
Section 2.3.
Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Maker shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Maker is not the surviving corporation or where there is a change in or distribution with respect to the Class A Common Stock of the Maker), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of Class A Common Stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of Class A Common Stock of the successor or acquiring corporation (Other Property), are to be received by or distributed to the holders of C l a s s A Common Stock of the Maker, then Holder shall have the right thereafter to receive, upon conversion of this Note, the number of shares of common stock of the successor or acquiring corporation or of the Maker, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of C l a s s A Common Stock into which this Note is convertible immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Maker) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Note to be performed and observed by the Maker and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Maker) in order to provide for adjustments of the number of shares of Class A Common Stock into which this Note is convertible which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 2.3(a). For purposes of this Section 2.3(a), common stock of the successor or acquiring corporation shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 2.3(a) shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.
Section 2.4. Restrictions on Securities. This Note has been issued by the Maker pursuant to the exemption from registration under the Securities Act of 1933, as amended (the Act). None of this Note or the shares of Class A Common Stock issuable upon conversion of this Note may be offered, sold or otherwise transferred unless (i) they first shall have been registered under the Act and applicable state securities laws or (ii) the Maker shall have been furnished with an opinion of legal counsel (in form, substance and scope reasonably acceptable to Maker) to the effect that such sale or transfer is exempt from the registration requirements of the Act. Each certificate for shares of share of Class A Common Stock issuable upon conversion of this Note that have not been so registered and that have not been sold pursuant to an exemption that permits removal of the applicable legend, shall bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE ACT). THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Class A Common Stock issuable upon conversion of this Note, the Maker shall remove the foregoing legend from the certificate or issue to such Holder a new certificate free of any transfer legend, if (a) with such request, the Maker shall have received an opinion of counsel, reasonably satisfactory to the Maker in form, substance and scope, to the effect that any such legend may be removed from such certificate or
(b)
a registration statement under the Act covering such securities is in effect.
Section 2.5. Reservation of Common Stock.
(a)
The Maker covenants that during the period the Note is outstanding, it will reserve from its authorized and unissued Class A Common Stock a sufficient number of shares to provide for the issuance of Class A Common Stock of the Maker upon the Conversion of the Note. The Maker further covenants that its issuance of this Note shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Class A Common Stock of the Maker issuable upon the conversion of this Note. The Maker will take all such reasonable action as may be necessary to assure that such shares of Class A Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the OTCBulletin Board (or such other principal market upon which the Class A Common Stock of the Maker may be listed or quoted).
(b)
The Maker shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Maker will (a) not increase the par value of any shares of Class A Common Stock issuable upon the conversion of this Note above the amount payable therefor upon such conversion immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Maker may validly and legally issue fully paid and non-assessable shares of Class A Common Stock upon the conversion of this Note, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Maker to perform its obligations under this Note.
(c)
Upon the request of Holder, the Maker will at any time during the period this Note is outstanding acknowledge in writing, in form reasonably satisfactory to Holder, the continuing validity of this Note and the obligations of the Maker hereunder.
(d)
Before taking any action which would cause an adjustment reducing the current Conversion Price below the then par value, if any, of the shares of Class A Common Stock issuable upon conversion of the Notes, the Maker shall take any corporate action which may be necessary in order that the Maker may validly and legally issue fully paid and non- assessable shares of such Class A Common Stock at such adjusted Conversion Price.
(e)
Before taking any action which would result in an adjustment in the number of shares of Class A Common Stock into which this Note is convertible or in the Conversion Price, the Maker shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
(f)
If at any time the Maker does not have a sufficient number of authorized and available shares of Class A Common Stock for issuance upon conversion of the Note, then the Maker shall call and hold a special meeting of its stockholders within forty-five (45) days of that time for the sole purpose of increasing the number of authorized shares of Class A Common Stock.
Section 2.6. Maximum Conversion.
The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Class A Common Stock which would be in excess of the sum of (i) the number of shares of Class A Common Stock beneficially owned by the Holder and its affiliates on Conversation Date, and (ii) the number of shares of Class A Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its Affiliates of more than 9.99% of the outstanding shares of Class A Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Section 2.7. Exchange for Qualified Offering Shares.
If, at any time during the term of this Note, Borrower chooses to file an offering under Form 1-A with the Commission (Reg A Offering) and such is qualified by the Commission, Holder may exchange the Note as subscription payment toward purchase of those shares offered for resale per the Reg A Offering. In the event that Holder elects to exchange the note for purchase of shares from the Reg A Offering, said shares shall be issued free of restrictive legend and will be deemed qualified shares.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1. The Holder represents and warrants to the Maker:
(a) The Holder of this Note, by acceptance hereof, agrees that this Note is being acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Note or the Class A Common Stock issuable upon conversion hereof except under circumstances that will not result in a violation of the Act or any application state securities laws or similar laws relating to the sale of securities;
(b)
That Holder understands that none of this Note or the Class ACommon Stock issuable upon conversion hereof have been registered under the Securities Act of 1933, as amended (the Act), in reliance upon the exemptions from the registration provisions of the Act and any continued reliance on such exemption is predicated on the representations of the Holder set forth herein;
(c)
Holder (i) has adequate means of providing for his current needs and possible contingencies, (ii) has no need for liquidity in this investment, (iii) is able to bear the substantial economic risks of an investment in this Note for an indefinite period, (iv) at the present time, can afford a complete loss of such investment, and (v) does not have an overall commitment to investments which are not readily marketable that is disproportionate to Holders net worth, and Holders investment in this Note will not cause such overall commitment to become excessive;
(d)
Holder is an accredited investor (as defined in Regulation D promulgated under the Act) and the Holders total investment in this Note does not exceed 10% of the Holders net worth; and
(e)
Holder recognizes that an investment in the Maker involves significant risks and only investors who can afford the loss of their entire investment should consider investing in the Maker and this Note.
