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HMBL:Integer
As
filed with the Securities and Exchange Commission on November 29, 2021
Registration
Statement No. 333-________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
HUMBL,
INC.
(Exact
name of Registrant as specified in its charter)
Delaware
|
|
5500
|
|
91-2048019
|
(State
or other jurisdiction
of incorporation or organization)
|
|
(Primary
Standard Industrial
Classification Code Number)
|
|
(I.R.S.
Employer
Identification No.)
|
600
B Street
Suite
300
San
Diego, California 92101
(786)
738-9012
(Address,
including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Brian
Foote, CEO
600
B Street
San
Diego, California 92101
(786)
738-9012
(Name,
address, including zip code, and telephone number, including area code, of agent for service)
Copies
to:
Ernest
M. Stern, Esq.
Culhane Meadows PLLC
1701
Pennsylvania Avenue, N.W.
Suite 200
Washington,
D.C. 20006
(301)
910-2030
Approximate
Date of Proposed Sale to the Public: As soon as practicable after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
[ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
|
[ ]
|
Accelerated
filer
|
[ ]
|
|
|
|
|
Non-accelerated
filer
|
[X]
|
Smaller
reporting company
|
[X]
|
|
|
|
|
|
|
Emerging
growth company
|
[X]
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.
CALCULATION
OF REGISTRATION FEE
Title of each Class of
Securities to be Registered
|
|
Shares to be
Registered(1)
|
|
|
Proposed Maximum
Aggregate Offering
Price Per Share
|
|
|
Maximum Aggregate
Offering Price(2)
|
|
|
Amount of
Registration Fee
|
|
Shares of Common Stock, par value $0.00001
|
|
|
40,783,294
|
|
|
$
|
0.51
|
|
|
|
20,799,480
|
|
|
|
1,928.11
|
|
Shares of Common Stock issuable upon exercise of warrants
|
|
|
123,275,000
|
|
|
$
|
0.51
|
|
|
|
62,870,250
|
|
|
|
5,828.07
|
|
Shares of Common Stock issuable upon conversion of Series B Preferred Stock
|
|
|
74,400,000
|
|
|
$
|
0.51
|
|
|
|
37,944,000
|
|
|
|
3,517.41
|
|
Shares of Common Stock issuable upon conversion of convertible notes
|
|
|
16,500,000
|
|
|
$
|
0.51
|
|
|
|
8,415,000
|
|
|
|
780.07
|
|
Total number of securities to be registered
|
|
|
254,958,294
|
|
|
$
|
0.51
|
|
|
|
130,028,730
|
|
|
|
12,053.66
|
|
|
(1)
|
Pursuant
to Rule 416 under the Securities Act, this registration statement shall be deemed to cover additional securities (i) to be offered
or issued in connection with any provision of any securities purported to be registered hereby pursuant to terms which provide for
a change in the amount of securities being offered or issued to prevent dilution resulting from stock splits, stock dividends, or
similar transactions and (ii) of the same class as the securities covered by this registration statement issued or issuable prior
to completion of the distribution of the securities covered by this registration statement as a result of a split of, or a stock
dividend on, the registered securities.
|
|
|
|
|
(2)
|
Estimated
solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) promulgated under the Securities
Act of 1933, as amended.
|
This
registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date
as the commission, acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED NOVEMBER 29, 2021
Prospectus
254,958,294
Shares of Common Stock
HUMBL,
Inc.
This
prospectus covers 254,958,294 shares of our common stock that may be offered for resale or otherwise disposed of by the selling stockholders
listed on the Selling Stockholder table on page 26 (the “Selling Stockholders”).
We
will not receive any proceeds from the sale or other disposition of the securities by the Selling Stockholders. However, we may receive
up to approximately $39,237,500 in gross proceeds upon the cash exercise of the warrants by the Selling Stockholders. We will
use such proceeds, if and when received, for acquisitions and working capital. We do not have any planned acquisitions at this time.
We
are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting
requirements as set forth on page 9 of this prospectus. Our common stock is quoted under the symbol “HMBL” on the OTC Pink
Market (“OTC Pink”). On November 26, 2021, the last reported sale price of our common stock was $0.51.
The
Selling Stockholders may only offer and sell the common stock registered pursuant to this prospectus at a fixed price of $0.51 per share
(which was the last reported sale price of our common stock on the OTC Pink market) until such time as our common stock is listed on
a national securities exchange or quoted on the OTC Bulletin Board, OTCQX or OTCQB, at which time such shares may be sold at a prevailing
market price or in a privately negotiated transaction.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 13 in this prospectus for a
discussion of information that should be considered in connection with an investment in our securities.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
date of this prospectus is November 29, 2021
ADDITIONAL
INFORMATION
You
should rely only on the information contained or incorporated by reference in this prospectus and in any accompanying prospectus supplement.
No one has been authorized to provide you with different information. The shares are not being offered in any jurisdiction where the
offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of such documents.
TABLE
OF CONTENTS
Trademarks
This
prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience,
trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended
to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the
applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks
or service marks to imply a relationship with, or endorsement or sponsorship of us by any other companies.
PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information
that may be important to you. You should read this entire prospectus carefully, including the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial
statements and related notes included elsewhere in this prospectus. In this prospectus, unless otherwise noted, the terms “the
Company,” “HUMBL”, “we,” “us,” and “our” refer to HUMBL, Inc.
The
Company
Overview
HUMBL
is a Web 3, digital commerce platform that was built to connect consumers, freelancers and merchants in the digital economy. HUMBL provides
simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the
cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades.
Our
goal is to provide ready built tools and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL
is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster connections
to the digital economy and each other.
We
have three interconnected product verticals:
●
HUMBL Pay – A mobile app that allows peers, consumers and merchants to connect in the digital economy.
●
HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy.
●
HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.
HUMBL
Pay
We
are developing a mobile application that allows customers to migrate to digital forms of payment, along with services such as maps, ratings
and reviews. We are also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the world
as these services migrate into digital and blockchain-based modalities. The mobile application is designed to provide functionality to
the following groups:
●
Individuals - Consumers who want to discover, pay, rate and review experiences digitally versus paper bills and hardware point-of-sale
(“POS”);
●
Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS; and
●
Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.
HUMBL
Marketplace
Through
our online marketplace, we are developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market
audiences, that, when appropriate, incorporate the benefits of blockchain. HUMBL provides merchants with the ability to list and sell
goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve
the merchant’s ability to trade, track and pay for assets.
We
launched our NFT Marketplace to issue NFTs (Non-Fungible Tokens) that allow entities and individuals such as athletes, celebrities, agencies,
artists and companies to monetize their digital images, multimedia, content and catalogues on the blockchain. We will work with clients
to create, list and sell their NFTs across a variety of modalities and platforms. We had performed some beta testing of minting NFTs
for future endeavors, and currently contracts with third parties to place their NFTs on the HUMBL NFT Gallery for sales to consumers.
Sales of these NFTs are those of the designers, and HUMBL receives a commission for the sale.
In
September of 2021, we launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live events
across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and we earn a commission for each
sale. In addition to its subsidiary Tickeri, we will continue to work with clients to merge the realms of NFTs, event tickets and blockchain
authentication.
HUMBL
Financial
We
developed HUMBL Financial to package step-function technologies such as blockchain into “several clicks” for the customer.
With the total value of digital assets in excess of $1 trillion, there is increased conviction that investment markets will need to migrate
to more digital forms of asset tokenization. This will create opportunities for a new generation of market participants and provide access
to markets that have been historically reserved for high-net-worth individuals.
HUMBL
Financial recently announced the creation of its BLOCK ETX products to simplify digital asset investing for customers and institutions
seeking exposure to a new, 24/7 digital asset class. We have launched this product in 100 countries outside the United States. HUMBL
Financial has developed proprietary, multi-factor blockchain indexes, trading algorithms and financial services for the new digital asset
trading markets to accommodate index, active and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically
driven software services that allow customers to purchase and hold digital assets in pre-set allocations through their own digital asset
exchange accounts. BLOCK ETXs are compatible for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US.
BLOCK ETXs are also available to non-US customers who have accounts with Bittrex Global. BLOCK ETXs will be served first on the desktop
and web version of the HUMBL platform, with the goal of future applications inside the HUMBL mobile application. HUMBL Financial is open
to the licensing of the BLOCK ETXs to institutions and exchanges. HUMBL Financial also plans to offer trusted, third party financial
services in areas such as payments, investments, credit card services and lending across the HUMBL platform over time.
Organizational
History
We
were formed under the name Ponca Acquisition Corporation in Nevada on May 3, 2000, as a “blank check” development stage company
that indicated that our business plan was to engage in a merger or acquisition with an unidentified company or companies. Following a
series of name changes and changes in the focus of our business, on November 18, 2008, we filed Form 15 with the SEC to terminate its
registration with the SEC.
On
March 12, 2009, we redomiciled to Oklahoma and on March 16, 2009, changed our name from IWT Tesoro Corporation to Tesoro Distributors,
Inc. Tesoro Enterprises, Inc., an Oklahoma corporation, was incorporated on November 12, 2009, as a subsidiary of Tesoro Distributors,
Inc.
On
March 11, 2010, we changed our name to Tesoro Enterprises, Inc. and received a new symbol of TSNP following FINRA review of our name
and symbol change request.
Effective
November 4, 2020, we entered into a Stock Purchase Agreement with Henry J. Boucher, then President, CEO and Chairman of the Board of
Directors, and Brian Foote under which Henry J. Boucher sold his controlling interest in the Company in the form of 7,000,000 shares
of the Company’s Series A preferred stock to Brian Foote in return for Brian Foote assigning a $40,000 promissory note from HUMBL
LLC to Henry J. Boucher. Our Board of Directors, following the change of control, appointed Brian Foote, Jeff Hinshaw and Michele Rivera
to be the members of the Board following the resignation of Henry J. Boucher as our sole director.
On
November 30, 2020, we changed our domicile to Delaware.
On
December 3, 2020, we merged with HUMBL LLC to conduct the business of HUMBL LLC through a reverse merger. Under the terms of the merger,
the members of HUMBL LLC exchanged their membership interests for 552,029 shares of our Series B Preferred Stock.
On
December 23, 2020, we filed a Certificate of Amendment to our Certificate of Incorporation (“Amended Certificate”) to effect
a 1:4 reverse split, change our name to HUMBL, Inc., increase our authorized common stock to 7,450,000,000 shares, reduce our authorized
number of “blank check” preferred stock from 25 million to 10 million and designate a Series B and Series C Preferred Stock.
Recent
Acquisitions
On
June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri
became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists
throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of
which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value
equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending
with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez
and Javier Gonzalez, 4,672,897 shares of our common stock each. We also issued to each of Juan and Javier Gonzalez a secured promissory
note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the
rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory
note, Juan and Javier have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free
and clear of any claims or encumbrances by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until
the promissory notes are paid in full. We agreed to register on Form S-1 within three months from the closing the shares issued to Juan
and Javier Gonzalez and have the registration statement declared effective within six months of the closing date. Following the closing,
Juan Gonzalez and Javier Gonzalez entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO
of HUMBL, respectively
On
June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in
producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate
with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was
paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate
principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress
in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at
5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate
amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress
each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and
Kevin Childress was appointed as its President and Creative Director.
Recent
Financings and Material Agreements
Aurea
Group
On
March 15, 2021 we entered into a Securities Purchase Agreement with HUMBL CL SpA, an affiliate of Aurea Group Ventures (“Aurea
Group”), a Chilean multi-family office, under which Aurea Group purchased shares of our common stock in return for exclusive country
rights to Chile of our HUMBL products for a purchase price of up to $7,500,000.
Under
the terms of the Securities Purchase Agreement, Aurea Group agreed to purchase 437,500 shares of our common stock for $1,000,000. The
payment for these shares was due on or before March 30, 2021 but as a result of restrictions imposed due to COVID-19 was paid in two
tranches of $500,000 each on April 5, 2021 and April 6, 2021. In addition, Aurea Group also received the right to purchase 1,562,500
shares of HUMBL common stock for $6,500,000 by December 31, 2021 and to receive a 35% equity interest in a Chilean subsidiary HUMBL intends
to form to conduct its operations in Chile. The Company and Aurea Group are in negotiations on potential funding of this second
tranche.
The
Securities Purchase Agreement provides that if Aurea Group exercises its right to purchase the subsidiary interest, it will receive 35%
of the profits from operations of the HUMBL family of products in Chile. In addition, Aurea Group also received a right of first refusal
with respect to regional or country rights sales in Latin America.
We
are also discussing with Aurea Group Latin American business development opportunities for our HUMBL products in key verticals such as:
banking, merchant and financial services, real estate, hospitality, tourism, sports, festivals, entertainment and ticketing services
in the region.
Brighton
Capital Partners, LLC
On
April 14, 2021 we received bridge financing in the form of a loan in the principal amount of $3,300,000 from Brighton Capital Partners,
LLC (“Brighton Capital”) for which we issued them a convertible promissory note due 15 months after April 14, 2021. The note
bears interest at 10% per annum and is convertible at Brighton Capital’s election at a fixed price of $3.15 per share.
Under
the terms of the note, Brighton Capital has a right of redemption commencing on the earlier of the effective date of this Registration
Statement and the 12-month anniversary of the note, to cause us to redeem all or any portion of the note in cash or shares of our common
stock, at our election. Any redemption with shares of our common stock shall be at the “market price” which is defined as
80% of our lowest closing trade price for the 10 consecutive trading days prior to the date on which the market price is measured. The
Company and Brighton Capital also entered into an Equity Financing Agreement for the purchase of up to $50,000,000 of the Company’s
common stock by Brighton Capital. The Company and Brighton Capital agreed to terminate the Equity Financing Agreement on October
26, 2021. The Company paid a termination fee of 1,000,000 shares of its common stock to Brighton Capital.
Next
Generation Wealth Management LLC
On
May 13, 2021, we entered into a Securities Purchase Agreement with Next Generation Wealth Management LLC (“Next Generation”)
under which we received a loan of $382,500 for which we issued a convertible note to Next Generation. in the principal amount of $382,500
bearing interest at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our
common stock at $1.00 per share. The note is subject to customary default provisions. Under the terms of the Securities Purchase Agreement,
we also issued a warrant to allow Next Generation to purchase 750,000 shares of our common stock during a two-year period ending May
13, 2023 at an exercise price of $1.00 per share. On June 24, 2021, the note was split into two separate notes and warrants and assigned
to The Strider Lir Trust and Scottish Isles Investing, LLC, the notes being in the principal amount of $336,600 and $45,900, respectively,
and two separate warrants to purchase 660,000 and 90,000 shares of our common stock, respectively.
Maize
and Gray, LLC
On
May 13, 2021, we entered into a Securities Purchase Agreement with Maize and Gray LLC (“Maize”) under which we received a
loan of $402,750 for which we issued a convertible note to Maize in the principal amount of $402,750 bearing interest at 8% per annum
with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share.
The note is subject to customary default provisions. Under the terms of the Securities Purchase Agreement, we also issued a warrant to
allow Maize to purchase 825,000 shares of our common stock during a two-year period ending May 13, 2023 at an exercise price of $1.00
per share.
Archura
Capital Pty Ltd
On
May 17, 2021, we entered into a Securities Purchase Agreement with Archura Capital Pty Ltd (“Archura”) under which we received
a loan in the amount of $1,020,000 for which we issued a convertible note in the principal amount of $1,020,000 bearing interest at 8%
per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00
per share. The note is subject to customary default provisions.
KWP
50, LLC
On
May 19, 2021, we entered into a Securities Purchase Agreement with KWP 50, LLC (“KWP 50”) under which we received a loan
of $497,250 for which we issued a convertible note to KWP 50 in the principal amount of $497,250 bearing interest at 8% per annum with
a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The
note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control
of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow KWP 50 to purchase 975,000 shares
of our common stock during a two-year period ending May 19, 2023 at an exercise price of $1.00 per share.
North
Falls Investments, L.P
On
May 19, 2021, we entered into a Securities Purchase Agreement with North Falls Investments, L.P. (“North Falls”) under which
we received a loan of $153,000 for which we issued a convertible note to North Falls in the principal amount of $153,000 bearing interest
at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at
$1.00 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there
is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow North
Falls to purchase 300,000 shares of our common stock during a two-year period ending May 19, 2023 at an exercise price of $1.00 per share.
CMP76,
LLC
On
May 19, 2021, we entered into a Securities Purchase Agreement with CMP76, LLC (“CMP76”) under which we received a loan of
$76,500 for which we issued a convertible note to CMP76 in the principal amount of $76,500 bearing interest at 8% per annum with a maturity
date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share. The note is subject
to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company.
Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow CMP76 to purchase 150,000 shares of our common
stock during a two-year period ending May 19, 2023 at an exercise price of $1.00 per share.
Murtaugh
Group LLC
On
June 21, 2021, we entered into a Securities Purchase Agreement with Murtaugh Group LLC (“Murtaugh”) under which we received
a loan of $382,500 for which we issued a convertible note to Murtaugh in the principal amount of $82,500 bearing interest at 8% per annum
with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $1.00 per share.
The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control
of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Murtaugh to purchase 750,000
shares of our common stock during a two-year period ending June 21, 2023 at an exercise price of $1.00 per share.
Infinity
Block Investments, LLC
On
June 21, 2021, we entered into a Securities Purchase Agreement with Infinity Block Investments LLC (“Infinity”) under which
we received a loan of $382,500 for which we issued a convertible note to Infinity in the principal amount of $382,500 bearing interest
at 8% per annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at
$1.00 per share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there
is a change of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Infinity
to purchase 750,000 shares of our common stock during a two-year period ending June 21, 2023 at an exercise price of $1.00 per share.
Hahanakai,
LLC
On
August 30, 2021, we entered into a Securities Purchase Agreement with Hahanakai, LLC (“Hahanakai”) under which we received
a loan of $153,000 for which we issued a convertible note to Hahanakai in the principal amount of $153,000 bearing interest at 8% per
annum with a maturity date 22 months from the date of the note. The note is convertible into shares of our common stock at $0.90 per
share. The note is subject to customary default provisions. The note may not be prepaid unless the lender consents or there is a change
of control of the Company. Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Hahanakai to purchase
375,000 shares of our common stock during a two-year period ending August 30, 2023 at an exercise price of $0.90 per share.
Joy Corbin
On November 12, 2021, we entered
into a Securities Purchase Agreement with Joy Corbin (“Ms. Corbin”) under which we received a loan of $306,000 for which
we issued a convertible note to Ms. Corbin in the principal amount of $306,000 bearing interest at 8% per annum with a maturity date
22 months from the date of the note. The note is convertible into shares of our common stock at $0.60 per share. The note is subject
to customary default provisions. The note may not be prepaid unless the lender consents or there is a change of control of the Company.