Section 3.2
The Maker represents and warrants to Holder:
Organization and Qualification. The Maker and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. The Maker and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Material Adverse Effect means any material adverse effect on the business, operations, assets, financial condition or prospects of the Maker or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. Subsidiaries means any corporation or other organization, whether incorporated or unincorporated, in which the Maker owns, directly or indirectly, any equity or other ownership interest.
Authorization; Enforcement. (i) The Maker has all requisite corporate power and authority to enter into and perform this Note and to consummate the transactions contemplated hereby and thereby and to issue the Class A Common Stock, in accordance with the terms hereof, (ii) the execution and delivery of this Note by the Maker and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Class A Common Stock issuable upon conversion or exercise hereof) have been duly authorized by the Makers Board of Directors and no further consent or authorization of the Maker, its Board of Directors, or its shareholders is required, (iii) this Note has been duly executed and delivered by the Maker by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Note and the other documents executed in connection herewith and bind the Maker accordingly, and (iv) this Note constitutes, a legal, valid and binding obligation of the Maker enforceable against the Maker in accordance with its terms.
Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Maker and will not impose personal liability upon the holder thereof.
Acknowledgment of Dilution. The Maker understands and acknowledges the potentially dilutive effect to the Class A Common Stock upon the issuance of the Conversion Shares upon conversion of this Note. The Maker further acknowledges that its obligation to issue Conversion Shares upon conversion of this Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Maker.
ARTICLE IV.
EVENTS OF DEFAULT
Section 4.1.
Default. The following events shall be defaults under this Note: (Events of Default):
(a)
default in the due and punctual payment of all or any part of any payment of interest or the Principal Amount as and when such amount or such part thereof shall become due and payable hereunder; or
(b)
failure on the part of the Maker duly to observe or perform in all material respects any of the covenants or agreements on the part of the Maker contained herein (other than those covered by clause (a) above) for a period of 5 business days after the date on which written notice specifying such failure, stating that such notice is a Notice of Default hereunder and demanding that the Maker remedy the same, shall have been given by the Holder by registered or certified mail, return receipt requested, to the Maker; or
(c)
any representation, warranty or statement of fact made by the Maker herein when made or deemed to have been made, false or misleading in any material respect; provided, however, that such failure shall not result in an Event of Default to the extent it is corrected by the Maker within a period of 5 business days after the date on which written notice specifying such failure, stating that such notice is a Notice of Default hereunder and demanding that the Maker remedy same, shall have been given by the Holder by registered or certified mail, return receipt requested; or
(d) any of the following actions by the Maker pursuant to or within the meaning title 11, U.S. Code or any similar federal or state law for the relief of debtors (collectively, the Bankruptcy Law): (A) commencement of a voluntary case or proceeding, (B) consent to the entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law (each, a Custodian), of it or for all or substantially all of its property, (D) a general assignment for the benefit of its creditors, or (E) admission in writing its inability to pay its debts as the same become due; or
(e)
entry by a court of competent jurisdiction of an order or decree under any Bankruptcy Law that: (A) is for relief against the Maker in an involuntary case, (B) appoints a Custodian of the Maker or for all or substantially all of the property of the Maker, or (C) orders the liquidation of the Maker, and such order or decree remains unstayed and in effect for 60 days.
Section 4.2. Remedies Upon Default. Upon the occurrence of an event of default by Maker under this Note or at any time before default when the Holder reasonably feels insecure, then, in addition to all other rights and remedies at law or in equity, Holder may exercise any one or more of the following rights and remedies:
a.
Accelerate the time for payment of all amounts payable under this Note by written notice thereof to Maker, whereupon all such amounts shall be immediately due and payable.
b.
Pursue any other rights or remedies available to Holder at law or in equity.
Notwithstanding the foregoing or any other term of this Note, the Holder may not force the Maker into any involuntary bankruptcy proceeding by reason of Makers inability to make payments on this Note. Holder expressly waives any right it may have in law or equity to force Maker into any such involuntary bankruptcy proceeding for any reason.
Section 4.3. Payment of Costs. The Maker shall reimburse the Holder, on demand, for any and all reasonable costs and expenses, including reasonable attorneys fees and disbursement and court costs, incurred by the Holder in collecting or otherwise enforcing this Note or in attempting to collect or enforce this Note.
Section 4.4. Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. No right or remedy herein conferred upon or reserved to the Holder is intended to be exclusive of any other right or remedy available to Holder under applicable law, and every such right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Holder to exercise any right or power accruing upon any Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Default or an acquiescence therein; and every power and remedy given by this Note or by law may be exercised from time to time, and as often as shall be deemed expedient, by the Holder.
Section 4.5. Waiver of Past Defaults. The Holder may waive any past default or Event of Default hereunder and its consequences but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.
Section 4.6. Waiver of Presentment etc. The Maker hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, except as specifically provided herein.
ARTICLE V. MISCELLANEOUS
Section 5.1. Notices. Any notice herein required or permitted to be given shall be in writing and may be personally served or delivered by courier or sent by United States mail and shall be deemed to have been given upon receipt if personally served (which shall include telephone line facsimile transmission) or sent by courier or three (3) days after being deposited in the United States mail, certified, with postage pre-paid and properly addressed, if sent by mail. For the purposes hereof, the address of the Holder shall be 450 7th Ave. Suite 609, New York, NY 10123; and the address of the Maker shall be 78 Reade St, Suite 4FW, New York, NY, 10007. Both the Holder or its assigns and the Maker may change the address for service by delivery of written notice to the other as herein provided.
Section 5.2. Amendment. This Note and any provision hereof may be amended only by an instrument in writing signed by the Maker and the Holder.
Section 5.3. Assignability. This Note shall be binding upon the Maker and its successors and assigns and shall inure to be the benefit of the Holder and its successors and assigns; provided, however, that so long as no Event of Default has occurred, this Note shall only be transferable in whole subject to the restrictions contained in the restrictive legend on the first page of this Note.
Section 5.4. Governing Law. This Note shall be governed by the internal laws of the State of New York, without regard to conflicts of laws principles.
Section 5.5. Replacement of Note. The Maker covenants that upon receipt by the Maker of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which shall not include the posting of any bond), and upon surrender and cancellation of such Note, if mutilated, the Maker will make and deliver a new Note of like tenor.
Section 5.6. This Note shall not entitle the Holder to any of the rights of a stockholder of the Maker, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholder or any other proceedings of the Maker, unless and to the extent converted into shares of Class A Common Stock in accordance with the terms hereof.
Section 5.7. Severability. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
Section 5.8. Headings. The headings of the sections of this Note are inserted for convenience only and do not affect the meaning of such section.
Section 5.9. Counterparts. This Note may be executed in multiple counterparts, each of which shall be an original, but all of which shall be deemed to constitute one instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Maker as executed this Note as of the date first written above.
HempAmericana, Inc.
By: Salvador Rosillo Its: CEO
Acknowledged and Agreed: Blackbridge Capital, LLC.
By: Alexander Dillon Its: Managing Partner
EXHIBIT 1 CONVERSION NOTICE
(To be executed by the Holder in order to Convert the Note)
TO:
The undersigned hereby irrevocably elects to convert US$
of the Principal Amount of the above Note into Shares of Class A Common Stock of HempAmericana, Inc., according to the conditions stated therein, as of the Conversion Date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Maker in accordance therewith. No fee will be charged to the Holder for any conversion, except for such transfer taxes, if any.
Conversion Date:
Applicable Conversion Price: $
Signature: Name: Address:
Tax I.D. or Soc. Sec. No: Principal Amount to be converted:
US$
Amount of Note unconverted:
US$
Number of shares of Class A Common Stock to be issued:
Attach Equity Purchase Agreement Here
HempAmericana, Inc. 78 Reade St
Suite 4FW
New York, NY, 10007
The undersigned, Salvador Rosillo, is the duly elected Chief Executive Officer of HempAmericana, Inc., a Delaware corporation (the Company).
I hereby warrant and represent that I have undertaken a complete and thorough review of the Companys corporate and financial books and records including, but not limited to the Companys records relating to the following:
(A)
the certain convertible note (Original Note) dated March 25, 2016 (the Original Note Issuance Date) to Blackbridge Capital, LLC (the Investor) by the Company in the original principal amount of Fifty Thousand, Dollars ($500,000.00), and issued pursuant to the Securities Purchase Agreement dated March 25, 2016 is a valid debt and current outstanding obligation of the Company
(B)
the Companys Board of Directors duly approved the issuance of the Original Note to the Blackbridge Capital, LLC.
(C)
the Companys Board of Directors duly approved the terms of the Securities Purchase Agreement between HempAmericana, Inc. and Blackbridge Capital, LLC, dated March 25, 2016 and of the Original Note that is a fee of that agreement
(D)
The Companys officers and directors have not entered into or given any commitment contemplating the receipt or acceptance of any said consideration arising out of or relating to the issuance of the Original Note.
(E)
To my best knowledge and after completing the aforementioned review of the Companys shareholder and corporate records, I am able to certify that Blackbridge Capital, LLC and its partners and management are not officers, directors, or directly or indirectly, ten percent (10.00%) or more stockholders of the Company and none of said persons have had any such status in the one hundred fifty (150) days immediately preceding the date of this Certificate.
(F)
I understand the constraints imposed under Rule 144 on those persons who are or may be deemed to be affiliates, as that term is defined in Rule 144(a)(1) of the 1933 Act.
(G)
I understand that all of the representations set forth in this Certificate will be relied upon by counsel to Blackbridge Capital, LLC in connection with the preparation of a legal opinion claiming the exemption provided by Rule 144 of the Securities Act of 1933, as amended.
I hereby affix my signature to this Notarized Certificate and hereby confirm the accuracy of the statements made herein.
Signed:
Name: Salvador Rosillo Title: CEO
Date:
UNANIMOUS WRITTEN CONSENT OF DIRECTORS OF HEMPAMERICANA, INC.
THE UNDERSIGNED, being all the members of the Board of Directors of HempAmericana, Inc., a Delaware corporation (the Corporation), in order to obviate the necessity of holding a meeting, hereby waive the calling and holding of a meeting of the Board of Directors of the Corporation and approve the following resolutions by unanimous vote of all the members of the Board of Directors of the Corporation, and direct that the same be filed with the records of the Corporation:
WHEREAS, the Corporation is and will be in the future in need of funds and it is in the best interests of this Corporation to allow the assignment of a certain Convertible Notes as described herein;
NOW, THEREFORE, BE IT RESOLVED, that the Corporation is authorized to execute Securities Purchase Agreement dated March 25, 2016, authorizing the Regulation A Stock Purchase, as well as the
$500,000.00 Convertible Note issued and $500,000.00 restricted shares of Class A Common Stock, that come with registration rights and will be registered in the FORM 1-A Offering Circular as a fee for the Security Purchase Agreement between HempAmericana, Inc. and Blackbridge Capital LLC.