Under the terms of the Securities Purchase Agreement, we also issued a warrant to allow Ms. Corbin to purchase 1,000,000 shares of our
common stock during a two-year period ending November 12, 2023 at an exercise price of $0.90 per share.
Red
Rock Development Group, LLC; Hard Rock Suite Purchase
On
July 29, 2021, we entered into a Development Services Agreement with Red Rock Development Group, LLC (“Red Rock”). We intend
to purchase and/or develop a portfolio of real estate assets and then potentially tokenize the interest in the portfolio. We have engaged
Red Rock to advise us with respect to that process. As part of the foregoing strategy, we purchased a suite at the Hard Rock Hotel in
San Diego, California. HUMBL is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property.
HUMBL has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being
used. We issued 5,000,000 shares of our common stock to Red Rock as payment for its services.
Recent
Name Change
On
February 26, 2021, FINRA announced the change of our name from Tesoro Enterprise, Inc. to HUMBL, Inc. and the change of our trading symbol
from TSNP to HMBL that became effective March 26, 2021.
Corporate
Strategy
Our
objective is to provide more seamless digital pairing experiences for consumers and merchants in the global economy. The key elements
of our growth strategy are:
●
innovate and advance our platform;
●
drive growth by acquiring new customers;
●
drive increased usage within our existing customer base;
●
expand our global footprint;
●
expand data sharing across our global ecosystem;
●
grow and invest in our partner network;
●
expand our sales capabilities; and
●
develop additional revenue streams.
Implications
of Being an Emerging Growth Company
As
a company with less than $1.0 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth
company” as defined in Section 2(a) of the Securities Act of 1933, as amended, which we refer to as the Securities Act, as modified
by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified
reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth
companies. These provisions include:
|
●
|
Reduced
disclosure about our executive compensation arrangements;
|
|
●
|
No
non-binding shareholder advisory votes on executive compensation or golden parachute arrangements;
|
|
●
|
Exemption
from the auditor attestation requirement in the assessment of our internal control over financial reporting; and
|
|
●
|
Reduced
disclosure of financial information in this prospectus, limited to two years of audited financial information and two years of selected
financial information.
|
As
a smaller reporting company, each of the foregoing exemptions is currently available to us. We may take advantage of these exemptions
for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company
if we have more than $1.0 billion in annual revenues as of the end of a fiscal year, if we are deemed to be a large-accelerated filer
under the rules of the Securities and Exchange Commission, or if we issue more than $1.0 billion of non- convertible debt over a three-year-period.
The
JOBS Act permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting
standards applicable to public companies. We have elected the extended transition period for complying with new or revised accounting
standards pursuant to Section 107(b) of the Act until the earlier of the date we (i) are no longer an emerging growth company or (ii)
affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements
may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Corporate
Information
We
were formed under the name Ponca Acquisition Corporation in Nevada on May 3, 2000, as a “blank check” development stage company
We were incorporated in the State of Nevada on May 3, 2000. Our principal executive office is located at 600 B Street, Suite 300, San
Diego, California 92101, and our telephone number is (786) 738-9012. Our internet website is www.humblpay,com,. The information
on, or that can be accessed through, our website is not part of this prospectus, and you should not rely on any such information in making
the decision whether to purchase our common stock.
The
Offering
Common
Stock to be Sold
|
|
Up
to 254,958,294 shares of our common stock including (i) up to 16,500,000 shares underlying convertible notes we have issued
to various persons, (ii) up to 123,275,000 shares of our common stock underlying warrants we have issued to various persons;
(iii) 74,400,000 shares of our common stock underlying Series B Preferred Stock we have issued to individuals; and (iv) 40,783,294
shares of our common stock issued in connection with certain acquisition and financing activity. We will not receive any proceeds
from the sale of common stock by the Selling Stockholders but will receive up to $39,237,500 upon exercise of warrants by
the Selling Stockholders.
|
|
|
|
Common
Stock Outstanding
|
|
947,311,833
as of November 26, 2021
|
|
|
|
Use
of Proceeds
|
|
This
is a resale prospectus to register shares of the Selling Stockholders but we may receive up to approximately $39,237,500 in
gross proceeds upon the cash exercise of the warrants by the Selling Stockholders.
|
|
|
|
|
|
We
intend to use the net proceeds from the exercise of warrants by the Selling Stockholders for (i) potential mergers and acquisitions,
(ii) technology costs, (iii) general working capital and (iv) debt repayment. The expected uses of the net proceeds from the sale
of the offered shares represents our intentions based upon our current plans and business conditions. The precise uses, amounts and
timing of the application of proceeds have yet to be determined by our management and may differ, in some or all respects, from those
enumerated above. The amounts used for each purpose and timing of our actual expenditures may also vary significantly depending on
numerous factors. See “Use of Proceeds.” We will not receive any of the proceeds from the sale or other disposition of
the securities by the Selling Stockholders. See “Use of Proceeds”.
|
|
|
|
Dividend
Policy
|
|
We
have never declared any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings
for use in financing the growth of our business and do not anticipate paying any cash dividends for the foreseeable future. See “Dividend
Policy”.
|
|
|
|
OTC
Pink Symbol
|
|
HMBL
|
|
|
|
Risk
Factors
|
|
You
should carefully consider the information set forth in this prospectus and, in particular, the specific factors set forth in the
“Risk Factors” section beginning on page 13 of this prospectus before deciding whether or not to invest in our common
stock.
|
Summary
Financial Information
The
summary financial information set forth below is derived from the more detailed audited consolidated financial statements of the Company
appearing elsewhere in this prospectus. You should read the summary consolidated financial information below in conjunction with “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements, including the notes to
such financial statements.
Statement
of Operations Data:
|
|
Nine
Months Ended
|
|
|
Nine
Months Ended
|
|
|
Year
Ended
|
|
|
|
September
30,
2021
|
|
|
September
30,
2020
|
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
1,580,486
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Cost
of Revenues
|
|
|
604,217
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Gross
Profit
|
|
|
976,269
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
Operating Expenses
|
|
|
31,652,904
|
|
|
|
299,191
|
|
|
|
705,724
|
|
|
|
280,742
|
|
Loss
from Operations
|
|
|
(30,676,635
|
)
|
|
|
(299,191
|
)
|
|
|
(705,724
|
)
|
|
|
(280,742
|
)
|
Other
income (expense)
|
|
|
(4,267,782
|
)
|
|
|
10,000
|
|
|
|
(6,739
|
)
|
|
|
-
|
|
Net
(Loss) Income Before Income Taxes
|
|
$
|
(34,944,417
|
)
|
|
$
|
(289,191
|
)
|
|
$
|
(712,463
|
)
|
|
$
|
(280,742
|
)
|
Basic
and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss Per Share
|
|
$
|
(0.04
|
)
|
|
|
N/A
|
|
|
$
|
(0.0007
|
)
|
|
|
N/A
|
|
Weighted
Average Number of Shares Outstanding Basic and Diluted
|
|
|
939,626,865
|
|
|
|
N/A
|
|
|
|
982,108,478
|
|
|
|
N/A
|
|
Balance
Sheet Data:
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,465,355
|
|
|
$
|
1,720,979
|
|
|
$
|
4,855
|
|
Other
Current Assets
|
|
|
799,690
|
|
|
|
84,591
|
|
|
|
2,395
|
|
Fixed
assets, net of accumulated depreciation
|
|
|
362,062
|
|
|
|
-
|
|
|
|
-
|
|
Goodwill
|
|
|
16,593,706
|
|
|
|
-
|
|
|
|
-
|
|
Total
Assets
|
|
$
|
20,220,813
|
|
|
$
|
1,805,570
|
|
|
$
|
7,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt/Convertible
and Non-convertible
|
|
$
|
24,416,261
|
|
|
$
|
181,103
|
|
|
$
|
-
|
|
Other
Current Liabilities
|
|
|
1,621,969
|
|
|
|
63,635
|
|
|
|
83,292
|
|
Preferred
Stock
|
|
|
76
|
|
|
|
70
|
|
|
|
-
|
|
Common
Stock
|
|
|
9,199
|
|
|
|
9,742
|
|
|
|
-
|
|
Additional
Paid-In Capital
|
|
|
30,112,530
|
|
|
|
2,545,825
|
|
|
|
205,500
|
|
Accumulated
Deficit
|
|
|
(35,939,222
|
)
|
|
|
(994,805
|
)
|
|
|
(281,542
|
)
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
20,220,813
|
|
|
$
|
1,805,570
|
|
|
$
|
7,250
|
|
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent,
contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements
are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown
that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In
some cases, you can identify forward-looking statements by terminology, such as “expects”, “anticipates”, “intends”,
“estimates”, “plans”, “potential”, “possible”, “probable”, “believes”,
“seeks”, “may”, “will”, “should”, “vision,” “could” or the negative
of such terms or other similar expressions. Accordingly, these statements involve estimates, assumptions and uncertainties that could
cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety
by reference to the factors discussed throughout this prospectus.
You
should read this prospectus and the documents that we reference herein and therein and have filed as exhibits to the registration statement,
of which this prospectus is part, completely and with the understanding that our actual future results may be materially different from
what we expect. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of
this prospectus only. Because the risk factors referred to above could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements.
These risks and uncertainties, along with others, are described above under the heading “Risk Factors” beginning on page
13 of this prospectus. Further, any forward-looking statement speaks only as of the date on which it is made, and 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, except as required by law. New factors emerge from time to time, and it is not possible for us
to predict which factors will arise. In addition, we cannot assess the impact of each factor 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.
We qualify all of the information presented in this prospectus, and particularly our forward-looking statements, by these cautionary
statements.
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, together
with all of the other information included or referred to in this prospectus, before purchasing shares of our common stock. There are
numerous and varied risks that may prevent us from achieving our goals. If any of these risks actually occurs, our business, financial
condition or results of operations may be materially adversely affected. In such case, the trading price of our common stock could decline
and investors in our common stock could lose all or part of their investment.
Risks
Related to Our Company and Our Business
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 December 31, 2020, we incurred
a net loss of $713,263 and for the year ended December 31, 2019 we incurred a net loss of $281,542. For the nine months ended September
30, 2021 we incurred a net loss of $34,944,417. We have not achieved sustainable 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.
We
may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our level of marketing efforts
to expand the number of customers and merchants using our products and acquisition of suitable target companies and could cause our business
plan to fail.
We
will need substantial additional funding to increase our customer base and pursue our acquisition of companies and business units that
meet our desired standards. There are no assurances that future funding will be available on favorable terms or at all. The failure to
fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of
operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to reduce our efforts to enlist
more customers and merchants to use our technology and to delay, reduce or eliminate our acquisition strategy. Any of these events could
significantly harm our business, financial condition and prospects.
We
may acquire other assets or businesses, or form collaborations or make investments in other companies or technologies that could harm
our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.
As
part of our business strategy, we may pursue acquisitions of businesses and assets or enter into strategic alliances and collaborations,
to initiate and then expand our operations. We may not identify or complete these transactions in a timely manner, on a cost-effective
basis, or at all, and we may not realize the anticipated benefits of any such transaction, any of which could have a detrimental effect
on our financial condition, results of operations and cash flows. We have limited experience with acquiring other companies and assets
and limited experience with forming strategic alliances and collaborations. We may not be able to find suitable acquisition candidates,
and if we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business and we may
incur additional debt or assume unknown or contingent liabilities in connection therewith. Integration of an acquired company or assets
may also disrupt ongoing operations, require the hiring of additional personnel and the implementation of additional internal systems
and infrastructure, especially the acquisition of commercial assets, and require management resources that would otherwise focus on developing
our existing business. We may not be able to find suitable strategic alliance or collaboration partners or identify other investment
opportunities, and we may experience losses related to any such investments.
To
finance any acquisitions or collaborations, we may choose to issue debt or equity securities as consideration. Any such issuance of securities
would dilute the ownership of our stockholders. If the price of our common stock is low or volatile, we may not be able to acquire other
assets or companies or fund a transaction using our stock as consideration. Alternatively, it may be necessary for us to raise additional
funds for acquisitions through public or private financings. Additional funds may not be available on terms that are favorable to us,
or at all.
Because
we do not have an audit or compensation committee, shareholders will have to rely on the entire Board of Directors to perform these functions.
We
do not have an audit or compensation committee comprised of independent directors. Indeed, we do not have any audit or compensation committee.
These functions are performed by the Board of Directors as a whole. Thus, there is a potential conflict in that board members who are
also part of management will participate in discussions concerning management compensation and audit issues that may affect management
decisions.
We
expect to face intense competition, often from companies with greater resources and experience than we have.
To
acquire qualified companies, we are likely to face competition from companies that have substantially greater financial, technological,
managerial and research and development resources and experience than we have. In addition, if we are successful in closing our acquisition
of one or more target companies, these acquired companies are likely to face competition for their service and product offerings from
large and well-established companies that have greater marketing and sales experience and capabilities than we have. If we are unable
to compete successfully, we may be unable to grow, sustain our revenue or be successful in achieving our business plan.
Current
global financial conditions have been characterized by increased volatility which could negatively impact our business, prospects, liquidity
and financial condition.
Current
global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of
the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guaranty that debt
or equity financing, the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our
initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations
will negatively impact our business, prospects, liquidity and financial condition.
We
are growing the size of our organization, and we may experience difficulties in managing any growth we may achieve.
As
of the date of this prospectus, we have 27 full-time employees. As our growth plans proceed and development and commercialization plans
and strategies develop, we expect to need additional development, managerial, operational, sales, marketing, financial, accounting, legal,
and other resources. Future growth would impose significant added responsibilities on members of management. Our management may not be
able to accommodate those added responsibilities, and our failure to do so could prevent us from effectively managing future growth,
if any, and successfully growing our Company.
Our
potential for rapid growth and our entry into new markets make it difficult for us to evaluate our current and future business prospects,
and we may be unable to effectively manage any growth associated with these new markets, which may increase the risk of your investment
and could harm our business, financial condition, results of operations and cash flow.
Our
entry into new markets as we seek to expand globally the adoption of our software services and seek to acquire complementary businesses
may place a significant strain on our resources and increase demands on our executive management, personnel and systems, and our operational,
administrative and financial resources may be inadequate. We may also not be able to effectively manage any expanded operations or achieve
planned growth on a timely or profitable basis, particularly if the number of customers using our technology significantly increases
or their demands and needs change as our business expands. If we are unable to manage expanded operations effectively, we may experience
operating inefficiencies, the quality of our products and services could deteriorate, and our business and results of operations could
be materially adversely affected.
If
we are unable to develop and maintain our brand and reputation for our service and product offerings, our business and prospects could
be materially harmed.
Our
business and prospects depend, in part, on developing and then maintaining and strengthening our brand and reputation in the markets
we will serve and for the companies we acquire. If problems arise with our future products or services, our brand and reputation could
be diminished. If we fail to develop, promote and maintain our brand and reputation successfully, our business and prospects could be
materially harmed.
Any
failure to protect our future intellectual property rights could impair our ability to protect our technology and our brand.
Our
success depends in part on our ability to enforce our intellectual property and other proprietary rights of the companies we expect to
acquire. We expect to rely upon a combination of trademark and trade secret laws, as well as license and other contractual provisions,
to protect our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection
and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent
that our intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary
information, develop and market solutions similar to ours or use trademarks similar to ours, each of which could materially harm our
business. The failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect
on our business, financial condition and results of operations.
Our
expansion into new products, services, technologies, and geographic regions subjects us to additional risks.
We
may have limited or no experience in our newer markets, and our customers may not adopt our product or service offerings. These offerings,
which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience service
disruptions or failures or other quality issues. For example, the NFTs on which we have recently focused may prove to be speculative
and not sustain the value they currently have to our clients. In addition, profitability, if any, in our newer activities may not meet
our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize
the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written
down or written off.
The
impact of epidemics or pandemics may limit our future business both from the demand and supply sides. Our sale people may not be able
to effectively engage with customers due to restrictions on travel, conferences and in-person meetings. Our supply chain may be impacted
by production and distribution delays. Due to these factors we may limit future operations to reduce expenses until events support and
allow normal business procedures.
Our
current business, specifically our ticketing vertical, and future acquired businesses and/or operations both domestic and abroad, and
the businesses of our potential customers could be materially and adversely affected by the risks, or the public perception of the risks,
related to a pandemic or other health crisis, such as the outbreak of the novel coronavirus (COVID-19) as well as the variants.
The
growth of the businesses we acquire may, in part, be reliant on the willingness of customers to invest in their products and solutions.
The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could cause customers to avoid purchases
which would delay sales of those products and solutions.
Our
financial results fluctuate and may be difficult to forecast, and this may cause a decline in the trading price of our stock.
Our
revenues, expenses and operating results are difficult to predict given our limited history of current operations. We expect that our
operating results will continue to fluctuate in the future due to a number of factors, some of which are beyond our control. These factors
include, but are not limited to:
|
●
|
our
ability to increase our brand awareness;
|
|
|
|
|
●
|
our
ability to attract new customers;
|
|
|
|
|
●
|
our
ability to increase our customer base;
|
|
|
|
|
●
|
the
amount and timing of costs relating to the expansion of our operations, including sales and marketing expenditures;
|
|
|
|
|
●
|
our
ability to introduce new mobile payment offerings or customer services in a competitive environment;
|
|
|
|
|
●
|
technical
difficulties consumers might encounter in using our mobile apps; and
|
|
|
|
|
●
|
our
ability to manage third-party outsourced operations;
|
Due
to all of these factors, our operating results may fall below the expectations of investors, which could cause a decline in the trading
price of our common stock.
We
intend to make acquisitions that could disrupt our operations and adversely impact our business and operating results.
We
intend to attempt to acquire complementary e-commerce businesses and to support the transition and integration of acquired operations
with our ongoing business as a part of our growth strategy. Other than as disclosed herein, we currently have no binding commitments
or agreements with respect to any such acquisitions and there can be no assurance that we will eventually consummate any acquisitions.
The process of integrating acquired assets into our operations may result in unforeseen operating difficulties and expenditures and may
absorb significant management attention that would otherwise be available for the ongoing development of our business. In addition, we
have limited experience in performing acquisitions and managing growth. There can be no assurance that the anticipated benefits of any
acquisition will be realized. In addition, future acquisitions could result in potentially dilutive issuances of equity securities, the
incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets, any of which
could materially and adversely affect our operating results and financial position. In addition, acquisitions also involve other risks,
including risks inherent in entering markets in which we have no or limited prior experience and the potential loss of key employees.