FURTHER RESOLVED, that the Officer of this Corporation be and hereby is authorized and directed to execute, and to issue a Convertible Promissory Note to Blackbridge Capital, LLC in the principal amount of $500,000.00 in such form, substance and content as may be necessary, said Officers execution and delivery thereof on behalf of this Corporation to be conclusive evidence of said Officers approval; and
FURTHER RESOLVED, that the Officer is hereby authorized to do such further acts and things and execute any and all documents and instruments, both original and amendatory, of every kind and character on behalf of the Corporation as may be necessary or appropriate, in said Officers judgment, to carry out the terms of the aforementioned Assignment and Assumption Agreement and carry out the purpose of these Resolutions; and
FURTHER RESOLVED, that any indebtedness heretofore contracted and any contracts, agreements or notes heretofore made with the Purchaser on behalf of this Corporation and all acts of the Officer or of other officers or agents of this Corporation in connection with such indebtedness or such contracts, agreements or notes are hereby ratified and confirmed; and
FURTHER RESOLVED, that the shares of Class A Common Stock underlying the Note when issued upon conversion of the Note, shall be fully paid, validly issued and non- assessable.
This Unanimous Written Consent of Directors may be executed in any number of
counterparts, and it shall not be necessary that the signatures of all Directors be contained on any one counterpart hereof, each counterpart shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.
Signature Page to follow
IN WITNESS WHEREOF, we have caused this instrument to be duly executed this 15th day of March, 2016.
, Director
, Director
, Director
HempAmericana, Inc. 78 Reade St
Suite 4FW
New York, NY, 10007
VIA Email
March 25, 2016
,
To Whom It May Concern:
You are instructed as Transfer Agent of our Class A Common Stock to issue an aggregate
shares of the Companys Restricted Class A Common Stock to the following entities and individuals respectively, listed on Exhibit A.
Please call to confirm delivery options prior to issuing the shares by mail, express shipment, or electronic deposit.
If you require anything further to process these issuances, please let me know. Salvador Rosillo
CEO
Exhibit A
| Recipient | Number of Shares |
| Blackbridge Capital, LLC 450 7th Ave. Suite 601 New York, NY 10123 EIN 46-1044853 | |
| | Price/Share |
| | |
| | Value Received |
| | Commitment Fee |
Send Via US Mail To: Blackbridge Capital 450 7th Ave. Suite 601 New York, NY 10123
HempAmericana, Inc.
78 Reade St Suite 4FW
New York, NY, 10007
March 25, 2016
To Whom It May Concern:
Please be advised that the shares of Class A Common Stock (Stock) of
HempAmericana, Inc. (the Company) registered in the name of Blackbridge Capital, LLC (the Investor) are validly issued, restricted, fully-paid, and non-assemble in accordance with the Securities Purchase Agreement/ Convertible Note dated [ ], 2016 between HempAmericana, Inc. and Blackbridge Capital, LLC. It is understood that neither the Company nor the transfer agent,
, will take any action to cancel or encumber the Stock. The company hereby indemnifies and hold harmless the Investor and any brokerage and/or clearing firm working with the investor against any all claims with respect to the Stock and any reliance on the preceding sentence. These Shares are clear of any encumbrances.
Sincerely,
Salvador Rosillo CEO
Schedule 3 (k)
864 Inc., a Delaware corporation, is owned and controlled by Salvador Rosillo, the
Companys chief executive o fficer. 864 Inc. owns all the Class B common stock of the
Company in exchange for control related services to the Company.
Schedule 3(t)
HempAmericana.com is owned by Salvador Rosillo
![[opinionandconsenteilersla002.gif]](opinionandconsenteilersla002.gif)
1000 Fifth Street
PO Box 5025
Suite 200 P2 Asheville, NC 28813
Miami Beach, FL 33139
Phone: 786.273.9152 www.eilerslawgroup.com
November 10, 2016
Gentlemen:
We are acting as counsel to Hemp Americanaa, Inc. (the Company) in connection with the preparation and filing with the Securities and Exchange Commission, under the Securities Act of 1933, as amended, of the Companys Offering Statement on Form 1-A. The Offering Statement covers $20,000,000 of the Companys common stock at a price to be determined (the Shares).
In our capacity as such counsel, we have examined and relied upon the originals or copies certified or otherwise identified to our satisfaction, of the Offering Statement, the form of Subscription Agreement and such corporate records, documents, certificates and other agreements and instruments as we have deemed necessary or appropriate to enable us to render the opinions hereinafter expressed.
On the basis of such examination, we are of the opinion that:
| 1. | The Shares have been duly authorized by all necessary corporate action of the Company as the Board as been authorized by the shareholders to increase the authorized as need to accommodate the offering underlying. |
| 2. | When issued and sold by the Company against payment therefor pursuant to the terms of the Subscription Agreement, the Shares will be validly issued, fully paid and non-assessable. |
We hereby consent to the use of our name in the Offering Statement and we also consent to the filing of this opinion as an exhibit thereto. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ William R. Eilers
Eilers Law Group, P.A.
eilers law group, p.a. |1000 Fifth Street | Suite 200 P2 |Miami Beach, FL 33139 | 786.273.9152 |PO Box 5025| Asheville, NC 28813 Page | 1
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![[doc23165920161110164212002.gif]](doc23165920161110164212002.gif)
![[doc23165920161110164212004.gif]](doc23165920161110164212004.gif)
![[doc23165920161110164212006.gif]](doc23165920161110164212006.gif)
![[doc23165920161110164212008.gif]](doc23165920161110164212008.gif)
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
ACT) OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE NOR ANY
INTEREST THEREIN NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
SUCH LAWS.