Our
plans for expansion cannot be implemented if we lose our key personnel or cannot recruit additional personnel.
We
depend substantially on the continued services, specialized knowledge and performance of our senior management, particularly Brian Foote,
our President and CEO, Jeffrey Hinshaw, our COO and CFO, Dennis Lee, our Mobile Pay Division Lead, Drew Foster, our Marketplace Division
Lead, Javier Gonzalez, our Chief Technology Officer, Michele Rivera, our Vice President, Global Partnerships, and Karen Garcia, our Vice
President, Major Accounts. While we have employment agreements with all these executives, those employment agreements do not prevent
such employees from terminating their employment with us at any time. As a result, these executives may elect to pursue other opportunities
at any time. If one or more of these individuals choose to leave our company, we may lose a significant number of supplier relationships
and operating expertise which they have developed over many years and which would be difficult to replace. The loss of the services of
any executive officer or other key employee could hurt our business.
In
addition, as our business expands, we will need to add new information technology and engineering personnel to maintain and expand our
website and systems and customer support personnel to serve our growing customer base. If we are unable to hire and successfully train
employees or contractors in these areas, users of our website may have negative experiences and we may lose customers, which would diminish
the value of our brand and harm our business. The market for recruiting qualified information technology and other personnel is extremely
competitive, and we may experience difficulties in attracting and retaining employees. Should we fail to retain or attract qualified
personnel, we may not be able to compete successfully or implement our plans for expansion.
We
have an evolving business model with still untested growth initiatives.
We
have an evolving business model and intend to implement new strategies to grow our business in the future. Among other strategies for
organic growth, we intend to recruit country partners to sell our mobile financial services. There can be no assurance that we will be
successful in developing new product categories or in entering new specialty markets or in implementing any other growth strategies.
Similarly, there can be no assurance that we already have or will be able to obtain or retain any employees, consultants or other resources
with any specialized skills or relationships to successfully implement our strategies in the future.
We
rely on third-party systems to conduct our business and relationships with payment processors, advertisers, third party sellers of our
mobile apps, and our revenues and market share may decrease if these third-party relationship and systems are unavailable in the future
or if they no longer offer quality performance.
We
rely on third-party computer systems and third-party service providers, including payment services such as Stripe, and Wyre for credit
card verifications and confirmations, to host our website and to advertise and deliver the products sold on our website to customers.
We also rely on third-party licenses for components of the software underlying our technology platform. Any interruption in our ability
to obtain the products or services of these or other third parties or deterioration in their performance could impair the timing and
quality of our own service. If our service providers fail to deliver high-quality services in a timely manner to our customers, our services
will not meet the expectations of our customers and our reputation and brand will be damaged. Furthermore, if our arrangements with any
of these third parties are terminated, we may not find an alternate source of systems support on a timely basis or on terms as advantageous
to us. In addition, our contracts or arrangements with suppliers do not provide for the continuation of particular pricing practices,
for the availability of any specific services and generally may be terminated by either party. If we are unable to develop and maintain
relationships with these third-party suppliers that will allow us to obtain sufficient levels of service on acceptable commercial terms,
such inability could harm our business, prospects, financial condition and results of operations.
We
are subject to cyber security risks and risks of data loss or other security breaches.
Our
business involves the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk
of loss or misuse of this information, and to resulting claims, fines, and litigation. We have been subjected to a variety of cyber-attacks,
which have increased in number and variety over time. We believe our systems are probed by potential hackers virtually 24/7, and we expect
the problem will continue to grow worse over time. Cyber-attacks may target us, our customers, our suppliers, banks, credit card processors,
delivery services, e-commerce in general or the communication infrastructure on which we depend. Any compromise of our security could
result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a
loss of confidence in our security measures, any of which could have a material adverse effect on our financial results and business.
Moreover, any insurance coverage we may carry may be inadequate to cover the expenses and other potential financial exposure we could
face as a result of a cyber-attack or data breach.
We
may not be able to compete successfully against existing or future competitors including larger, well-established and well-financed mobile
app companies.
Many
of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we do. In addition, some of our competitors may be able to devote greater resources
to marketing and promotional campaigns, adopt more aggressive pricing and devote substantially more resources to systems development
than we do. Increased competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We
cannot provide assurance that we will be able to compete successfully against existing or future competitors.
Our
business depends on effective marketing, including marketing via email and social networking messaging, and we intend to increase our
spending on marketing and branding, which may adversely affect our financial results.
We
depend on effective marketing to attract customers and merchants. We depend on email and social networking messaging to promote our site
and offerings and to generate a substantial portion of our revenues. If we are unable to develop, implement and maintain effective and
efficient cost-effective advertising and marketing programs, it would have a material adverse effect on our financial results and business.
Further, as part of our growth strategies, we intend to increase our spending on marketing and branding initiatives significantly, which
may adversely affect our financial results. There is no assurance that any increase in our marketing or branding expenditures will result
in increased market shares or will ultimately have a positive effect on our financial results.
If
we do not respond to rapid technological changes, our services could become obsolete and we could lose customers.
To
remain competitive, we must continue to enhance and improve the functionality and features of our e-commerce businesses. We may face
material delays in introducing new services, products and enhancements. If this happens, our customers may forego the use of our websites
and use those of our competitors. If competitors introduce new products and services using new technologies or if new industry standards
and practices emerge, our existing technology and systems may become obsolete. Our failure to respond to technological change or to adequately
maintain, upgrade and develop our computer network and the systems used to process customers’ orders and payments could harm our
business, prospects, financial condition and results of operations.
Use
of social media may adversely impact our reputation.
There
has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other
forms of internet-based communications that allow individuals access to a broad audience of consumers and other interested persons. Consumers
value readily available information concerning retailers, manufacturers, and their goods and services and often act on such information
without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms
and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers
and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information,
including inaccurate information, is seemingly limitless and readily available. Information concerning our company may be posted on such
platforms and devices at any time. Information posted may be adverse to our interests, may be inaccurate, and may harm our performance,
prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could
be used for the dissemination of trade secret information or otherwise compromise valuable company assets, all of which could harm our
business, prospects, financial condition and results of operations.
We
are subject to payments-related risks.
We
accept payments using a variety of methods, including credit card, and debit card, credit accounts (including promotional financing),
gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment upon delivery. For
existing and future payment options we offer to our customers, we may become subject to additional regulations and compliance requirements
(including obligations to implement enhanced authentication processes that could result in significant costs and reduce the ease of use
of our payments products), as well as fraud. For certain payment methods, including credit and debit cards, we pay interchange and other
fees, which may increase over time and raise our operating costs and lower profitability. We rely on third parties to provide certain
Amazon-branded payment methods and payment processing services, including the processing of credit cards, and debit cards., electronic
checks, and promotional financing. In each case, it could disrupt our business if these companies become unwilling or unable to provide
these services to us. We are also subject to payment card association operating rules, including data security rules, certification requirements,
and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.
If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable
for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card
payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating
results could be adversely affected.
In
addition, we provide regulated services in certain jurisdictions because we enable customers to keep account balances with us and transfer
money to third parties, and because we provide services to third parties to facilitate payments on their behalf. In these jurisdictions,
we may be subject to requirements for licensing, regulatory inspection, bonding and capital maintenance, the use, handling, and segregation
of transferred funds, consumer disclosures, and authentication. We are also subject to or voluntarily comply with a number of other laws
and regulations relating to payments, money laundering, international money transfers, privacy and information security, and electronic
fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to additional requirements
and civil and criminal penalties or forced to cease providing certain services.
We
could be liable for fraudulent or unlawful activities of sellers.
The
law relating to the liability of providers of online payment services is currently unsettled. In addition, governmental agencies could
require changes in the way this business is conducted. Under our seller programs, we may be unable to prevent sellers from collecting
payments, fraudulently or otherwise, when buyers never receive the products they ordered or when the products received are materially
different from the sellers’ descriptions. We reimburse buyers for payments up to certain limits in these situations, and as our
third-party seller sales grow, the cost of this program will increase and could negatively affect our operating results. We also may
be unable to prevent sellers on our sites or through other seller sites from selling unlawful goods, selling goods in an unlawful manner,
or violating the proprietary rights of others, and could face civil or criminal liability for unlawful activities by our sellers.
If
we do not begin to generate significant revenues, we will still need to raise additional capital to meet our long-term business requirements.
Any such capital raising may be costly or difficult to obtain and would likely dilute current stockholders’ ownership interests.
If we are unable to secure additional financing in the future, we will not be able to continue as a going concern.
If
we do not begin to generate significant revenues from our operations we will need additional capital, which may not be available on reasonable
terms or at all. The raising of additional capital will dilute current stockholders’ ownership interests. We may need to raise
additional funds through public or private debt or equity financings to meet various objectives including, but not limited to:
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maintaining
enough working capital to run our business;
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pursuing
growth opportunities, including more rapid expansion;
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acquiring
complementary businesses and technologies;
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making
capital improvements to improve our infrastructure;
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responding
to competitive pressures;
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complying
with regulatory requirements for advertising or taxation; and
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maintaining
compliance with applicable laws.
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Any
additional capital raised through the sale of equity or equity-linked securities may dilute current stockholders’ ownership percentages
and could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool
of outstanding equity. The terms of those securities issued by us in future capital transactions may be more favorable to new investors,
and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further
dilutive effect that is different from or in addition to that reflected in the capitalization described in this report.
Further,
any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to
obtain required additional capital, we may have to curtail our growth plans or cut back on existing business and we may not be able to
continue operating if we do not generate sufficient revenues from operations needed to stay in business.
We
may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities
law compliance fees and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we
issue, such as convertible notes and warrants, which may adversely impact our financial condition.
Any
failure to protect our future intellectual property rights could impair our ability to protect our technology and our brand.
Our
success depends in part on our ability to enforce our intellectual property and other proprietary rights of the companies we expect to
acquire. We expect to rely upon a combination of trademark and trade secret laws, as well as license and other contractual provisions,
to protect our intellectual property and other proprietary rights. These laws, procedures and restrictions provide only limited protection
and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. To the extent
that our intellectual property and other proprietary rights are not adequately protected, third parties may gain access to our proprietary
information, develop and market solutions similar to ours or use trademarks similar to ours, each of which could materially harm our
business. The failure to adequately protect our intellectual property and other proprietary rights could have a material adverse effect
on our business, financial condition and results of operations.
Our
international operations expose us to a number of risks.
We
expect that our current limited international activities will grow significantly. In certain international market segments, we have relatively
little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It can be costly to establish,
develop, and maintain international operations and promote our brand internationally. Our international operations may not become profitable
on a sustained basis.
In
addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including:
●
local economic and political conditions;
●
government regulation (such as regulation of our product and service offerings and of competition); restrictive governmental actions
(such as trade protection measures, including export duties and quotas and custom duties and tariffs); nationalization; and restrictions
on foreign ownership;
●
restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and
content, including uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying
rules, regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property
rights;
●
business licensing or certification requirements, such as for imports, exports, web services, and electronic devices;
●
limitations on the repatriation and investment of funds and foreign currency exchange restrictions;
●
limited fulfillment and technology infrastructure;
●
shorter payable and longer receivable cycles and the resultant negative impact on cash flow;
●
laws and regulations regarding privacy, data protection, data security, network security, consumer protection, payments, advertising,
and restrictions on pricing or discounts;
●
lower levels of use of the Internet;
●
lower levels of consumer spending and fewer opportunities for growth compared to the United States;
●
lower levels of credit card usage and increased payment risk;
●
difficulty in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences;
●
compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government
officials and other third parties;
●
laws and policies of the United States and other jurisdictions affecting trade, foreign investment, loans, and taxes; and
●
geopolitical events, including war and terrorism.
The
impact of epidemics or pandemics may limit our future business both from the demand and supply sides.
Our
current business and future acquired businesses and/or operations both domestic and abroad, and the businesses of our potential customers
and merchants could be materially and adversely affected by the risks, or the public perception of the risks, related to a pandemic or
other health crisis, such as the outbreak of the novel coronavirus (COVID-19).
The
growth of our ticketing business in particular and the businesses we acquire may, in part, be reliant on the willingness of customers
to invest in their products and solutions. The risk, or public perception of the risk, of a pandemic or media coverage of infectious
diseases could cause customers to avoid purchases which would delay sales of those products and solutions.
Risks
Related to Our Common Stock
Our
securities are “Penny Stock” and subject to specific rules governing their sale to investors.
Under
SEC Rule 15g-9 we are a “penny stock,” which is defined as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require that a broker or dealer approve a person’s 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.
To
approve a person’s 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 Company’s shareholders to sell shares of our common 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 stocks.
Investors
will experience dilution of their ownership interests because of the shares to be sold in this offering and future issuances of additional
shares of our common stock.
You
will incur substantial dilution as a result of this offering. After giving effect to the sale by our Selling Stockholders.
In
the future, we may issue additional authorized but previously unissued equity securities, such as we expect to do through this offering,
resulting in the dilution of the ownership interests of our present stockholders. We may also issue additional shares of common stock
or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future
acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. There can be no assurance
that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any
capital raising efforts, including at a price (or exercise prices) below the price at which shares of our common stock is currently traded.
Because
we became public by means of a merger, we may not be able to attract the attention of major brokerage firms.
Additional
risks may exist since we became public through a merger with a publicly traded company. Securities analysts of major brokerage firms
may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance
can be given that brokerage firms will want to conduct any secondary offerings on behalf in the future.
Compliance
with the reporting requirements of federal securities laws can be expensive.
We
will become a fully reporting company upon effectiveness of this offering and will be subject to the information and reporting requirements
of the Exchange Act and other federal securities laws and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing
and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial.
Applicable
regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to
retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain
or retain listing of our common stock.
As
a fully reporting company under Section 13 of the Exchange Act, we may be unable to attract and retain those qualified officers, directors
and members of board committees required to provide for effective management because of the rules and regulations that govern publicly
held companies, including, but not limited to, certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act
has resulted in the issuance of a series of related rules and regulations and the strengthening of existing rules and regulations by
the SEC, as well as the adoption of new and more stringent rules by the stock exchanges. The perceived increased personal risk associated
with these changes may deter qualified individuals from accepting roles as directors and executive officers.
Further,
some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s
independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining
directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management
of our business and its ability to obtain or retain listing of our shares of common stock on any stock exchange (assuming we elect to
seek and are successful in obtaining such listing) could be adversely affected.
If
we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect
fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.
We
must maintain effective internal controls to provide reliable financial reports and detect fraud. We have been assessing our internal
controls to identify areas that need improvement. Failure to identify and thereafter implement required changes to our internal controls
or any others that we identify as necessary to maintain an effective system of internal controls, if any, could harm our operating results
and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect
on the trading price of our stock.
The
price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The
trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
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actual
or anticipated variations in our operating results;
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announcements
of developments by us or our competitors;
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regulatory
actions regarding our products;
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announcements
by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
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adoption
of new accounting standards affecting our industry;
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additions
or departures of key personnel;
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introduction
of new products by us or our competitors;
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sales
of our common stock or other securities in the open market; and
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other
events or factors, many of which are beyond our control such as the continuation of disruptions due to COVID-19.
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The
stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price
of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated
against us, whether or not successful, could result in substantial costs and diversion of its management’s attention and resources,
which could harm our business and financial condition.
Our
common stock is controlled by insiders.
Our
officers and directors beneficially own approximately 80% of our outstanding shares of common stock through their ownership of Series
B preferred shares. Such concentrated control may adversely affect the price of our common stock. Investors who acquire common stock
may have no effective voice in our management. Sales by our insiders or affiliates along with any other market transactions, could negatively
affect the market price of our common stock.
We
are an “emerging growth company,” and we cannot be certain if the reduced reporting 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 Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act,
and we intend to take advantage of some of the exemptions from reporting requirements that are applicable to other public companies that
are not emerging growth companies, including:
●
being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements,
with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
disclosure;
●
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
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not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory
audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial
statements;
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reduced disclosure obligations regarding executive compensation; and
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not being required to hold a non-binding advisory vote on executive compensation or obtain stockholder approval of any golden parachute
payments not previously approved.
Further,
the JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition time to comply with
new or revised accounting standards as applicable to public companies. We are choosing to elect the extended transition period for complying
with new or revised accounting standards applicable to public companies. We have elected the extended transition period for complying
with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act until the earlier of the date we (i) are no longer
an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as
of public company effective dates.
We
cannot predict if investors will find our common stock less attractive because we will 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. We may take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain
an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion
of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large
accelerated filer, which means the market value of our common stock that is held by non- affiliates exceeds $700 million as of the prior
June 30 and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
If
we do not meet the listing standards of a national securities exchange our investors’ ability to make transactions in our securities
will be limited, and we will be subject to additional trading restrictions.
Our
securities currently are traded over-the-counter on the OTC Pink Market and are not qualified to be listed on a national securities exchange,
such as NASDAQ. Accordingly, we face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
●
reduced liquidity with respect to our securities;
●
our shares of common stock are currently classified as “penny stock” which requires brokers trading in our shares of common
stock to adhere to more stringent rules, resulting in a reduced level of trading activity in the secondary trading market for our shares
of common stock;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the
sale of certain securities, which are referred to as “covered securities.” Since our Common Stock is traded on OTC Pink,
our common stock is a covered security. Although the states are preempted from regulating the sale of our securities, the federal statute
allows the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then
the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer traded over-the-counter,
our common stock would not be a covered security and we would be subject to regulation in each state in which we offer our securities.
Because
we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be
your sole source of gain.
We
have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to
finance the growth and development of our business. In addition, the terms of any future debt agreements may preclude us from paying
dividends. As a result, capital appreciation, if any, of our securities will be your sole source of gain for the foreseeable future.
Some
provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others,
even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our
current management.
Provisions
in our certificate of incorporation and bylaws that will become effective in connection with consummation of this offering, as well as
provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if
doing so would benefit our stockholders, or remove our current management. These include provisions that:
●
permit our Board of Directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as it
may designate, of which we have designated 7,000,000 Series A preferred stock with 1,000 votes per share, all of which are
held by Brian Foote, our CEO; issue 570,000 Series B preferred stock with 10,000 votes per share 552,913 of which are
issued and outstanding;
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provide that all vacancies on our Board of Directors, including as a result of newly created directorships, may, except as otherwise
required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
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not provide for cumulative voting rights, thereby allowing the holders of a majority of the shares of common stock entitled to vote in
any election of directors to elect all of the directors standing for election;
●
provide that special meetings of our stockholders may be called by a majority of the Board of Directors; and
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provide that our Board of Directors is expressly authorized to make, alter or repeal the bylaws.