CONVERTIBLE PROMISSORY NOTE
Principal Amount: $500,000.00
Issue Date: March 15, 2016
Maturity Date: March 15, 2017
For good and valuable consideration, HempAmericana, Inc. a Delaware corporation (Maker),
hereby makes and delivers this Promissory Note (this Note) in favor of Blackbridge Capital,
LLC, or its assigns (Holder), and hereby agrees as follows:
ARTICLE I.
PRINCIPAL AND INTEREST
Section 1.1 For value received, Maker promises to pay to Holder at such place as Holder or its
assigns may designate in writing, in currently available funds of the United States, the principal
sum of Five Hundred Thousand, Dollars. Makers obligation under this Note shall accrue interest
at the rate of Five percent (5.0%) per annum from the date hereof until paid in full. Interest
shall be computed on the basis of a 365-day year or 366-day year, as applicable, and actual days
lapsed. Accrual of interest shall commence on the first business day to occur after the Issue
Date and continue until payment in full of the principal sum has been made or duly provided for.
Section 1.2
a.
All payments shall be applied first to interest, then to principal and shall be
credited to the Maker's account on the date that such payment is physically received by the Holder.
b.
All principal and accrued interest then outstanding shall be due and payable
by the Maker to the Holder on or before March 15, 2017 (the Maturity Date).
c.
Maker shall have no right to prepay all or any part of the principal under
this Note.
d.
This Note is free from all taxes, liens, claims and encumbrances with respect
to the issue thereof and shall not be subject to preemptive rights or other similar rights of
shareholders of the Maker and will not impose personal liability upon the holder thereof.
e.
In the event the Company is unable to pay back the Note in cash, the Holder
may elect to convert the note into shares pursuant to its right under Section 2.1
Section 1.3
This Note is issued as the Commitment Fee pursuant to Section 1. f of Securities
Purchase Agreement dated March 15, 2016, and attached below.
ARTICLE II.
CONVERSION RIGHTS; CONVERSION PRICE
Section 2.1
Conversion. The Holder or its assigns shall have the right, from time to time,
commencing on the Issuance Date of this Note, to convert any part of the outstanding interest or
Principal Amount of this Note into fully paid and non-assessable shares of Class A Common Stock
of the Maker (the Conversion Stock) at the Conversion Price determined as provided herein.
Promptly after delivery to Maker of a Notice of Conversion of Convertible Note in the form
attached hereto as Exhibit 1, properly completed and duly executed by the Holder or its assigns
(a Conversion Notice), the Maker shall issue and deliver to or upon the order of the Holder that
number of shares of C l a s s A Common Stock for the that portion of this Note to be converted
as shall be determined in accordance herewith.
No fraction of a share or scrip representing a fraction of a share will be issued on conversion, but
the number of shares issuable shall be rounded to the nearest whole share. The date on which
Notice of Conversion is given (the Conversion Date) shall be deemed to be the date on which
the Holder faxes or emails the Notice of Conversion duly executed to the Maker. Certificates
representing C l a s s A Common Stock upon conversion will be delivered to the Holder within
two (2) trading days from the date the Notice of Conversion is delivered to the Maker. Delivery
of shares upon conversion shall be made to the address specified by the Holder or its assigns in
the Notice of Conversion.
Section 2.2. Conversion Price. Upon any conversion of this Note, the Conversion Price shall equal
to Eighty Percent (80%) of the lowest Trading Price (defined below) during the Valuation Period
(defined below), and the Conversion Amount shall be the amount of principal or interest electively
converted in the Conversion Notice. The total number of shares due under any conversion notice
(Notice Shares) will be equal to the Conversion Amount divided by the Conversion Price.
On the date that a Conversion Notice is delivered to Holder, the Company shall deliver an
estimated number of shares (Estimated Shares) to Holders brokerage account equal to the
Conversion Amount divided by the product of (i) Eighty Percent (80%) and (ii) the lowest trading
price in the twenty trading days prior to the day the Holder requests conversion.
The Valuation Period shall mean twenty (20) Trading Days, commencing on the first Trading
Day following delivery and clearing of the Notice Shares in Holders brokerage account, as
reported by Holder (Valuation Start Date). If at any time, one or multiple times, during the
Valuation Period the sum of Estimated Shares and Additional Shares already delivered to Holder
is less than the Notice Shares, the company must immediately deliver enough shares equal to the
difference (Additional Shares). A Conversion Amount will not be considered fully converted
until the end of the Valuation Period for that Conversion Amount, as decreases in the Conversion
Price would require the issuance of more Additional Shares, and thereby the issuance of more
Notice Shares.
Trading Price means, for any security as of any date, any trading price on the OTC Bulletin
Board, or other applicable trading market (the OTCBB) as reported by a reliable reporting
service (Reporting Service) mutually acceptable to Maker and Holder (i.e. Bloomberg) or, if the
OTCBB is not the principal trading market for such security, the price of such security on the
principal securities exchange or trading market where such security is listed or traded. Trading
Day shall mean any day on which the Class A Common Stock is tradable for any period on the
OTCBB, or on the principal securities exchange or other securities market on which the Class A
Common Stock is then being traded.