These
provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult
for stockholders to replace members of our Board of Directors, who are responsible for appointing the members of our management. Any
provision of our articles of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control
could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the
price that some investors are willing to pay for our common stock.
USE
OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold from time to time by the Selling Stockholders. We will
receive no proceeds from the sale of shares of Common Stock by the Selling Stockholders in this offering. We may receive proceeds from
warrants exercised by the Selling Stockholders. We may receive up to $39,237,500 from the exercise of warrants by the Selling
Stockholders. See “Plan of Distribution” elsewhere in this prospectus for more information.
We
expect to use the net proceeds from the exercise of warrants from the Selling Stockholders for acquisitions, joint ventures, technology
costs and general corporate purposes.
The
following table illustrates the amount of net proceeds we will receive on the exercise of warrants by the Selling Stockholders totaling
$39,237,500. It is possible that we may not raise the entire $39,237,500 through this prospectus. In such case, we will
reallocate our use of proceeds as the Board of Directors deems to be in the best interests of the Company to effectuate our business
plan. The intended use of proceeds are as follows:
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100%
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75%
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50%
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25%
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Gross
Offering Proceeds
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$
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39,237,500
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$
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29,428,125
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$
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19,618,750
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$
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9,809,375
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Offering
Costs(1)
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$
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100,000
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$
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100,000
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$
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100,000
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$
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100,000
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Use
of Net Proceeds:
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Acquisitions
|
|
$
|
16,637,500
|
|
|
$
|
12,478,125
|
|
|
$
|
8,318,750
|
|
|
$
|
4,159,375
|
|
Technology
Costs(2)
|
|
$
|
15,000,000
|
|
|
$
|
10,000,000
|
|
|
$
|
7,500,000
|
|
|
$
|
3,500,000
|
|
Working
Capital(3)
|
|
$
|
4,000,000
|
|
|
$
|
3,350,000
|
|
|
$
|
1,700,000
|
|
|
$
|
1,050,000
|
|
Debt
Reduction
|
|
$
|
3,500,000
|
|
|
$
|
3,500,000
|
|
|
$
|
2,000,000
|
|
|
$
|
1,000,000
|
|
(1)
|
We
expect to spend approximately $100,000 in expenses relating to this offering, including legal, accounting, travel, printing
and other miscellaneous costs.
|
|
|
(2)
|
Technology
costs include the costs or hiring additional developers to further the development of our suite of products.
|
|
|
(3)
|
We
use working capital to pay for miscellaneous and general operating expenses, as well as legal and accounting fees.
|
The
allocation of the use of proceeds among the categories of anticipated expenditures represents management’s best estimates based
on the current status of our proposed operations, plans, investment objectives, capital requirements, and financial conditions. Future
events, including changes in economic or competitive conditions of our business plan or the completion of less than the total offering,
may cause us to modify the above-described allocation of proceeds. Our use of proceeds may vary significantly in the event any of our
assumptions prove inaccurate. We reserve the right to change the allocation of net proceeds from the offering as unanticipated events
or opportunities arise.
MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock is quoted on the OTC Pink under the symbol HMBL. As of November 26, 2021, there were 399 holders of record of our
common stock.
The
last report sales price of our common stock on the OTC Pink on November 26, 2021 was $0.51 per share.
Dividend
Policy
We
have not declared nor paid any cash dividend on our common stock, and we currently intend to retain future earnings, if any, to finance
the expansion of our business, and we do not expect to pay any cash dividends in the foreseeable future. The decision whether to pay
cash dividends on our common stock will be made by our board of directors, in their discretion, and will depend on our financial condition,
results of operations, capital requirements and other factors that our board of directors considers significant.
DILUTION
The
sale of shares of our common stock by the Selling Stockholders, may have a dilutive impact on our stockholders.
Our
net tangible book value as of September 30, 2021 was approximately ($22,411,123) or ($0.02436) per share. Net tangible book value per
share is determined by dividing our total tangible assets, less total liabilities, by the number of shares of common stock outstanding
as of September 30, 2021. Dilution with respect to net tangible book value per share represents the difference between the amount per
share paid by the Selling Stockholders, and the net tangible book value per share of common stock immediately after such issuances to
the Selling Stockholders.
After
giving effect to the issuance of 254,958,294 shares of our common stock to the other Selling Stockholders at the assumed sale
prices ranging from $0.20 to $1.00 per share, and after deducting estimated offering expenses payable by us, our as adjusted net tangible
book value as of September 30, 2021 would have been approximately $16,826,377, or $0.01423 per share.
To
the extent that options or warrants outstanding as of September 30, 2021 have been or may be exercised or other shares are issued, investors
purchasing shares of our common stock in this offering may experience further dilution. In addition, we may choose to raise additional
capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating
plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these
securities could result in further dilution to our stockholders.
SELLING
STOCKHOLDERS
This
prospectus relates to the possible resale by the Selling Stockholders. We do not know how long the selling stockholder will hold the
shares of our common stock before selling them, and we currently have no agreements, arrangements or understandings with the Selling
Stockholders regarding the sale of any of the shares of our common stock. See “Plan of Distribution.”
The
table below sets forth, to our knowledge, information concerning the beneficial ownership of shares of our common stock by the Selling
Stockholders as of November 26, 2021. The percentages of shares owned before and after the offering are based on 947,311,833
shares of common stock outstanding and 1,182,270,127 shares of common stock, respectively, which includes the 947,311,833
shares of common stock outstanding as of November 26, 2021 and the 254,958,294 shares of common stock offered by this prospectus.
The information in the table below with respect to the Selling Stockholders has been obtained from the Selling Stockholders. solely on
information supplied to us by the Selling Stockholders and assumes the sale of all the shares offered hereby. Other than as described
in the footnotes below, the Selling Stockholders have not, within the past three years, had any position, office or other material relationship
with us or any of our predecessors or affiliates other than as a holder of our securities, or are broker-dealers or affiliates of a broker-dealer.
Information concerning the Selling Stockholders may change from time to time and, if necessary and required, we will amend or supplement
this prospectus accordingly.
Beneficial
ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to shares. Unless
otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their
shares of common stock. The inclusion of any shares in this table does not constitute an admission of beneficial ownership for the person
named below.
Selling
Stockholder
|
|
Number
of Shares of Common Stock Beneficially Owned Prior to Offering(1)(2)(3)
|
|
|
Maximum
Number of Shares of Common Stock to be Sold Pursuant to this Prospectus
|
|
|
Number
of Shares of Common Stock Beneficially Owned After Offering(4)
|
|
|
Percentage
of Common Stock Owned After the Offering(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Juan
Luis Gonzalez
|
|
|
4,672,897
|
|
|
|
4,672,897
|
|
|
|
-
|
|
|
|
*
|
|
Javier
Gonzalez
|
|
|
4,672,897
|
|
|
|
4,672,897
|
|
|
|
-
|
|
|
|
*
|
|
Forwardly,
Inc.(5)
|
|
|
62,500,000
|
|
|
|
62,500,000
|
|
|
|
-
|
|
|
|
*
|
|
Charger
Corporation(6)
|
|
|
51,500,000
|
|
|
|
51,500,000
|
|
|
|
-
|
|
|
|
*
|
|
Konop
Enterprises, Inc.(7)
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
*
|
|
Adel
Wakil
|
|
|
4,000,000
|
|
|
|
4,000,000
|
|
|
|
-
|
|
|
|
*
|
|
Antonio
Dutra
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
|
|
-
|
|
|
|
*
|
|
Kevin
Levine
|
|
|
862,500
|
|
|
|
450,000
|
|
|
|
412,500
|
|
|
|
*
|
|
Judith
Levine
|
|
|
862,500
|
|
|
|
450,000
|
|
|
|
412,500
|
|
|
|
*
|
|
Archumbl
Pty Ltd(8)
|
|
|
12,500,000
|
|
|
|
12,500,000
|
|
|
|
-
|
|
|
|
*
|
|
The
Strider Lir Trust(9)
|
|
|
996,600
|
|
|
|
660,000
|
|
|
|
336,600
|
|
|
|
*
|
|
Scottish
Isles Investing, LLC(10)
|
|
|
135,900
|
|
|
|
90,000
|
|
|
|
45,900
|
|
|
|
*
|
|
Maize
and Gray, LLC(11)
|
|
|
1,132,500
|
|
|
|
825,000
|
|
|
|
307,500
|
|
|
|
*
|
|
KWP
50, LLC(12)
|
|
|
1,472,250
|
|
|
|
975,000
|
|
|
|
497,250
|
|
|
|
*
|
|
North
Falls Investments, L.P.(13)
|
|
|
453,000
|
|
|
|
300,000
|
|
|
|
153,000
|
|
|
|
*
|
|
CMP76,
LLC(14)
|
|
|
226,500
|
|
|
|
150,000
|
|
|
|
76,500
|
|
|
|
*
|
|
Murtaugh
Group LLC(15)
|
|
|
1,132,500
|
|
|
|
750,000
|
|
|
|
382,500
|
|
|
|
*
|
|
Infinity
Block Investments LLC(16)
|
|
|
1,132,500
|
|
|
|
750,000
|
|
|
|
382,500
|
|
|
|
*
|
|
Hahanakai,
LLC(17)
|
|
|
545,000
|
|
|
|
375,000
|
|
|
|
170,000
|
|
|
|
*
|
|
Archura
Capital Pty Ltd(18)
|
|
|
1,020,000
|
|
|
|
1,500,000
|
|
|
|
-
|
|
|
|
*
|
|
Brighton
Capital Partners, LLC(19)
|
|
|
1,054,313
|
|
|
|
16,000,000
|
|
|
|
-
|
|
|
|
*
|
|
HUMBL
CL SpA(20)
|
|
|
437,500
|
|
|
|
437,500
|
|
|
|
-
|
|
|
|
*
|
|
George
Sharp
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
*
|
|
Red
Rock Development Group, LLC(21)
|
|
|
5,000,000
|
|
|
|
5,000,000
|
|
|
|
-
|
|
|
|
*
|
|
Alan
Gunn
|
|
|
5,637,000
|
|
|
|
12,500,000
|
|
|
|
-
|
|
|
|
*
|
|
Michael
Temple
|
|
|
4,532,000
|
|
|
|
12,000,000
|
|
|
|
-
|
|
|
|
*
|
|
Webb
Ellinger
|
|
|
4,532,000
|
|
|
|
12,000,000
|
|
|
|
-
|
|
|
|
*
|
|
McDougal
& Duncan, LLC(22)
|
|
|
16,640,000
|
|
|
|
7,500,000
|
|
|
|
9,140,000
|
|
|
|
*
|
|
William
Jared Magnuson and Katherine Marie Magnuson Living Trust(23)
|
|
|
6,778,000
|
|
|
|
6,700,000
|
|
|
|
78,000
|
|
|
|
*
|
|
Nancy
Angell
|
|
|
2,124,000
|
|
|
|
4,500,000
|
|
|
|
-
|
|
|
|
*
|
|
Dylan
Rachman
|
|
|
1,669,000
|
|
|
|
3,400,000
|
|
|
|
-
|
|
|
|
*
|
|
Zach
Stevens
|
|
|
903,000
|
|
|
|
1,800,000
|
|
|
|
-
|
|
|
|
*
|
|
Jim
Yeager
|
|
|
4,673,000
|
|
|
|
1,750,000
|
|
|
|
2,923,000
|
|
|
|
*
|
|
Jennifer
Edgerton
|
|
|
2,615,000
|
|
|
|
1,750,000
|
|
|
|
865,000
|
|
|
|
*
|
|
Kurt
Kimmel
|
|
|
1,308,000
|
|
|
|
1,500,000
|
|
|
|
-
|
|
|
|
*
|
|
Jose
Colchao
|
|
|
903,000
|
|
|
|
1,500,000
|
|
|
|
-
|
|
|
|
*
|
|
Mark
Turner
|
|
|
7,480,000
|
|
|
|
1,300,000
|
|
|
|
6,180,000
|
|
|
|
*
|
|
Bryce
Dixon
|
|
|
6,370,242
|
|
|
|
1,200,000
|
|
|
|
5,170,242
|
|
|
|
*
|
|
Cyberbeat
Pte Ltd(24)
|
|
|
5,310,000
|
|
|
|
1,000,000
|
|
|
|
4,310,000
|
|
|
|
*
|
|
Rajan
Narayan
|
|
|
5,310,000
|
|
|
|
1,000,000
|
|
|
|
4,310,000
|
|
|
|
*
|
|
Dinh
Thi Thong Hanh
|
|
|
5,310,000
|
|
|
|
1,000,000
|
|
|
|
4,310,000
|
|
|
|
*
|
|
Roberta
Wyn
|
|
|
5,310,000
|
|
|
|
750,000
|
|
|
|
4,560,000
|
|
|
|
*
|
|
HinCamp,
LLC(25)
|
|
|
4,820,000
|
|
|
|
750,000
|
|
|
|
4,070,000
|
|
|
|
*
|
|
Stephanie
Nhim
|
|
|
1,320,000
|
|
|
|
250,000
|
|
|
|
1,070,000
|
|
|
|
*
|
|
Carmen
Baldwin
|
|
|
1,320,000
|
|
|
|
250,000
|
|
|
|
1,070,000
|
|
|
|
*
|
|
*Denotes
less than 1%
(1)
|
Under
applicable SEC rules, a person is deemed to beneficially own securities which the person has the right to acquire within 60 days
through the exercise of any option or warrant or through the conversion of a convertible security. Also under applicable SEC rules,
a person is deemed to be the “beneficial owner” of a security with regard to which the person directly or indirectly,
has or shares (a) voting power, which includes the power to vote or direct the voting of the security, or (b) investment power, which
includes the power to dispose, or direct the disposition, of the security, in each case, irrespective of the person’s economic
interest in the security. Each listed selling stockholder has the sole investment and voting power with respect to all shares of
Common Stock shown as beneficially owned by such selling stockholder, except as otherwise indicated in these footnotes.
|
(2)
|
Beneficial
ownership of shares of common stock that could be obtained pursuant to convertible notes is calculated as the original principal
balance of the note divided by the conversion price.
|
|
|
(3)
|
Beneficial
ownership of the Series B Preferred Stock is limited by conversion limitations in our Certificate of Incorporation. For Series B
Preferred shareholders holding greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and
January 2022, Series B Preferred shareholders shall not have the right, whether by election, operation of law, or otherwise, to convert
into Common Stock shares of Series B Preferred stock constituting more than 5% of the total number of Series B Preferred shares held
by them; and for each of the calendar months from February 2022 to May 2023, the percentage that the Series B Preferred shareholder
may convert is 3% of the total number of Series B Preferred shares held by them.
|
(4)
|
Represents
the amount and percentage of shares in the event all of the registered securities are sold during the offering.
|
(5)
|
George
Sharp is the President and CEO of Forwardly, Inc. and may be deemed to have voting and investment power over the shares. The address
of Forwardly, Inc. is 3535 Executive Terminal Drive, Henderson, Nevada 89052.
|
|
|
(6)
|
Louis
Sapi is the President of Charger Corporation and may be deemed to have voting and investment power over the shares. The address of
Charger Corporation is 5025 Orbitor Drive, Building 4, Suite 400, Mississaugua, Ontario L4W 4YS, Canada.
|
|
|
(7)
|
Thad
Konop is the President of Konop Enterprises Inc. and may be deemed to have voting and investment power over the shares. The address
of Konop Enterprises Inc. is 39 Mountainview Avenue, Toronto, Ontario M6P 2L5, Canada.
|
(8)
|
Alev
Dover is the Director of Archumbl Pty Ltd and may be deemed to have voting and investment power over the shares. The address of Archura
Capital Pty Ltd. is Archumbl Pty Ltd is 337 Claremont St., Kellyville Ridge, NSW 2155, Australia.
|
|
|
(9)
|
Brian
Kirchoff and Tirsa Hackshaw are the Trustee of the Strider Lir Trust and may be deemed to have voting and investment power over the
shares. The address of Strider Lir Trust: c/o The Library, 435 South Spring Street, Suite 332, Los Angeles, CA 90013
|
|
|
(10)
|
Becky
Moore is the Manager of Scottish Isles Investing, LLC and may be deemed to have voting and investment power over the shares. The
address of Scottish Isles Investing, LLC is PO Box 44, Bishop, GA 30621-9998.
|
(11)
|
Richard
Shebib II is the Manager of Maize and Gray, LLC and may be deemed to have voting and investment power over the shares. The address
of Maize and Gray, LLC is 30800 Telegraph Road, Suite 2800, Bingham Farms, MI 48025.
|
|
|
(12)
|
Kendall
Prince is the Manager of KWP50, LLC and may be deemed to have voting and investment power over the shares. The address of KWP 50,
LLC: 7135 E. Lakeview Ave., Mesa, AZ 85209.
|
|
|
(13)
|
Kendal
Madsen is the Manager of the General Partner of North Falls Investments, L.P. and may be deemed to have voting and investment power
over the shares. The address of North Falls Investments,.LP. is 1550 W. Gordon Avenue, Suite 1, Layton, Utah 84041.
|
|
|
(14)
|
Christina
Pelz is the Manager of CMP76, LLC and may be deemed to have voting and investment power over the shares. The address of CMP76, LLC:
375 S. Curson Avenue, Los Angeles, CA 90036.
|
|
|
(15)
|
Chris
Williams is the Manager of Murtaugh Group, LLC and may be deemed to have voting and investment power over the shares. The address
of Murtaugh Group, LLC is PO Box 246, Great Barrington, MA 01230.
|
|
|
(16)
|
Jordan
Smith is the Manager of Infinity Block Investments, LLC and may be deemed to have voting and investment power over the shares. The
address of Infinity Block Investments LLC is P.O. Box 2728, Lebanon, Virginia 24266.
|
|
|
(17)
|
Cathleen
Peters and Blayne Takemoto are the Member-Managers of Hahanakai, LLC and may be deemed to have voting and investment power over the
shares. The address of Hahanakai is 98-023 Hekaka St. 603, Aiea, Hawaii 96701.
|
|
|
(18)
|
Alev
Dover is the Director of Archura Capital Pty Ltd and may be deemed to have voting and investment power over the shares. The address
of Archura Capital Pty Ltd. is Archumbl Pty Ltd is 337 Claremont St., Kellyville Ridge, NSW 2155, Australia.
|
|
|
(19)
|
Lucas
Hales is the Manager of Brighton Capital Partners, LLC and may be deemed to have voting and investment power over the shares. The
address of Brighton Capital is 3500 San Mateo Court, Austin, Texas 78738, Attention: Lucas Hales, Manager. Brighton Capital is not
a licensed broker dealer or an affiliate of a licensed broker dealer.
|
|
|
(20)
|
Juan
Pablo Morales is the General Manager of HUMBL CL SpA and may be deemed to have voting and investment power over the shares. The address
of HUMBL CL SpA is San Pio X 2455, Oficina 1008, Providencia, Santiago, Chile.
|
|
|
(21)
|
Brian
Innes is the Manager of Red Rock Development Group, LLC and may be deemed to have voting and investment power over the shares. The
address of Red Rock Development Group, LLC is 1785 W. State Route 89A, Suite 2A, Sedona, AZ 86336.
|
|
|
(22)
|
Tom
McDougal is the Manager of McDougal & Duncan, LLC and may be deemed to have voting and investment power over the shares.
|
|
|
(23)
|
William
and Katherine Magnusson are Trustees of the William Jared Magnuson and Katherine Marie Magnuson Living Trust and may be deemed to
have voting and investment power over the shares. The address of the William Jared Magnuson and Katherine Marie Magnuson Living Trust
is 12000 Stroganof Drive, Anchorage, AK 99507.
|
|
|
(24)
|
Rajan
Narayan is the CEO of Cyberbeat Pte Ltd and may be deemed to have voting and investment power over the shares. The address of Cyberbeat
Pte Ltd is 1 Fullerton Road #02-0, One Fullerton, Singapore 049213.
|
|
|
(25)
|
Steven
Hinshaw is the Manager of HinCamp, LLC and may be deemed to have voting and investment power over the shares. The address of HinCamp,
LLC is 850 New Burton Road Suite 201, Dover, DE 19904.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The
following discussion should be read in conjunction with the consolidated financial statements and the related notes contained elsewhere
in this prospectus. In addition to historical information, the following discussion contains forward looking statements based upon current
expectations that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to
a number of factors, including, but not limited to, risks described in the section entitled “Risk Factors” and elsewhere
in this prospectus.
General
Our
executive offices are located at 600 B Street, Suite 300, San Diego, California 92101 telephone (786) 738-9012. Our corporate website
address is www.humblpay.com.
Overview
Following
our merger with HUMBL LLC on December 3, 2020, we changed our name from Tesoro Enterprises, Inc. to HUMBL, Inc. and adopted the business
of HUMBL to deliver a more seamless digital pairing experiences for consumers and merchants in the global economy.
Comparison
of Results of Operations for the Nine Months Ended September 30, 2021 and 2020
The
following table sets forth the summary operations for the nine months ended September 30, 2021 and 2020:
|
|
For the Nine Months Ended
|
|
|
|
September 30, 2021
|
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,580,486
|
|
|
$
|
-
|
|
Cost of Revenues
|
|
$
|
604,217
|
|
|
$
|
-
|
|
Gross Profit
|
|
$
|
976,269
|
|
|
$
|
-
|
|
Operating Expenses
|
|
$
|
31,652,904
|
|
|
$
|
299,191
|
|
Other Income (Expense)
|
|
$
|
(4,267,782
|
)
|
|
$
|
10,000
|
|
Net Loss
|
|
$
|
(34,944,417
|
)
|
|
$
|
(289,191
|
)
|
Revenues
Revenues
for the nine months ended September 30, 2021 were $1,580,486 as compared to $0 for the nine months ended September 30, 2020, an increase
of $1,580,486. The increase was due to the sales of merchandise related to the HUMBL Marketplace segment, ticketing revenue recognized
from our acquisition of Tickeri, Inc. as well the launch of HUMBL Tickets and services rendered from Monster Creative. In addition, we
started HUMBL Financial in our fiscal second quarter and continue to grow subscriptions.
Cost
of Revenues and Gross Profit
Cost
of revenues for the nine months ended September 30, 2021 were $604,217 as compared to $0 for the nine months ended September 30, 2020,
an increase of $604,217. The increase was primarily due to the sales of merchandise related to the HUMBL Marketplace segment as well
as the ticketing costs incurred for Tickeri, Inc. Our gross profit of $976,269 is the result of the recognition of our revenue and grew
in the last fiscal quarter due to full reporting of the two acquisition companies that were completed in June 2021.
Operating
Expenses
Operating
expenses for the nine months ended September 30, 2021 were $31,652,904 as compared to $299,191 for the nine months ended September 30,
2020, an increase of $31,353,713. Operating expenses consists of development costs, professional fees and general and administrative
expenses and non-cash charges for impairment expenses and stock-based compensation.
Development
Costs
Development
costs for the nine months ended September 30, 2021 were $1,470,005 compared with $52,877 for the nine months ended September 30, 2020.
The increase of development costs related to the roll out of HUMBL Marketplace which include development of our NFT Gallery and the launch
of HUMBL Tickets as well as the HUMBL Financial platform. In addition, the Company continued the development of HUMBL Pay which was started
in 2020.
Professional
Fees
Professional
fees for the nine months ended September 30, 2021 were $2,986,355 compared with $227,334 for the nine months ended September 30, 2020.
The increase in professional fees related to the roll out of HUMBL Marketplace, and professional fees in regulatory filings including
OTC compliance and reporting, as well as the HUMBL Financial platform costs to consultants.
Impairment
of Goodwill and Digital Assets and Stock-Based Compensation
The
Company incurred $24,196,559 in non-cash charges in the nine months ended September 30, 2021 related to goodwill impairment on Tickeri,
Inc., impairment of digital assets we hold as well as stock-based compensation to consultants, advisors, directors of $12,055,497. We
incurred none of these charges for the nine months ended September 30, 2020.
General
and Administrative
General
and administrative expenses for the nine months ended September 30, 2021 were $2,966,521 compared with $18,980 for the nine months ended
September 30, 2020. The increase in general and administrative expenses is related to a full period in 2021 of operations including the
general and administrative costs associated with our subsidiaries Tickeri, Inc. and Monster Creative, LLC.
Other
Income (Expense)
In
the nine months ended September 30, 2021 we incurred $4,267,782 in other expenses, compared to $10,000 in other income in the nine months
ended September 30, 2020 which related to a grant for COVID-19. The 2021 other expenses related to $535,163 of interest expense on debt
incurred during the year, $3,300,000 in a non-cash beneficial conversion feature on a convertible note, and $489,848 in amortization
of discounts related to certain convertible notes. In addition, we had other income of $28,200 on PPP forgiveness and $29,029 in gains
on the sale of digital assets. There were no such expenses in 2020.
Net
Loss
Net
loss from operations for the nine months ended September 30, 2021 was ($34,944,417) as compared to a net loss of ($289,191) for the nine
months ended September 30, 2020. The $34,655,226 increase in the net loss was due to the changes noted herein.
Segment
Reporting
The
Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard
requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating
decisions. As of September 30, 2021 and for the nine months ended September 30, 2021, the Company operated in three segments. The segments
are HUMBL Marketplace, HUMBL Pay, and HUMBL Financial. For the nine months ended September 30, 2020, the Company operated in one segment.
Nine Months Ended September 30, 2021
|
|
HUMBL Pay
|
|
|
HUMBL Marketplace
|
|
|
HUMBL Financial
|
|
|
Total
|
|
Segmented operating revenues
|
|
$
|
13,778
|
|
|
$
|
1,375,205
|
|
|
$
|
191,503
|
|
|
$
|
1,580,486
|
|
Cost of revenues
|
|
|
-
|
|
|
|
604,217
|
|
|
|
-
|
|
|
|
604,217
|
|
Gross profit
|
|
|
13,778
|
|
|
|
770,988
|
|
|
|
191,503
|
|
|
|
976,269
|
|
Total operating expenses net of depreciation, amortization and impairment
|
|
|
9,535,290
|
|
|
|
6,572,498
|
|
|
|
3,365,076
|
|
|
|
19,472,864
|
|
Depreciation, amortization and impairment
|
|
|
215
|
|
|
|
12,179,771
|
|
|
|
54
|
|
|
|
12,180,040
|
|
Other (income) expense
|
|
|
2,157,672
|
|
|
|
1,247,041
|
|
|
|
863,069
|
|
|
|
4,267,782
|
|
Income (loss) from operations
|
|
$
|
(11,679,399
|
)
|
|
$
|
(19,228,322
|
)
|
|
$
|
(4,036,696
|
)
|
|
$
|
(34,944,417
|
)
|
Comparison
of Results of Operations for the Three Months Ended September 30, 2021 and 2020
The
following table sets forth the summary operations for the three months ended September 30, 2021 and 2020:
|
|
For the Three Months Ended
|
|
|
|
September 30,
2021
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,198,270
|
|
|
$
|
-
|
|
Cost of Revenues
|
|
$
|
460,352
|
|
|
$
|
-
|
|
Gross Profit
|
|
$
|
737,918
|
|
|
$
|
-
|
|
Operating Expenses
|
|
$
|
12,370,114
|
|
|
$
|
122,241
|
|
Other Expense
|
|
$
|
(679,860
|
)
|
|
$
|
-
|
|
Net Loss
|
|
$
|
(12,312,056
|
)
|
|
$
|
(122,241
|
)
|
Revenues
Revenues
for the three months ended September 30, 2021 were $1,198,270 as compared to $0 for the three months ended September 30, 2020, an increase
of $1,198,270. The increase was due to the sales of merchandise related to the HUMBL Marketplace segment, ticketing revenue recognized
from our acquisition of Tickeri, Inc. and Monster Creative as both of these acquisitions had a full quarter of reporting as well the
launch of HUMBL Tickets.
Cost
of Revenues and Gross Profit
Cost
of revenues for the three months ended September 30, 2021 were $460,352 as compared to $0 for the three months ended September 30, 2020,
an increase of $460,352. The increase was primarily due to the sales of merchandise related to the HUMBL Marketplace segment as well
as the ticketing costs incurred for Tickeri, Inc. Our gross profit of $737,918 is the result of the recognition of our revenue and grew
in the last fiscal quarter due to full reporting of the two acquisition companies that were completed in June 2021.
Operating
Expenses
Operating
expenses for the three months ended September 30, 2021 were $12,370,114 as compared to $122,241 for the three months ended September
30, 2020, an increase of $12,247,873. Operating expenses consists of development costs, professional fees and general and administrative
expenses and non-cash charges for impairment expenses and stock-based compensation.
Development
Costs
Development
costs for the three months ended September 30, 2021 were $713,993 compared with $19,640 for the three months ended September 30, 2020.
The increase of development costs related to the roll out of HUMBL Marketplace which include development of our NFT Gallery and the launch
of HUMBL Tickets as well as the HUMBL Financial platform. In addition, the Company continued the development of HUMBL Pay which was started
in 2020.
Professional
Fees
Professional
fees for the three months ended September 30, 2021 were $928,761 compared with $95,756 for the three months ended September 30, 2020.
The increase in professional fees related to the roll out of HUMBL Marketplace, and professional fees in regulatory filings including
OTC compliance and reporting, as well as the HUMBL Financial platform costs to consultants.
Impairment
of Goodwill and Digital Assets and Stock-Based Compensation
The
Company incurred $8,652,893 in non-cash charges in the three months ended September 30, 2021 related to impairment of digital assets
we hold as well as stock-based compensation to consultants, advisors, directors of $8,619,429. We incurred none of these charges for
the three months ended September 30, 2020.
Other
Income (Expense)
In
the three months ended September 30, 2021 we incurred $679,860 in other expenses, compared to none in other expenses in the three months
ended September 30, 2020 which related to a grant for COVID-19. The 2021 other expenses related to $391,294 of interest expense on debt
incurred during the year, and $342,595 in amortization of discounts related to certain convertible notes. In addition, we had other income
of $25,000 on PPP forgiveness and $29,029 in gains on the sale of digital assets. There were no such expenses in 2020.
Net
Loss
Net
loss from operations for the three months ended September 30, 2021 was ($12,312,056) as compared to a net loss of ($122,241) for the
three months ended September 30, 2020. The $12,189,815 increase in the net loss was due to the changes noted herein.
Segment
Reporting
The
Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard
requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating
decisions. As of September 30, 2021 and for the three months ended September 30, 2021, the Company operated in three segments. The segments
are HUMBL Marketplace, HUMBL Pay, and HUMBL Financial. For the three months ended September 30, 2020, the Company operated in one segment.
Three Months Ended September 30, 2021
|
|
HUMBL Pay
|
|
|
HUMBL Marketplace
|
|
|
HUMBL Financial
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segmented operating revenues
|
|
$
|
13,778
|
|
|
$
|
1,097,355
|
|
|
$
|
87,137
|
|
|
$
|
1,198,270
|
|
Cost of revenues
|
|
|
-
|
|
|
|
460,352
|
|
|
|
-
|
|
|
|
460,352
|
|
Gross profit
|
|
|
13,778
|
|
|
|
637,003
|
|
|
|
87,137
|
|
|
|
737,918
|
|
Total operating expenses net of depreciation, amortization and impairment
|
|
|
5,894,648
|
|
|
|
4,304,910
|
|
|
|
2,131,578
|
|
|
|
12,330,136
|
|
Depreciation, amortization and impairment
|
|
|
215
|
|
|
|
38,709
|
|
|
|
54
|
|
|
|
38,978
|
|
Other (income) expense
|
|
|
363,976
|
|
|
|
170,293
|
|
|
|
145,591
|
|
|
|
679,860
|
|
Income (loss) from operations
|
|
$
|
(6,245,061
|
)
|
|
$
|
(3,876,909
|
)
|
|
$
|
(2,190,086
|
)
|
|
$
|
(12,312,056
|
)
|
Comparison
of Results of Operations for the year ended December 31, 2020 and period May 13, 2019 (Inception) through December 31, 2019
The
following table sets forth the summary income statement for the year ended December 31, 2020 and period May 13, 2019 (Inception) through
December 31, 2019:
|
|
For the Periods Ended
|
|
|
|
December 31,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Operating Expenses
|
|
$
|
705,724
|
|
|
$
|
280,742
|
|
Other Expense and Provision for Income Taxes
|
|
$
|
7,539
|
|
|
$
|
800
|
|
Net Loss
|
|
$
|
(713,263
|
)
|
|
$
|
(281,542
|
)
|
Revenues
We
generated no revenues during the periods ended December 31, 2020 and 2019 as we were forming our business and commencing operations.
Operating
Expenses
Operating
expenses for the period ended December 31, 2020 were $705,724 as compared to $280,742 for the period ended December 31, 2019, an increase
of $424,982. Operating expenses consists of development costs, professional fees and general and administrative expenses.
Development
Costs
Development
costs for the period ended December 31, 2020 were $96,567 compared with $86,755 for the period ended December 31, 2019. The increase
of development costs related to the development of the various platforms the Company has developed and the eventual roll out of these
platforms in 2021.
Professional
Fees
Professional
fees for the period ended December 31, 2020 were $539,568 compared with $187,003 for the period ended December 31, 2019. The increase
in professional fees related to the roll out of HUMBL Marketplace and Studios as well as the HUMBL Financial platform. In addition, the
Company completed its merger with Tesoro Enterprises which contributed to the large increase in legal, accounting and consulting costs.
General
and Administrative
General
and administrative expenses for the period ended December 31, 2020 were $69,589 compared with $6,984 for the period ended December 31,
2019. The increase in general and administrative expenses is related to a full year in 2020 of administrative expenses.
Other
Income (Expense)
Interest
expense, net of interest income, for the period ended December 31, 2020 was $6,739 as compared to $0 for the period ended December 31,
2019. The increase was the result of the interest incurred on the debt incurred in December 2020 related to the note payables, as well
as the amortization of debt discount on those notes.
Net
Loss
Net
loss from operations for the period ended December 31, 2020 was ($713,263) as compared to a net loss of ($281,542) for the period ended
December 31, 2019. The $431,721 increase in the net loss was primarily due to the professional fees and development costs on the commencement
of operations in 2020.
Liquidity
and Capital Resources
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate
on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable
and accounts payable and capital expenditures.
As
of September 30, 2021, we had $2,465,355 in cash. Between the growth in revenues by fees generated by HUMBL Financial and through sales
of merchandise and NFTs in the HUMBL Marketplace, as well as revenue generated through our subsidiaries Tickeri, Inc. and Monster Creative
LLC, along with the successful launches of the HUMBL Pay application, HUMBL Financial and HUMBL Tickets in 2021 as well as proceeds received
from the exercise of warrants in October 2021, we have sufficient operating cash to continue the development of our core products and
services.
We
had a working capital deficit of $2,775,119 as of September 30, 2021 as compared to a working capital surplus of $1,560,832 as December
31, 2020, respectively. The decrease in working capital is the result of the incurrence of expenditures related to the commencement of
the various segments and the current potion of convertible that is due in the next 12 months. The Company believes it has adequate capital
resources to meet its cash requirements during the next 12 months as they continue to grow and develop suitable sources of capital.
We
expect that the revenue generating operations of the Company will continue to improve the liquidity of the Company moving forward. However,
going forward, the effect of the pandemic on the capital markets may limit our ability to raise additional capital on the terms acceptable
to us at the time we need it, if at all. The challenges related to remote work and travel restrictions that we as a smaller company have
faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our
employees have impacted, and may continue to further impact, our ability to raise additional capital.
Net
cash used in operating activities was $6,376,656 and $321,763 for the nine months ended September 30, 2021 and 2020, respectively. The
$6,054,893 increase in net cash used in operating activities was primarily a result of the net loss increase from 2020 to 2021 and the
increase in account payable and accrued expenses as well as the valuation of our share-based compensation in 2021 as well as other non-cash
charges such as impairment expense.
Net
cash used in investing activities was $237,182 for the nine months ended September 30, 2021 related to purchases of fixed assets of $367,576
offset by cash received in the acquisitions of Tickeri, Inc and Monster Creative, LLC of $130,394. There were no investing activities
in 2020.
Cash
provided by financing activities was $7,358,214 and $411,500 for the nine months ended September 30, 2021 and 2020, respectively. Cash
was provided through proceeds from sales of membership interests in HUMBL LLC in 2020. The Company in 2021 did receive proceeds from
convertible promissory notes of approximately $6,400,000, net of OID, and $1,000,000 in proceeds from the sale of common stock. The Company
in 2021 repaid $51,600 in amounts due to a seller of Monster Creative and $186 in repayments on a PPP loan. Subsequent to September 30,
2021, the Company received $4,000,000 for the exercise of warrants.
Net
cash used in operating activities was $856,317 and $200,645 for the periods ended December 31, 2020 and 2019, respectively. The $655,672
increase in net cash used in operating activities was primarily a result of the net loss increase from 2019 to 2020 and the changes in
amounts due our related parties.