Section 2.3.
Reorganization, Reclassification, Merger, Consolidation or Disposition of
Assets. In case the Maker shall reorganize its capital, reclassify its capital stock, consolidate or
merge with or into another corporation (where the Maker is not the surviving corporation or where
there is a change in or distribution with respect to the Class A Common Stock of the Maker), or sell,
transfer or otherwise dispose of all or substantially all its property, assets or business to another
corporation and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of Class A Common Stock of the successor or
acquiring corporation, or any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of
Class A Common Stock of the successor or acquiring corporation (Other Property), are to be
received by or distributed to the holders of C l a s s A Common Stock of the Maker, then
Holder shall have the right thereafter to receive, upon conversion of this Note, the number of
shares of common stock of the successor or acquiring corporation or of the Maker, if it is the
surviving corporation, and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of the number of
shares of C l a s s A Common Stock into which this Note is convertible immediately prior
to such event. In case of any such reorganization, reclassification, merger, consolidation or
disposition of assets, the successor or acquiring corporation (if other than the Maker) shall
expressly assume the due and punctual observance and performance of each and every covenant
and condition of this Note to be performed and observed by the Maker and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined
in good faith by resolution of the Board of Directors of the Maker) in order to provide for
adjustments of the number of shares of Class A Common Stock into which this Note is
convertible which shall be as nearly equivalent as practicable to the adjustments provided for in
this Section 2.3(a). For purposes of this Section 2.3(a), common stock of the successor or
acquiring corporation shall include stock of such corporation of any class which is not preferred
as to dividends or assets over any other class of stock of such corporation and which is not subject
to redemption and shall also include any evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 2.3(a)
shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
Section 2.4. Restrictions on Securities. This Note has been issued by the Maker pursuant to the
exemption from registration under the Securities Act of 1933, as amended (the Act). None of
this Note or the shares of Class A Common Stock issuable upon conversion of this Note may be
offered, sold or otherwise transferred unless (i) they first shall have been registered under the
Act and applicable state securities laws or (ii) the Maker shall have been furnished with an opinion
of legal counsel (in form, substance and scope reasonably acceptable to Maker) to the effect that
such sale or transfer is exempt from the registration requirements of the Act. Each certificate for
shares of Class A Common Stock issuable upon conversion of this Note that have not been so
registered and that have not been sold pursuant to an exemption that permits removal of the
applicable legend, shall bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE ACT). THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH
OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Class A Common Stock
issuable upon conversion of this Note, the Maker shall remove the foregoing legend from the
certificate or issue to such Holder a new certificate free of any transfer legend, if (a) with such
request, the Maker shall have received an opinion of counsel, reasonably satisfactory to the
Maker in form, substance and scope, to the effect that any such legend may be removed from
such certificate or
(b) a registration statement under the Act covering such securities is in effect.
Section 2.5. Reservation of Common Stock.
(a) The Maker covenants that during the period the Note is outstanding, it will
reserve from its authorized and unissued Class A Common Stock a sufficient number of
shares to provide for the issuance of Class A Common Stock of the Maker upon the
Conversion of the Note. The Maker further covenants that its issuance of this Note shall
constitute full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of Class A Common
Stock of the Maker issuable upon the conversion of this Note. The Maker will take all such
reasonable action as may be necessary to assure that such shares of Class A Common Stock
may be issued as provided herein without violation of any applicable law or regulation, or of
any requirements of the OTC
Bulletin Board (or such other principal market upon
which the Class A Common Stock of the Maker may be listed or quoted).
(b) The Maker shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Note, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all such actions as
may be necessary or appropriate to protect the rights of Holder against impairment.
Without limiting the generality of the foregoing, the Maker will (a) not increase the par
value of any shares of Class A Common Stock issuable upon the conversion of this Note
above the amount payable therefor upon such conversion immediately prior to such
increase in par value, (b) take all such action as may be necessary or appropriate in order
that the Maker may validly and legally issue fully paid and non-assessable shares of Class A
Common Stock upon the conversion of this Note, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Maker to perform its obligations under this Note.
(c) Upon the request of Holder, the Maker will at any time during the period this
Note is outstanding acknowledge in writing, in form reasonably satisfactory to Holder, the
continuing validity of this Note and the obligations of the Maker hereunder.
(d) Before taking any action which would cause an adjustment reducing the current
Conversion Price below the then par value, if any, of the shares of Class A Common Stock
issuable upon conversion of the Notes, the Maker shall take any corporate action which may
be necessary in order that the Maker may validly and legally issue fully paid and non-
assessable shares of such Class A Common Stock at such adjusted Conversion Price.
(e) Before taking any action which would result in an adjustment in the number of
shares of Class A Common Stock into which this Note is convertible or in the Conversion
Price, the Maker shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies having jurisdiction
thereof.
(f) If at any time the Maker does not have a sufficient number of authorized and
available shares of Class A Common Stock for issuance upon conversion of the Note, then
the Maker shall call and hold a special meeting of its stockholders within forty-five (45)
days of that time for the sole purpose of increasing the number of authorized shares of Class
A Common Stock.
Section 2.6. Maximum Conversion.
The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in
connection with that number of shares of Class A Common Stock which would be in excess of the
sum of
(i) the number of shares of Class A Common Stock beneficially owned by the Holder and its
affiliates on Conversation Date, and (ii) the number of shares of Class A Common Stock issuable
upon the conversion of the Notes with respect to which the determination of this provision
is being made on a Conversion Date, which would result in beneficial ownership by the Holder
and its Affiliates of more than 9.99% of the outstanding shares of Class A Common Stock of the
Company on such Conversion Date. For the purposes of the provision to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder.
Section 2.7. Exchange for Qualified Offering Shares.
If, at any time during the term of this Note, Borrower chooses to file an offering under Form 1-A
with the Commission (Reg A Offering) and such is qualified by the Commission, Holder may
exchange the Note as subscription payment toward purchase of those shares offered for resale per
the Reg A Offering. In the event that Holder elects to exchange the note for purchase of shares
from the Reg A Offering, said shares shall be issued free of restrictive legend and will be deemed
qualified shares.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1. The Holder represents and warrants to the Maker:
(a)
The Holder of this Note, by acceptance hereof, agrees that this Note is being
acquired for investment and that such Holder will not offer, sell or otherwise dispose of this Note
or the Class A Common Stock issuable upon conversion hereof except under circumstances that
will not result in a violation of the Act or any application state securities laws or similar laws
relating to the sale of securities;
(b)
That Holder understands that none of this Note or the Class A Common Stock issuable
upon conversion hereof have been registered under the Securities Act of 1933, as amended (the
Act), in reliance upon the exemptions from the registration provisions of the Act and any
continued reliance on such exemption is predicated on the representations of the Holder set forth
herein;
(c)
Holder (i) has adequate means of providing for his current needs and possible
contingencies, (ii) has no need for liquidity in this investment, (iii) is able to bear the substantial
economic risks of an investment in this Note for an indefinite period, (iv) at the present time, can
afford a complete loss of such investment, and (v) does not have an overall commitment to
investments which are not readily marketable that is disproportionate to Holders net worth, and
Holders investment in this Note will not cause such overall commitment to become excessive;
(d)
Holder is an accredited investor (as defined in Regulation D promulgated under
the Act) and the Holders total investment in this Note does not exceed 10% of the Holders net
worth; and
(e)
Holder recognizes that an investment in the Maker involves significant risks and
only investors who can afford the loss of their entire investment should consider investing in the
Maker and this Note.
Section 3.2
The Maker represents and warrants to Holder:
Organization and Qualification. The Maker and each of its Subsidiaries (as defined below),
if any, is a corporation duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own,
lease, use and operate its properties and to carry on its business as and where now owned, leased,
used, operated and conducted. The Maker and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business conducted by it makes such qualification
necessary except where the failure to be so qualified or in good standing would not have a Material
Adverse Effect. Material Adverse Effect means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Maker or its Subsidiaries, if any, taken
as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. Subsidiaries means any corporation or other organization,
whether incorporated or unincorporated, in which the Maker owns, directly or indirectly, any
equity or other ownership interest.
Authorization; Enforcement. (i) The Maker has all requisite corporate power and authority
to enter into and perform this Note and to consummate the transactions contemplated hereby and
thereby and to issue the Class A Common Stock, in accordance with the terms hereof, (ii) the
execution and delivery of this Note by the Maker and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance of the Note and the
issuance and reservation for issuance of the Class A Common Stock issuable upon conversion or
exercise hereof) have been duly authorized by the Makers Board of Directors and no further
consent or authorization of the Maker, its Board of Directors, or its shareholders is required, (iii)
this Note has been duly executed and delivered by the Maker by its authorized representative,
and such authorized representative is the true and official representative with authority to sign this
Note and the other documents executed in connection herewith and bind the Maker accordingly,
and (iv) this Note constitutes, a legal, valid and binding obligation of the Maker enforceable
against the Maker in accordance with its terms.
Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance
and, upon conversion of the Note in accordance with its respective terms, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect
to the issue thereof and shall not be subject to preemptive rights or other similar rights of
shareholders of the Maker and will not impose personal liability upon the holder thereof.
Acknowledgment of Dilution. The Maker understands and acknowledges the potentially
dilutive effect to the Class A Common Stock upon the issuance of the Conversion Shares upon
conversion of this Note. The Maker further acknowledges that its obligation to issue Conversion
Shares upon conversion of this Note is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other shareholders of the Maker.
ARTICLE IV.
EVENTS OF DEFAULT
Section 4.1. Default. The following events shall be defaults under this Note: (Events
of Default):
(a)
default in the due and punctual payment of all or any part of any payment of
interest or the Principal Amount as and when such amount or such part thereof shall become due
and payable hereunder; or
(b)
failure on the part of the Maker duly to observe or perform in all material respects
any of the covenants or agreements on the part of the Maker contained herein (other than those
covered by clause (a) above) for a period of 5 business days after the date on which written
notice specifying such failure, stating that such notice is a Notice of Default hereunder and
demanding that the Maker remedy the same, shall have been given by the Holder by registered or
certified mail, return receipt requested, to the Maker; or
(c)
any representation, warranty or statement of fact made by the Maker herein when
made or deemed to have been made, false or misleading in any material respect; provided,
however, that such failure shall not result in an Event of Default to the extent it is corrected by
the Maker within a period of 5 business days after the date on which written notice specifying
such failure, stating that such notice is a Notice of Default hereunder and demanding that the
Maker remedy same, shall have been given by the Holder by registered or certified mail, return
receipt requested; or
(d)
any of the following actions by the Maker pursuant to or within the meaning title
11, U.S. Code or any similar federal or state law for the relief of debtors (collectively, the
Bankruptcy Law): (A) commencement of a voluntary case or proceeding, (B) consent to the
entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the
appointment of a receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law (each, a Custodian), of it or for all or substantially all of its property, (D) a general
assignment for the benefit of its creditors, or (E) admission in writing its inability to pay its debts
as the same become due; or
(e)
entry by a court of competent jurisdiction of an order or decree under any
Bankruptcy Law that: (A) is for relief against the Maker in an involuntary case, (B) appoints a
Custodian of the Maker or for all or substantially all of the property of the Maker, or (C) orders
the liquidation of the Maker, and such order or decree remains unstayed and in effect for 60
days.