Cash
provided by financing activities was $2,572,441 and $205,500 for the periods ended December 31, 2020 and 2019, respectively. Cash was
provided through proceeds from sales of membership interests in HUMBL LLC as well as from the sale of warrants and from convertible promissory
notes in 2020. All activity in 2019 was from sales of membership interests in HUMBL LLC.
Since
the date of the reverse merger in December 2020 we have financed our operations through sales of common and preferred stock and the issuance
of debt.
The
main sources of convertible notes in 2021 were as follows:
|
(a)
|
On
April 14, 2021, the Company entered into a Convertible Promissory Note with Brighton Capital Partners, LLC (“BCP”) in
the amount of $3,300,000, which includes a $300,000 Original Issue Discount (the “BCP Note”). The BCP Note bears interest
at ten percent (10%) per annum and matures July 14, 2022. The BCP Note is convertible into shares of the Company’s common stock
at $3.15 per share. As per the BCP Note, the Company shall have the right to prepay all or any portion of the outstanding balance.
If the Company exercises its right to prepay this note, it will be at an amount of 115% of the balance being prepaid. The BCP Note
also contains a redemption right, where beginning on the earlier of the effective date of the to be filed Form S-1 Registration Statement
and the twelve-month anniversary of the BCP Note, BCP may cause the Company to redeem all or any portion of the BCP Note.
|
|
|
|
|
(b)
|
On
April 14, 2021, the Company and BCP entered into an EFA (“EFA”), whereby, at the Company’s election, BCP shall invest
up to $50,000,000 over the course of twelve months. This EFA was terminated in October 2021.
|
|
(c)
|
On
May 13, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500,
for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued warrants to the same investors to purchase
up to 750,000 warrant shares with the convertible note.
|
|
(d)
|
On
May 13, 2021, the Company issued a convertible promissory note to an investor for $420,750 with an original issue discount of $8,250,
for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued a warrant to the same investor to purchase
up to 825,000 warrant shares with the convertible note.
|
|
|
|
|
(e)
|
On
May 17, 2021, the Company issued a convertible promissory note to an investor for $1,020,000 with an original issue discount of $20,000,
for a term of twenty-two months maturing March 17, 2023. The Company is required to register 1,500,000 shares under a Form S-1 Registration
Statement for this convertible note agreement.
|
|
|
|
|
(f)
|
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $497,250 with an original issue discount of $9,750,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase
up to 975,000 warrant shares with the convertible note. The Company is required to register this convertible note under a Form S-1
Registration Statement.
|
|
|
|
|
(g)
|
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $76,500 with an original issue discount of $1,500,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase
up to 150,000 warrant shares with the convertible note. The Company is required to register this convertible note under a Form S-1
Registration Statement.
|
|
(h)
|
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase
up to 300,000 warrant shares with the convertible note. The Company is required to register this convertible note under a Form S-1
Registration Statement.
|
|
|
|
|
(i)
|
On
April 26, 2021, the Company, issued 437,500 for the acquisition of the Chile country rights. The value of this transaction was $1,000,000
received in cash.
(j)
On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of
$7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to
purchase up to 750,000 warrant shares with the convertible note. The Company recognized a BCF discount in the amount of $100,828
on this convertible note that is being amortized over the life of the convertible note.
(k)
On June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of
$7,500, for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to
purchase up to 750,000 warrant shares with the convertible note. The Company recognized a BCF discount in the amount of $100,828
on this convertible note that is being amortized over the life of the convertible note.
(l)
On August 30, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000,
for a term of twenty-two months maturing June 30, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 375,000 warrant shares with the convertible note.
|
BUSINESS
Overview
We
are a Web 3, digital commerce platform that was built to connect consumers, freelancers and merchants in the digital economy. We provide
simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the
cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades.
Our
goal is to provide ready built tools and platforms for consumers and merchants to seamlessly participate in the digital economy. HUMBL
is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster connections
to the digital economy and each other. We have four principal wholly-owned subsidiaries through which we provide a number of our products:
Tickeri, Inc., Monster Creative, LLC, HUMBL Financial Singapore, PTE. LTD. and HUMBL Oceania Pty Ltd.
We
have three interconnected product verticals:
●
HUMBL Pay – A mobile app that allows peers, consumers and merchants to connect in the digital economy.
●
HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy.
●
HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.
HUMBL
Pay
HUMBL
is developing a mobile application that allows customers to migrate to digital forms of payment, along with services such as maps, ratings
and reviews. The Company is also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the
world as these services migrate into digital and blockchain-based modalities. The mobile application is designed to provide functionality
to the following groups:
●
Individuals - Consumers who want to discover, pay, rate and review experiences digitally versus paper bills and hardware point-of-sale
(“POS”);
●
Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS; and
●
Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.
HUMBL
Marketplace
Through
its online marketplace, HUMBL is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market
audiences, that, when appropriate, incorporate the benefits of blockchain. HUMBL provides merchants with the ability to list and sell
goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve
the merchant’s ability to trade, track and pay for assets.
We
launched our NFT Marketplace to issue NFTs (Non-Fungible Tokens) that allow entities and individuals such as athletes, celebrities, agencies,
artists and companies to monetize their digital images, multimedia, content and catalogues on the blockchain. We will work with clients
to create, list and sell their NFTs across a variety of modalities and platforms. We had performed some beta testing of minting NFTs
for future endeavors, and currently contracts with third parties to place their NFTs on the HUMBL NFT Gallery for sales to consumers.
Sales of these NFTs are those of the designers, and HUMBL receives a commission for the sale.
In
September of 2021, we launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live events
across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and we earn a commission for each
sale. In addition to its subsidiary Tickeri, we will continue to work with clients to merge the realms of NFTs, event tickets and blockchain
authentication.
HUMBL
Financial
We
developed HUMBL Financial to package step-function technologies such as blockchain into “several clicks” for the customer.
With the total value of digital assets in excess of $1 trillion, there is increased conviction that investment markets will need to migrate
to more digital forms of asset tokenization. This will create opportunities for a new generation of market participants and provide access
to markets that have been historically reserved for high-net-worth individuals.
HUMBL
Financial recently announced the creation of its BLOCK ETX products to simplify digital asset investing for customers and institutions
seeking exposure to a new, 24/7 digital asset class. We have launched this product in 100 countries outside the United States. HUMBL
Financial has developed proprietary, multi-factor blockchain indexes, trading algorithms and financial services for the new digital asset
trading markets to accommodate index, active and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically
driven software services that allow customers to purchase and hold digital assets in pre-set allocations through their own digital asset
exchange accounts. BLOCK ETXs are compatible for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US.
BLOCK ETXs are also available to non-US customers who have accounts with Bittrex Global. BLOCK ETXs will be served first on the desktop
and web version of the HUMBL platform, with the goal of future applications inside the HUMBL mobile application. HUMBL Financial is open
to the licensing of the BLOCK ETXs to institutions and exchanges. HUMBL Financial also plans to offer trusted, third party financial
services in areas such as payments, investments, credit card services and lending across the HUMBL platform over time.
COVID-19
The
recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health,
economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global
pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.
Our
ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on
available financing and how we conduct business with our customers and vendors would adversely affect our business both domestically
and abroad.
A
list of our critical accounting policies are as follows:
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, liabilities to accrue, and determination of the fair value of stock awards. Actual results could differ from those estimates.
Segment
Reporting
We
follow the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based on the
manner in which management disaggregates the Company in making internal operating decisions.
For
the nine months ended September 30, 2020 the Company and its chief operating decision makers determined that the Company operated in
one segment as they were developing their business model. Effective 2021, the Company has established three distinct operating segments:
HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. All operations for the nine months ended September 30, 2021 and 2020, respectively
were conducted in North America.
Less
than 4% of the Company’s sales were from outside of North America, therefore the Company has determined that segment reporting
by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if
it is feasible to report segment information by location.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
The
Company accounts for revenues based on the verticals in which they were earned. The three principal verticals in which the Company operates
today are HUMBL Pay, HUMBL Marketplace, and HUMBL Financial.
HUMBL
Pay
The
Company is anticipated to earn transaction revenues primarily from fees charged to merchants and consumers on a transaction basis through
the Company’s mobile application. These fees may have a fixed and/or variable component. The variable component is generally a
percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions,
the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company
may estimate the amount of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume
of activity processed on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”).
The Company will earn additional fees on transactions where currency conversion is performed, when cross-border transactions are enabled
(i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for customers
from their HUMBL account to their debit card or bank account, and other miscellaneous fees. The Company will rely on third party partners
to perform all money transmission services.
The
Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral
fees, subscription fees, gateway fees, ticketing, peer-to-peer payments and other services that will be provided to merchants and consumers.
These contracts typically have one performance obligation which is provided and recognized over the term of the contract.
The
transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary
to estimate the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from
other value-added services on a net basis when they are considered the agent with respect to processing transactions.
HUMBL
Marketplace
The
Company will recognize revenue when its transfer control of promised goods or services to customers in an amount that reflects the consideration
to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which
are subsequently remitted to governmental authorities.
Net
transaction revenues
The
net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees
from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise
sellers. The net transaction revenues are reduced by incentives provided to customers.
The
Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the
secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying
this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings,
that are not distinct within the context of the contract.
Accordingly,
fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized
when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.
Further,
to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees,
discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant
judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later
of when revenue is recognized or when the incentive is paid or promise to be paid. Promotions and incentives to most buyers on our Marketplace
platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits
provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when
estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a
significant reversal of revenue will not occur and updated as additional information becomes available.
Ticketing
Revenues
The
Company with the acquisition of Tickeri and launch of HUMBL Tickets will recognize revenues from their ticketing services primarily from
service fees, commissions and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from
providing certain creators with account management services and customer support. Our customers are primarily event creators who use
our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers,
in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by
estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment
processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized
over the period from the date of the sale of the ticket to the date of the event.
We
evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control
of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk,
and have the latitude in establishing pricing and selecting suppliers, among other factors.
We
determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing
the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled.
Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and
process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service,
we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment
and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis
related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing
the transactions are included in cost of net revenues in the consolidated statements of operations.
Revenue
is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated
uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility
of that creator.
If
a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is
also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing
and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the
creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.
Marketing
services and other revenues
Marketing
services and other revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements.
Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e.,
the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated
each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.
The
Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have a
right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration
to the extent it is probable that a significant reversal of revenue will not occur.
HUMBL
Financial
Revenue
is recognized upon transfer of control of promised services to customers in an amount to which the Company expects to be entitled in
exchange for those services. Service subscription revenue is recognized for the month in which services are provided. If a customer pays
for an annual subscription, revenue is allocated over the months in the subscription and recognized for each month of the service provided.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Fixed
assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more
depending on circumstances.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
1.
Significant underperformance relative to expected historical or projected future operating results;
2.
Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
Significant
Vendor Relationships
We
have established contractual relationships with the following companies that we consider to be material to providing our four core product
groups, HUMBL Pay, HUMBL Marketplace and HUMBL Financial:
We
need in each country or region a payment processing company to allow the consumers to pay online the merchants using our software services.
In the United States we have a Platform Connect Agreement and Services Agreement with Stripe, Inc. as well a Referral Agreement with
Wyre, Inc. In South America we have a Payment Processing Services Agreement with Bexs Tehnologia Da Informacao LTDA. We have entered
into the standard forms of agreements that these companies offer to companies such as ours that promote online purchase of goods and
services.
We
utilize Gumroad, an online platform that facilitates the sale of products by creators directly to consumer, to process payments for the
monthly fee that HUMBL Financial charges its customers to use the service.
We
utilize Very Good Security (“VGS”), a company that encrypts debit and credit card data as well as banking information, that
allows us not to hold onto, see or decrypt any of the raw credit card or banking data from our customers since this information is handled
directly by VGS which encrypts all of it and securely sends this data directly to Stripe.
Competition
Each
of our three principal verticals is highly competitive. Throughout the globe, we currently face substantial competition from other service
providers that offer mobile payments, ticketing, NFT marketplaces and digital asset investing products. We compete primarily on the basis
of availability of services and products, unique product offerings and price.
HUMBL
Pay competes with PayPal and Square.
HUMBL
Marketplace competes with OpenSea, an open, decentralized marketplace for a large variety of digital
items—from game items to digital collectibles to digital art, Makers Place, a digital creation platform powered by blockchain
technology for digital creators, and Live Nation Entertainment, the world’s largest ticketing company.
HUMBL
Financial competes with companies such as Shrimpy and Stacked Invest that also provide digital asset investing opportunities.
Employees
and Human Capital
As
of November 26, 2021, we had 27 full time employees. None of our employees or personnel is represented by a labor union, and we
consider our employee/personnel relations to be good. Competition for qualified personnel in our industry is intense, particularly for
software development and other technical staff. Our human capital resources objectives include, as applicable, identifying, recruiting,
retaining, incentivizing and integrating our existing and new employees, advisors and consultants.
Properties
We
purchased a commercial property in the form of a suite at a luxury hotel. HUMBL is the owner of this suite and entered into a long-term
rental agreement with the hotel to manage the property. HUMBL has use of the suite for 28 calendar days a year, and will receive their
proportionate income for the other days the suite is being used. We currently rent an office in San Diego, California at a monthly cost
of $12,400 on a six-month lease (“Company Headquarters”). We believe that the Company Headquarters is currently adequate
for the purposes of our operations.
Legal
Proceedings
From
time to time we may be named in claims arising in the ordinary course of business. Currently, there are no legal proceedings that are
pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect
on our business or financial condition.
We
recently received from Charles Lass a notification that he had filed four trademark applications using the HUMBL name in various classes.
We have advised Mr. Lass through our trademark counsel that he should immediately discontinue any use of the trademark for similar services
regarding his claims of ownership of the trademark HUMBL and reminded him that we had various trademarks issued under the name HUMBL
with a first use date of April 1, 2018 and that his previous attempt at using the HUMBL name had resulted in him receiving a cease and
desist letter from us dated April 14, 2020 regarding his since abandoned trademark filings for HUMBL. We intend to vigorously contest
any effort by Mr. Lass to violate our trademark protection under federal law.
MANAGEMENT
Set
forth below is certain information regarding our executive officers and directors. Each of the directors listed below was elected to
our board of directors to serve until our next annual meeting of stockholders or until his or her successor is elected and qualified.
All directors hold office for one-year terms until the election and qualification of their successors. The following table sets forth
information regarding the members of our board of directors and our executive officers:
The
following persons are the executive officers and directors of our Company:
Name
|
|
Age
|
|
Position
|
Brian
Foote
|
|
42
|
|
President;
Chief Executive Officer; Chairman
|
Jeffrey
Hinshaw
|
|
34
|
|
Chief
Operating Officer; Chief Financial Officer; Director
|
William
B. Hoagland
|
|
39
|
|
Director
|
Peter
Schulte
|
|
64
|
|
Director
|
Michele
Rivera
|
|
46
|
|
Vice
President, Global Partnerships; Director
|
Javier
Gonzalez
|
|
34
|
|
Chief
Technology Officer
|
Karen
Garcia
|
|
50
|
|
Vice
President, Major Accounts
|
Brian
Foote has been our Chairman, President and Chief Executive Officer since November 24, 2020. Immediately prior to co-founding our predecessor
entity HUMBL LLC in May 2019 (“HUMBL LLC”), Mr. Foote worked as a Strategic Consultant across a variety of projects at Epson
from January 2011 to May 2019 including omnichannel marketing, sales and product launch strategies. From March 2005 to February 2011,
Mr. Foote worked as a Senior VP of Sales and Marketing at The Wilkinson Group, a consulting group specializing in events and sponsorships.
We believe that the broad business experience of Mr. Foote, including his experience with the daily operations of companies as well as
with the challenges of growing companies, makes him qualified to be a member of our Board of Directors.
Jeffrey
Hinshaw has served as our Chief Operating Officer, Chief Financial Officer, Corporate Secretary and a member of our Board of Directors
since November 24, 2020. Immediately prior to co-founding HUMBL LLC in May 2019, Mr. Hinshaw worked as an adjunct faculty at San Diego
State University. From July 2017 to November 2017, Mr. Hinshaw worked as a business analyst at Sempra Energy. From February 2015 to November
2018, Mr. Hinshaw worked as a strategic advisor to Balance Tracking Systems. From August 2012 to May 2014, Mr. Hinshaw worked as a graduate
researcher in biomechanics at San Diego State University. We believe that this varied experience makes him qualified to be a member of
our Board of Directors.
William
B. Hoagland has served as a member of our Board of Directors since July 23, 2021. Since 2019, Mr. Hoagland has served as the Chief
Executive Officer of Agora Digital Holdings, Inc. and Chief Financial Officer of Ecoark Holdings, Inc. Immediately prior to joining
Ecoark Holdings, Inc. in 2019, Mr. Hoagland spent the previous eight years as Managing Member of Trend Discovery Capital Management (“Trend
Discovery”), a hybrid hedge fund with a track record of outperforming the S&P 500. Prior to founding Trend Discovery in 2011,
Mr. Hoagland spent six years as a Senior Associate at Prudential Global Investment Management (PGIM), working in both PGIM’s Newark,
NJ and London, England offices. Mr. Hoagland holds the Chartered Financial Analyst designation and is a Level III candidate in the Chartered
Market Technician Program. We believe that this financial expertise and knowledge of the capital markets makes him qualified to be a
member of our Board of Directors.
Peter
Schulte has served as a member of our Board of Directors since September 24, 2021. Mr. Schulte holds the position of Managing Partner
and Co-founder of private equity firm CM Equity Partners. His past experience includes public and private debt and equity financing and
M&A at Salomon Brothers Inc. and large systems marketing at IBM’s Data Processing Division. Mr. Schulte has also established
two successful publicly traded companies: ICF International and ATS Corporation. Mr. Schulte currently serves as a member of the Board
of Directors at Black ICE Holdings, Citizant, Inc., and JANUS Research Group, Inc. among others. Mr. Schulte is a graduate of Harvard
College (AB) and also holds a Master’s degree in Public and Private Management (MPPM) from Yale University. We believe that Mr.
Schulte’s public company and capital market experience makes him qualified to be a member of our Board of Directors.
Michele
Rivera has served as Vice President, Global Partnerships and has been a member of our Board of Directors since November 24, 2020. Prior
to co-founding HUMBL LLC in May 2019, Ms. Rivera was a Retailer with ECSD from November 2018 to February 2019. Prior to that, Ms. Rivera
worked as a Home Furnishings Retailer at Williams Sonoma Inc. from October 1999 to October 2018. We believe that the business experience
of Ms. Rivera, including her experience with the daily operations of companies as well as with the challenges of growing companies, makes
her qualified to be a member of our Board of Directors.
Javier
Gonzalez has served as our Chief Technology Officer since June 3, 2021. Since November 2010, Mr. Gonzalez has worked as the Chief Technology
Officer of Tickeri, Inc., a leading ticket broker in the Latin American and Caribbean ticketing market. From January 2008 to January
2015, Mr. Gonzalez also worked as the Chief Technology Officer of Kesta Happenings. From November 2007 to April 2013, Mr. Gonzalez worked
as a Software Engineer for AboutWeb.
Karen
Garcia has served as Vice President, Major Accounts, since November 24, 2020. Prior to co-founding HUMBL LLC in May 2019, Ms. Garcia
worked as the Residents Service Manager at Garden Communities from August 2018 to June 2019. From April 2017 to August 2018, Ms. Garcia
worked as a Home Stager and Designer for Beach and Country Home Staging and Design. From February 2014 to April 2017, Ms. Garcia was
a General Store Manager for Pottery Barn Kids.
Board
of Directors and Corporate Governance
When
considering whether directors have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy
its oversight responsibilities effectively in light of our business and structure, the Board of Directors focuses primarily on the information
discussed in each of the directors’ individual biographies as set forth above. With regard to Mr. Foote, the Board considered their
day-to-day operational leadership of our company and in-depth knowledge of our business and experience in corporate management that will
assist our corporate governance.
The
Board of Directors periodically reviews relationships that directors have with our company to determine whether the directors are independent.
Directors are considered “independent” as long as they do not accept any consulting, advisory or other compensatory fee (other
than director fees) from us, are not an affiliated person of our company or our subsidiaries (e.g., an officer or a greater than 10%
stockholder) and are independent within the meaning of applicable United States laws, regulations and the Nasdaq Capital Market listing
rules. In this latter regard, the Board of Directors uses the Nasdaq Marketplace Rules (specifically, Section 5605(a)(2) of such rules)
as a benchmark for determining which, if any, of our directors are independent, solely in order to comply with applicable SEC disclosure
rules.
Director
or Officer Involvement in Certain Legal Proceedings
Our
directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past
ten years.
Directors
and Officers Liability Insurance
HUMBL
has had a directors’ and officers’ liability insurance policy in place since September 7, 2021. Our officers and directors
have indemnification rights under applicable laws, and our certificate of incorporation and bylaws.
Committees
of the Board of Directors
Our
Board of Directors has appointed an audit committee, a compensation committee and a nominating and corporate governance committee, each
of which has the composition and responsibilities described below.
Audit
Committee
The
Company’s audit committee consists of William B. Hoagland, Peter Schulte and Jeffrey Hinshaw. The Board has determined that Messrs.
Schulte and Hoagland are financially literate and qualify as independent directors under Section 5605(a)(2) and Section 5605(c)(2) of
the Nasdaq rules. Mr. Hoagland will be the chairman of our audit committee and he qualifies as an audit committee financial expert as
defined in Item 407(d)(5)(ii) of Regulation S-K.
Our
audit committee has adopted a written audit committee charter, viewable at https://humbl.com/auditcommittee, that provides that the functions
of our audit committee include, among other things:
|
●
|
selecting
a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
|
|
●
|
helping
to ensure the independence and performance of the independent registered public accounting firm;
|
|
●
|
discussing
the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the
independent accountants, our interim and year-end operating results;
|
|
●
|
developing
procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
|
|
●
|
reviewing
our policies on risk assessment and risk management;
|
|
●
|
reviewing
and approving related party transactions;
|
|
●
|
obtaining
and reviewing a report by the independent registered public accounting firm, at least annually, that describes our internal quality-control
procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law;
and
|
|
●
|
approving
(or, as permitted, pre-approving) all audit and all permissible non-audit services, other than de minimis non-audit services, to
be performed by the independent registered public accounting firm.
|
Compensation
Committee
Our
compensation committee is comprised of Peter Schulte, William B. Hoagland and Brian Foote. Our board has determined that each
of Messrs. Schulte and Hoagland qualifies as an independent director under Section 5605(a)(2) of the Nasdaq rules and a “non-employee
director” for purposes of Section 16b-3 under the Exchange Act and does not have a material relationship with us that would affect
his ability to be independent from management in connection with the duties of a compensation committee member, as described in Section
5605(d)(2) of the Nasdaq rules. Mr. Schulte will be the chairman of our compensation committee.
Our
compensation committee has adopted a written compensation committee charter, viewable at https://humbl.com/compensationcommittee, that
provides that the functions of our compensation committee include, among other things:
|
●
|
reviewing
and approving, or recommending to our board of directors for approval, the compensation of our executive officers and any compensatory
arrangement with our executive officers;
|
|
●
|
reviewing
and recommending to our board of directors for approval the compensation of our directors and any changes to their compensation;
|
|
●
|
reviewing
and approving, or recommending to our board of directors for approval, and administering incentive compensation and equity incentive
plans; and
|
|
●
|
reviewing
and establishing general policies relating to compensation and benefits of our employees and reviewing our overall compensation philosophy.
|
Nominating
and Corporate Governance Committee
Our
corporate governance committee is comprised of Peter. Schulte, William B. Hoagland and Michele Rivera. Our board has determined
that each of Messrs. Schulte and Hoagland qualifies as an independent director under Section 5605(a)(2) of the Nasdaq rules. Mr. Schulte
is the chairman of our nominating and corporate governance committee.
Our
nominating and corporate governance committee will have adopted a written nominating and corporate governance committee charter, viewable
at https://humbl.com/nominatingandgovernance, that provides that the functions of our nominating and corporate governance committee include,
among other things:
|
●
|
identifying,
evaluating and selecting, or making recommendations to our board of directors regarding, nominees for election to our board of directors
and its committees;
|
|
●
|
overseeing
the evaluation and the performance of our board of directors and of individual directors;
|
|
●
|
considering
and making recommendations to our board of directors regarding the composition of our board of directors and its committees;
|
|
●
|
overseeing
our corporate governance practices;
|
|
●
|
contributing
to succession planning; and
|
|
●
|
developing
and making recommendations to our board of directors regarding corporate governance guidelines and matters.
|
|
Compensation
Committee Interlocks and Insider Participation
None
of our directors or executive officers serves as a member of the board of directors or compensation committee of any other entity that
has one or more of its executive officers serving as a member of our board of directors.
Code
of Ethics
We
have adopted a written code of ethics that applies to all of our directors, officers and employees in accordance with the rules of the
Nasdaq Capital Market and the SEC. We will post a copy of our code of ethics on our website, and intend to post amendments to this code,
or any waivers of its requirements, as well.
Conflicts
of Interest
We
comply with applicable state law with respect to transactions (including business opportunities) involving potential conflicts. Applicable
state corporate law requires that all transactions involving our company and any director or executive officer (or other entities with
which they are affiliated) are subject to full disclosure and approval of the majority of the disinterested independent members of our
Board of Directors, approval of the majority of our stockholders or the determination that the contract or transaction is intrinsically
fair to us. More particularly, our policy is to have any related party transaction (i.e., transactions involving a director, an
officer or an affiliate of our company) be approved solely by a majority of the disinterested independent directors serving on the Board
of Directors. We expect to have at least three independent directors serving on the Board of Directors and intend to maintain a Board
of Directors consisting of a majority of independent directors.
Indemnification
of Directors and Executive Officers
Section
145 of the Delaware General Corporation Law provides for, under certain circumstances, the indemnification of our officers, directors,
employees and agents against liabilities that they may incur in such capacities. Below is a summary of the circumstances in which such
indemnification is provided.
In
general, the statute provides that any director, officer, employee or agent of a corporation may be indemnified against expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred in a proceeding (including
any civil, criminal, administrative or investigative proceeding) to which the individual was a party by reason of such status. Such indemnity
may be provided if the indemnified person’s actions resulting in the liabilities: (i) were taken in good faith; (ii) were reasonably
believed to have been in or not opposed to our best interests; and (iii) with respect to any criminal action, such person had no reasonable
cause to believe the actions were unlawful. Unless ordered by a court, indemnification generally may be awarded only after a determination
of independent members of the Board of Directors or a committee thereof, by independent legal counsel or by vote of the stockholders
that the applicable standard of conduct was met by the individual to be indemnified.
The
statutory provisions further provide that to the extent a director, officer, employee or agent is wholly successful on the merits or
otherwise in defense of any proceeding to which he or she was a party, he or she is entitled to receive indemnification against expenses,
including attorneys’ fees, actually and reasonably incurred in connection with the proceeding.
Indemnification
in connection with a proceeding by us or in our right in which the director, officer, employee or agent is successful is permitted only
with respect to expenses, including attorneys’ fees actually and reasonably incurred in connection with the defense. In such actions,
the person to be indemnified must have acted in good faith, in a manner believed to have been in our best interests and must not have
been adjudged liable to us, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability, in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expense which the Court of Chancery or such other court shall deem proper. Indemnification
is otherwise prohibited in connection with a proceeding brought on our behalf in which a director is adjudged liable to us, or in connection
with any proceeding charging improper personal benefit to the director in which the director is adjudged liable for receipt of an improper
personal benefit.
Delaware
law authorizes us to reimburse or pay reasonable expenses incurred by a director, officer, employee or agent in connection with a proceeding
in advance of a final disposition of the matter. Such advances of expenses are permitted if the person furnishes to us a written agreement
to repay such advances if it is determined that he or she is not entitled to be indemnified by us.
The
statutory section cited above further specifies that any provisions for indemnification of or advances for expenses does not exclude
other rights under our certificate of incorporation, by-laws, resolutions of our stockholders or disinterested directors, or otherwise.
These indemnification provisions continue for a person who has ceased to be a director, officer, employee or agent of the corporation
and inure to the benefit of the heirs, executors and administrators of such persons.
The
statutory provision cited above also grants us the power to purchase and maintain insurance policies that protect any director, officer,
employee or agent against any liability asserted against or incurred by him or her in such capacity arising out of his or her status
as such. Such policies may provide for indemnification whether or not the corporation would otherwise have the power to provide for it.
At
present, we do not maintain directors’ and officers’ liability insurance in order to limit the exposure to liability for
indemnification of directors and officers, including liabilities under the Securities Act; however, we are in the process of obtaining
such insurance.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation awarded to or earned by: (i) each individual who served as the principal
executive officer and principal financial officer of the Company during the years ended December 31, 2020 and 2019; and (ii) each other
individual that served as an executive officer of the Company at the conclusion of the years ended December 31, 2020 and 2019 and who
received more than $100,000 in the form of salary and bonus during such year. For purposes of this report, these individuals are collectively
the “named executive officers” of our Company.
Name and Position
|
|
Years
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
Non-equity Incentive Plan Compensation
|
|
|
Non-qualified Deferred Compensation Earnings
|
|
|
All Other Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Foote,
|
|
|
2020
|
|
|
$
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
30,000
|
|
Chairman, President and Chief Executive Officer
|
|
|
2019
|
|
|
$
|
56,544
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
56,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Hinshaw
|
|
|
2020
|
|
|
$
|
48,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
48,750
|
|
Chief Operating Officer, Chief Financial Officer
|
|
|
2019
|
|
|
$
|
15,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William B. Hoagland,
|
|
|
2020
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Director
|
|
|
2019
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Schulte, Director
|
|
|
2020
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
2019
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Michele Rivera
|
|
|
2020
|
|
|
$
|
53,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
53,900
|
|
Vice President, Global Partnerships
|
|
|
2019
|
|
|
$
|
35,751
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
35,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen Garcia
|
|
|
2020
|
|
|
$
|
32,487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,487
|
|
Vice President, Major Accounts
|
|
|
2019
|
|
|
$
|
21,270
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
$
|
21,270
|
|
Employment
and Advisory Agreements
On
June 3, 2021, we entered into an employment agreement with Javier Gonzalez, our Chief Technology Officer and Juan Luis Gonzalez, the
CEO of our subsidiary, Tickeri, Inc. The employment agreements provide that each executive will receive a salary of $150,000 a year.
On June 30, 2021, Doug Brandt and Kevin Childress entered into employment agreements with our subsidiary, Monster Creative, LLC. Pursuant
to those employment agreements, Mr. Brandt will be paid $500,000 a year and Mr. Childress will be paid $400,000 a year. Mr. Brandt will
act as Chief Executive Officer of Monster Creative, LLC and Mr. Childress will act as President and Creative Director of Monster Creative,
LLC. On July 13, 2021, we entered into a new employment agreement with Brian Foote, our Chairman, President and Chief Executive Officer;
Jeffrey Hinshaw, our Chief Operating Officer, and Corporate Secretary; Michele Rivera, our Vice President, Global Partnerships; and Karen
Garcia, Vice President, Major Accounts. The employment agreements are all in the same form and provide that Mr. Foote will receive a
salary of $1 and each of the other three officers will receive salaries of $90,000 a year.
Each
of the above employment agreements provides for termination by us upon the death or disability (defined as three aggregate months of
incapacity during any 365-consecutive day period) or upon conviction of a felony crime of moral turpitude or a material breach of his
obligations to us. In the event the employment agreement is terminated by us without cause or the employee resigns for good reason, the
terminated employee will be entitled to compensation for the balance of the term.
Each
executive also entered into a confidentiality and invention assignment agreement in conjunction with his or her employment agreement
which contains covenants prohibiting him or her from disclosure of confidential information regarding our company at any time. The employment
agreements for Juan Gonzalez, Javier Gonzalez, Doug Brandt and Kevin Childress also contain covenants restricting them from competing
against the Company and its subsidiaries during the term of their employment and for a period of time thereafter.
Equity
Compensation Plan Information
On
July 21 2021, our Board of Directors and stockholders adopted our 2021 Stock Incentive Plan (the “2021 Plan”). The purpose
of the Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees whose services
are considered valuable, to encourage a sense of proprietorship, and to stimulate an active interest of these persons in our development
and financial success. Under the Plan, we are authorized to issue up to 20,000,000 shares of Common Stock, including incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, stock appreciation
rights, performance shares, restricted stock and long-term incentive awards.
Administration.
The 2021 Plan is administered by the Board of Directors or the committee or committees as may be appointed by the Board of Directors
from time to time (the “Administrator”). The Administrator determines the persons who are to receive awards, the types of
awards to be granted, the number of shares subject to each such award and the terms and conditions of such awards. The Administrator
also has the authority to interpret the provisions of the 2021 Plan and of any awards granted there under and to modify awards granted
under the 2021 Plan. The Administrator may not, however, reduce the price of options or stock appreciation rights issued under the 2021
Plan without prior approval of the Company’s shareholders.
Eligibility.
The 2021 Plan provides that awards may be granted to employees, officers, directors and consultants of the Company or of any parent,
subsidiary or other affiliate of the Company as the Administrator may determine. A person may be granted more than one award under the
2021 Plan.
Shares
that are subject to issuance upon exercise of an option under the 2021 Plan but cease to be subject to such option for any reason (other
than exercise of such option), and shares that are subject to an award granted under the 2021 Plan but are forfeited or repurchased by
the Company at the original issue price, or that are subject to an award that terminates without shares being issued, will again be available
for grant and issuance under the 2021 Plan.
Terms
of Options and Stock Appreciation Rights. The Administrator determines many of the terms and conditions of each option and SAR granted
under the 2021 Plan, including whether the option is to be an incentive stock option or a non-qualified stock option, whether the SAR
is a related SAR or a freestanding SAR, the number of shares subject to each option or SAR, and the exercise price of the option and
the periods during which the option or SAR may be exercised. Each option and SAR is evidenced by a grant agreement in such form as the
Administrator approves and is subject to the following conditions (as described in further detail in the 2021 Plan):
(a)
Vesting and Exercisability: Options, restricted shares and SARs become vested and exercisable, as applicable, within such periods, or
upon such events, as determined by the Administrator in its discretion and as set forth in the related grant agreement. The term of each
option is also set by the Administrator. However, a related SAR will be exercisable at the time or times, and only to the extent, that
the option is exercisable and will not be transferable except to the extent that the option is transferable. A freestanding SAR will
be exercisable as determined by the Administrator but in no event after 10 years from the date of grant.
(b)
Exercise Price: Each grant agreement states the related option exercise price, which, in the case of SARs, may not be less than 100%
of the fair market value of the Company’s shares of common stock on the date of the grant. The exercise price of an incentive stock
option granted to a 10% stockholder may not be less than 110% of the fair market value of shares of the Company’s common stock
on the date of grant.
(c)
Method of Exercise: The option exercise price is typically payable in cash, common stock or a combination of cash of common stock, as
determined by the Administrator, but may also be payable, at the discretion of the Administrator, in a number of other forms of consideration.
(d)
Recapitalization; Change of Control: The number of shares subject to any award, and the number of shares issuable under the 2021 Plan,
are subject to proportionate adjustment in the event of a stock dividend, spin-off, split-up, recapitalization, merger, consolidation,
business combination or exchange of shares and the like. Except as otherwise provided in any written agreement between the participant
and the Company in effect when a change in control occurs, in the event an acquiring company does not assume plan awards (i) all outstanding
options and SARs shall become fully vested and exercisable; (ii) for performance-based awards, all performance goals or performance criteria
shall be deemed achieved at target levels and all other terms and conditions met, with award payout prorated for the portion of the performance
period completed as of the change in control and payment to occur within 45 days of the change in control; (iii) all restrictions and
conditional applicable to any restricted stock award shall lapse; (iv) all restrictions and conditions applicable to any restricted stock
units shall lapse and payment shall be made within 45 days of the change in control; and (v) all other awards shall be delivered or paid
within 45 days of the change in control.
(e)
Other Provisions: The option grant and exercise agreements authorized under the 2021 Plan, which may be different for each option, may
contain such other provisions as the Administrator deems advisable, including without limitation, (i) restrictions upon the exercise
of the option and (ii) a right of repurchase in favor of the Company to repurchase unvested shares held by an optionee upon termination
of the optionee’s employment at the original purchase price.
Amendment
and Termination of the 2021 Plan. The Administrator, to the extent permitted by law, and with respect to any shares at the time not subject
to awards, may suspend or discontinue the 2021 Plan or amend the 2021 Plan in any respect; provided that the Administrator may not, without
approval of the stockholders, amend the 2021 Plan in a manner that requires stockholder approval.