Section 4.2. Remedies Upon Default. Upon the occurrence of an event of default by Maker
under this Note or at any time before default when the Holder reasonably feels insecure, then, in
addition to all other rights and remedies at law or in equity, Holder may exercise any one or more
of the following rights and remedies:
a.
Accelerate the time for payment of all amounts payable under this Note by
written notice thereof to Maker, whereupon all such amounts shall be immediately due and
payable.
b.
Pursue any other rights or remedies available to Holder at law or in equity.
Notwithstanding the foregoing or any other term of this Note, the Holder may not force the Maker
into any involuntary bankruptcy proceeding by reason of Makers inability to make payments on
this Note. Holder expressly waives any right it may have in law or equity to force Maker into any
such involuntary bankruptcy proceeding for any reason.
Section 4.3. Payment of Costs. The Maker shall reimburse the Holder, on demand, for any and
all reasonable costs and expenses, including reasonable attorneys fees and disbursement and
court costs, incurred by the Holder in collecting or otherwise enforcing this Note or in attempting
to collect or enforce this Note.
Section 4.4. Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default. No
right or remedy herein conferred upon or reserved to the Holder is intended to be exclusive of
any other right or remedy available to Holder under applicable law, and every such right and
remedy shall, to the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy. No delay or
omission of the Holder to exercise any right or power accruing upon any Default occurring and
continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver
of any such Default or an acquiescence therein; and every power and remedy given by this Note
or by law may be exercised from time to time, and as often as shall be deemed expedient, by the
Holder.
Section 4.5. Waiver of Past Defaults. The Holder may waive any past default or Event of
Default hereunder and its consequences but no such waiver shall extend to any subsequent or
other default or Event of Default or impair any right consequent thereon.
Section 4.6. Waiver of Presentment etc. The Maker hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery, acceptance, performance
and enforcement of this Note, except as specifically provided herein.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Notices. Any notice herein required or permitted to be given shall be in writing and
may be personally served or delivered by courier or sent by United States mail and shall be deemed
to have been given upon receipt if personally served (which shall include telephone line facsimile
transmission) or sent by courier or three (3) days after being deposited in the United States mail,
certified, with postage pre-paid and properly addressed, if sent by mail. For the purposes hereof,
the address of the Holder shall be 450 7th Ave. Suite 609, New York, NY 10123; and the address
of the Maker shall be 78 Reade St, Suite 4FW, New York, NY, 10007. Both the Holder or its
assigns and the Maker may change the address for service by delivery of written notice to the other
as herein provided.
Section 5.2. Amendment. This Note and any provision hereof may be amended only by an
instrument in writing signed by the Maker and the Holder.
Section 5.3. Assignability. This Note shall be binding upon the Maker and its successors and
assigns and shall inure to be the benefit of the Holder and its successors and assigns; provided,
however, that so long as no Event of Default has occurred, this Note shall only be transferable in
whole subject to the restrictions contained in the restrictive legend on the first page of this Note.
Section 5.4. Governing Law. This Note shall be governed by the internal laws of the State of New
York, without regard to conflicts of laws principles.
Section 5.5. Replacement of Note. The Maker covenants that upon receipt by the Maker of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Note, and
in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which
shall not include the posting of any bond), and upon surrender and cancellation of such Note, if
mutilated, the Maker will make and deliver a new Note of like tenor.
Section 5.6. This Note shall not entitle the Holder to any of the rights of a stockholder of the Maker,
including without limitation, the right to vote, to receive dividends and other distributions, or to
receive any notice of, or to attend, meetings of stockholder or any other proceedings of the Maker,
unless and to the extent converted into shares of C l a s s A Common Stock in accordance with
the terms hereof.
Section 5.7. Severability. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible,
and the validity and enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby.
Section 5.8. Headings. The headings of the sections of this Note are inserted for convenience only
and do not affect the meaning of such section.
Section 5.9. Counterparts. This Note may be executed in multiple counterparts, each of which
shall be an original, but all of which shall be deemed to constitute one instrument.
IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Maker as executed
this Note as of the date first written above.
HempAmericana, Inc.
By: Salvador Rosillo
Its: CEO
Acknowledged and Agreed:
Blackbridge Capital, LLC.
By: Alexander Dillon
Its: Managing Partner
EXHIBIT 1
CONVERSION NOTICE
(To be executed by the Holder in order to Convert the Note)
TO:
The undersigned hereby irrevocably elects to convert US$
of the Principal Amount of
the above Note into Shares of C l a s s A Common Stock of HempAmericana, Inc., according to
the conditions stated therein, as of the Conversion Date written below. If shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Maker in accordance therewith. No fee will be charged to the
Holder for any conversion, except for such transfer taxes, if any.
Conversion Date:
Applicable Conversion Price: $
Signature:
Name:
Address:
Tax I.D. or Soc. Sec. No:
Principal Amount to be converted:
US$
Amount of Note unconverted:
US$
Number of shares of Class A Common Stock to be issued:
Attach Equity Purchase Agreement Here