PRINCIPAL
SECURITYHOLDERS
The following table sets
forth certain information as of November 26, 2021, the beneficial ownership of our common stock by the following persons:
|
●
|
each
person or entity who, to our knowledge, owns more than 5% of our common stock;
|
|
|
|
|
●
|
our
executive officers named in the Summary Compensation Table above;
|
|
|
|
|
●
|
each
director; and
|
|
|
|
|
●
|
all
of our executive officers and directors as a group.
|
Unless
otherwise indicated in the footnotes to the following table, each person named in the table has sole voting and investment power and
that person’s address is c/o 600 B Street, San Diego, California 92102, and our telephone number is (786) 738-9012. Shares of common
stock subject to options, warrants, or other rights currently exercisable or exercisable within 60 days of the date of this prospectus,
are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the stockholder holding the options,
warrants or other rights, but are not deemed outstanding for computing the percentage of any other stockholder.
Name and Address of Beneficial Owner
|
|
Class of Securities
|
|
# of Shares
|
|
|
% of Class
|
|
|
% of Voting Shares(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian Foote(1)
|
|
Common
|
|
|
11,894,304
|
|
|
|
1.30
|
%
|
|
|
69.04
|
%
|
|
|
Series A Preferred
|
|
|
7,000,000
|
|
|
|
100
|
%
|
|
|
|
|
|
|
Series B Preferred
|
|
|
248,319
|
|
|
|
44.91
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Hinshaw(1)
|
|
Common
|
|
|
3,081,811
|
|
|
|
*
|
|
|
|
2.95
|
%
|
|
|
Series B Preferred
|
|
|
40,269
|
|
|
|
7.28
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele Rivera(1)
|
|
Series B Preferred
|
|
|
28,715
|
|
|
|
5.19
|
%
|
|
|
2.09
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William B. Hoagland
|
|
Common
|
|
|
150,000
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Schulte
|
|
Common
|
|
|
287,422
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen Garcia
|
|
Series B Preferred
|
|
|
11,683
|
|
|
|
2.11
|
%
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Javier Gonzalez
|
|
Common
|
|
|
4,672,897
|
|
|
|
*
|
|
|
|
*
|
|
|
|
Series B Preferred
|
|
|
25
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Grado
|
|
Series B Preferred
|
|
|
56,079
|
|
|
|
10.14
|
%
|
|
|
4.08
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen L. Foote and Sandra M. Foote as Trustees of the Stephen L. Foote and Sandra M. Foote Revocable Trust u/a/d December 14, 2014, as amended May 13, 2014
|
|
Series B Preferred
|
|
|
33,561
|
|
|
|
6.07
|
%
|
|
|
2.44
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Officers and Directors as a Group (7 persons)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
20,086,434
|
|
|
|
2.18
|
%
|
|
|
*
|
|
Series A Preferred
|
|
|
|
|
7,000,000
|
|
|
|
100
|
%
|
|
|
50.89
|
%
|
Series B Preferred
|
|
|
|
|
418,651
|
|
|
|
75.72
|
%
|
|
|
30.44
|
%
|
(1)
|
Officer
and/or director of our Company.
|
(2)
|
Voting
control is based on a total of 13,800,077,833 voting rights attributable to shares of our commons stock with one vote per
share, shares of our Series A Preferred stock with 1,000 votes per share and shares of our Series B Preferred stock with 10,000 votes
per share.
|
*
|
less
than 1% of the issued and outstanding shares of common stock.
|
We
have agreed to keep such registration effective until all shares of common stock can be sold without registration pursuant to Rule 144
under the Securities Act.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Except
as set forth below, during the past three years, there have been no transactions, whether directly or indirectly, between the Company
and any of its officers, directors or their family members.
Brian
Foote’s parents, sister and cousin were investors in HUMBL LLC and are investors in Brighton Capital. The foregoing relatives own
approximately 26.67% of the investor interests in Brighton Capital and have no management or control rights over the operations of Brighton
Capital.
DESCRIPTION
OF SECURITIES
Authorized
Capital Stock
Our
authorized capital stock consists of 7,450,000,000 shares of common stock, par value $0.00001 per share, and 10,000,000 shares of “blank
check” preferred stock, par value $0.00001 per share.
Issued
and Outstanding Capital Stock
The
issued and outstanding securities of the Company on the date of this prospectus are as follows:
|
●
|
947,311,833
shares of common stock;
|
|
|
|
|
●
|
7,000,000
shares of Series A preferred stock;
|
|
|
|
|
●
|
552,913
shares of Series B preferred stock; and
|
|
|
|
|
●
|
Warrants
to purchase 272,600,000 shares of common stock at a range of $0.20 to $1.00 per share.
|
Description
of Common Stock
The
holders of common stock are entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election
of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors,
by a plurality) of the votes entitled to be cast by all shares of common stock that are present in person or represented by proxy. Except
as otherwise provided by law, amendments to the articles of incorporation generally must be approved by a majority of the votes entitled
to be cast by all outstanding shares of common stock. Our Articles of Incorporation do not provide for cumulative voting in the election
of directors. The common stockholders will be entitled to such cash dividends as may be declared from time to time by the Board from
funds available. Upon liquidation, dissolution or winding up of the Company, the common stockholders will be entitled to receive pro
rata all assets available for distribution to such holders.
Description
of Preferred Stock
We
have 10,000,000 shares of preferred stock authorized of which we have designated 7,000,000 shares of Series A preferred stock, 570,000
shares of Series B preferred stock and we had 150,000 shares of Series C preferred stock prior to withdrawing them on October 29, 2021.
Voting
Rights
Holders
of our Series A preferred stock are entitled to 1,000 votes for each share held on all matters submitted to a vote of stockholders, holders
of our Series B preferred stock are entitled to 10,000 votes for each share held on all matters submitted to a vote of stockholders,
and holders of our Series C preferred stock are entitled to 5,000 votes for each share hold on all matters submitted to a vote of stockholders
on any matter that is submitted to a vote of stockholders.
Conversion
Rights
Only
our Series B preferred stock is convertible into common stock. Holders of Series B preferred stock may at any time after December 3,
2021 convert each share of Series B preferred stock into 10,000 shares of common stock.
On
October 29, 2021, the Company by Board consent approved an amendment to their Certificate of Amendment for the Series B Preferred Stock
to (a) reduce the number of authorized shares of Series B Preferred stock to 570,000 and (b) for Series B Preferred shareholders holding
greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders
shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred
stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from
February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred
shares held by them. This action was approved by Series B Shareholder consent.
Dividends
Holders
of our shares of Series A preferred stock and Series B preferred stock shall be entitled to receive dividends, out of funds legally available
for that purpose, on the same terms and conditions as that of holders of common stock, as may be declared by the Board of Directors.
Redemption
Rights
We
have the right to redeem some or all the shares of the holders of our Series A preferred stock and Series B preferred stock in the event
of a Change of Control (defined in our amended certificate of incorporation as the time at which as a third party not affiliated with
the Company or any holders of the Series A preferred stock and Series B preferred stock shall have acquired, in one or a series of related
transactions, more than 50% of our outstanding voting securities) at a price equal to 100% of their liquidation value.
Liquidation
Rights
Upon
any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the holders
of the Series A preferred and Series B preferred will be entitled to receive out of the assets, whether capital or surplus, of the Company
an amount equal to the liquidation value of their preferred shares before any distribution or payment shall be made to the holders of
any junior securities, and if the assets of the Company are insufficient to pay in full such amounts, then the entire assets to be distributed
to the holders of the Series A preferred stock and the Series B preferred stock shall be ratably distributed among those holders in accordance
with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full.
Anti-Takeover
Provisions
Certain
provisions of Delaware law, our amended certificate of incorporation and our bylaws, which are summarized below, may have the effect
of delaying, deferring or discouraging another person from acquiring control of us. They are also designed, in part, to encourage persons
seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection
of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal
to acquire us because negotiation of these proposals could result in an improvement of their terms.
Amended
Certificate of Incorporation and Bylaw Provisions
Our
amended certificate of incorporation and our bylaws include a number of provisions that could deter hostile takeovers or delay or prevent
changes in control of our board of directors or management team, including the following:
Board
of Directors Vacancies
Our
amended certificate of incorporation and bylaws authorize only our board of directors to fill vacant directorships, including newly created
seats. In addition, the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted
by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board
of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This will make
it more difficult to change the composition of our board of directors and will promote continuity of management.
Stockholder
Action; Special Meeting of Stockholders
Our
amended certificate of incorporation provides that special meetings of our stockholders may be called only by a majority of our board
of directors, the chairperson of our board of directors, our Chief Executive Officer or our President, thus prohibiting a stockholder
from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or
for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.
Advance
Notice Requirements for Stockholder Proposals and Director Nominations
Our
bylaws provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate
candidates for election as directors at our annual meeting of stockholders. Our bylaws also specify certain requirements regarding the
form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual
meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not
followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies
to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
No
Cumulative Voting
The
Delaware General Corporation Law provides that stockholders are not entitled to cumulate votes in the election of directors unless a
corporation’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not provide
for cumulative voting.
Amendment
of Charter and Bylaws Provisions
Amendments
to our amended certificate of incorporation will require the approval of the holders of at least a majority of the voting power of the
outstanding shares of our Class A common stock and Class B common stock. Our amended and restated bylaws will provide that the approval
of the holders of at least a majority of the voting power of the outstanding shares of our Class A common stock and Class B common voting
together as a single class is required for stockholders to amend or adopt any provision of our bylaws.
Issuance
of Undesignated Preferred Stock
Our
board of directors will have the authority, without further action by our stockholders, to issue up to 10,000,000 shares of undesignated
preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence
of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an
attempt to obtain control of us by means of a merger, tender offer, proxy contest or other means.
Exclusive
Forum
Our
bylaws will provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i)
any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any
of our directors, officers, or other employees to us or our stockholders, (iii) any action asserting a claim against the company or any
director or officer of the company arising pursuant to any provision of the Delaware General Corporation Law, (iv) any action to interpret,
apply, enforce, or determine the validity of our amended and restated certificate of incorporation or amended and restated bylaws, or
(v) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Chancery Court of the State of
Delaware, in all cases subject to the court’s having jurisdiction over indispensable parties named as defendants. Our bylaws also
provide that the federal district court in the State of Delaware will be the exclusive forum for resolving any complaint asserting a
course of action under the Securities Act and the Securities Exchange Act of 1934.
Any
person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to
these provisions. We note that stockholders cannot waive compliance (or consent to non-compliance) with the federal securities laws and
the rules and regulations thereunder.
Transfer
Agent
Our
transfer agent is Pacific Stock Transfer Company, 6725 Via Austi Parkway, Suite 300, Las Vegas, Nevada.
Blank
Check Preferred Stock
The
ability to authorize “blank check” preferred stock makes it possible for our board of directors to issue preferred stock
with voting or other rights or preferences that could impede the success of any attempt to acquire us. These and other provisions may
have the effect of deferring hostile takeovers or delaying changes in control or management of our Company.
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Delaware
General Corporation Law (“DGCL”) Section 145 provides us with the power to indemnify any of our directors, officers, employees
and agents. The person entitled to indemnification must have conducted himself in good faith, and must reasonably believe that his conduct
was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable
cause to believe that his conduct was unlawful.
Under
DGCL section 145, advances for expenses may be made by agreement if the director or officer affirms in writing that he has met the standards
for indemnification and will personally repay the expenses if it is determined that such officer or director did not meet those standards.
Our
bylaws include an indemnification provision under which we have the power to indemnify our directors, officers, former directors and
officers, employees and other agents (including heirs and personal representatives) against all costs, charges and expenses actually
and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which a director or officer is made a
party by reason of being or having been a director or officer of the Company. Our bylaws further provide for the advancement of all expenses
incurred in connection with a proceeding upon receipt of an undertaking by or on behalf of such person to repay such amounts if it is
determined that the party is not entitled to be indemnified under our bylaws. No advance will be made by the Company to a party if it
is determined that the party acting in bad faith. These indemnification rights are contractual, and as such will continue as to a person
who has ceased to be a director, officer, employee or other agent, and will inure to the benefit of the heirs, executors and administrators
of such a person.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable.
SHARES
ELIGIBLE FOR FUTURE SALE
We
have a limited public market for our common stock and a limited number of shares in the public float. Sales of substantial amounts of
our common stock in the public market resulting from this Offering could adversely affect the prevailing market price and our ability
to raise capital in the future.
As
of the date of this prospectus, we have 947,311,833 shares of common stock issued and outstanding. Upon the completion of this
offering, we will have outstanding an aggregate of up to an additional 214,175,000 including the shares of the Selling Stockholders.
All 254,958,294 shares included in this offering will be freely tradable without restriction or further registration under the Securities
Act. Of the 947,311,833 shares of our common stock outstanding prior to the completion of this offering and held by existing stockholders,
approximately 786,912,048 shares are currently free trading and the remaining are “restricted securities” as that term is
defined in Rule 144 under the Securities Act. Restricted shares may be sold in the public market only if registered or if they qualify
for exemption under Rule 144 or 701 promulgated under the Securities Act, which rules are summarized below, or another exemption.
Rule
144
In
general, under Rule 144, as currently in effect, a person who owns shares that were acquired from us or one of our affiliates at least
six months prior to the proposed sale is entitled to sell, within any three-month period beginning 90 days after the date of this prospectus,
a number of shares that does not exceed the greater of:
|
●
|
One
percent of the number of shares of common stock then outstanding, which will equal approximately 9,473,118 shares immediately
after this offering; or
|
|
|
|
|
●
|
The
average weekly trading volume of the common stock on a national securities exchange during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
|
|
|
|
|
●
|
In
addition to these volume limitations, sales of unregistered shares of our common stock in reliance on Rule 144 may only be made by
affiliates if such sales:
|
|
●
|
are
preceded by a notice filing on Form 144;
|
|
|
|
|
●
|
are
limited to broker’s transactions, as such term is defined under Section 4(a)(4) of the Securities Act; and
|
|
|
|
|
●
|
only
occur at a time when current public information about us is available, which generally would require that we are not delinquent with
any of our reports required pursuant to Sections 13 or 15(d) of the Exchange Act. Rule 144 also provides that our affiliates who
sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted
shares, with the exception of the holding period requirement.
|
Under
Rule 144, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90
days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period
of any prior owner other than one of our affiliates, is entitled to sell such shares without complying with the manner of sale, volume
limitation or notice provisions of Rule 144. If the non-affiliate has held the shares for at least one year, then the shares may be sold
without regard to the public information provisions of Rule 144. Therefore, unless otherwise restricted, shares held by non-affiliates
may be sold immediately upon the expiration of the lock-up agreements.
Rule
701
In
general, under Rule 701 as currently in effect, any of our employees, consultants or advisors who acquire shares from us in connection
with a compensatory stock or option plan or other written agreement will be eligible to resell such shares 90 days after the effective
date of this offering in reliance of Rule 144, but without compliance with certain restrictions, including the holding period, contained
in Rule 144.
Penny
Stock Rules
Broker-dealer
practices in connection with transactions in penny stocks are regulated by certain penny stock rules adopted by the SEC. Penny stocks
generally are equity securities with a price of less than US $5.00. Penny stock rules require a broker- dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about
penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations
for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that
prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Our
shares may in the future be subject to such penny stock rules in which care our stockholders would, in all likelihood, as a result of
the penny stock rules, find it difficult to sell their securities.
PLAN
OF DISTRIBUTION
The Selling Stockholders may,
from time to time, sell, transfer or otherwise dispose of any or all of their securities or interests in such securities on any stock
exchange, market or trading facility on which the securities are traded or in private transactions. The Selling Stockholders may only
offer and sell the common stock registered pursuant to this prospectus at a fixed price of $0.51 per share (which was the last reported
sale price of our common stock on the OTC Pink market) until such time as our common stock is listed on a national securities exchange
or quoted on the OTC Bulletin Board, OTCQX or OTCQB, at which time such shares may be sold at a prevailing market price or in a privately
negotiated transaction.
The
aggregate proceeds to the Selling Stockholders from the sale of the securities offered by them will be the purchase price of the securities
less discounts or commissions, if any. Each of the Selling Stockholders reserves the right to accept and, together with their agents
from time to time, to reject, in whole or in part, any proposed purchase of securities to be made directly or through agents. We will
not receive any of the proceeds from the sale or other disposition of the securities by the Selling Stockholders. However, we will receive
up to approximately $39,237,500 in gross proceeds upon the cash exercise of the warrants issued to the Selling Stockholders.
The
Selling Stockholders also may resell all or a portion of the securities in open market transactions in reliance upon Rule 144 under the
Securities Act of 1933, provided that they meet the criteria and conform to the requirements of that rule.
The
Selling Stockholders and any underwriters, broker-dealers or agents that participate in the sale of the securities or interests therein
may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions
or profit they earn on any resale of the securities may be underwriting discounts and commissions under the Securities Act. Selling Stockholders
who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act.
To
the extent required, the securities to be sold, the names of the Selling Stockholders, the respective purchase prices and public offering
prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will
be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the Registration Statement.
The
maximum amount of compensation to be received by any FINRA member or independent broker-dealer for the sale of any securities registered
under this prospectus will not be greater than 8% of the gross proceeds from the sale of such securities.
To
comply with the securities laws of some states, if applicable, the securities may be sold in these jurisdictions only through registered
or licensed brokers or dealers. In addition, the securities may not be sold unless they have been registered or qualified for sale under
the applicable state securities laws, or an exemption from registration or qualification requirements is available and is complied with,
or registration or qualification is otherwise not required.
We
have advised the Selling Stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of securities
in the market and to the activities of the Selling Stockholders and their affiliates. The Selling Stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the securities against certain liabilities, including liabilities arising under
the Securities Act.
We
intend to seek qualification for sale of the securities in those states where the securities will be offered. That qualification is necessary
to resell the securities in the public market. The securities can only be offered if they are qualified for sale or are exempt from qualification
in the states in which the selling stockholders or proposed purchasers reside. There is no assurance that the states in which we seek
qualification will approve of the security re-sales.
LEGAL
MATTERS
Culhane
Meadows PLLC, 1701 Pennsylvania Avenue, N.W., Suite 200, Washington, D.C. 20006, will pass upon the validity of the shares of our common
stock to be sold in this Offering.
EXPERTS
The
financial statements of the Company as of and for the years ended December 31, 2020 and 2019, included in this prospectus have been audited
by B.F. Borgers CPA PC, (“Borgers”) an independent registered public accounting firm as set forth in their report,
and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. Borgers also
audited the Tickeri, Inc. financial statements for the period January 2, 2020 (Inception) through December 31, 2020 and the Monster Creative
LLC financial statements for the years ended December 31, 2020 and 2019.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock
offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information
set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules
and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the registration statement,
including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents
of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration
statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract
or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an internet website that contains
reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website
is www.sec.gov.
As
a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance
with this law, will file periodic reports, proxy statements and other information with the SEC. We also maintain a website at www. humblpay.com.
Upon completion of this offering, you may access these materials free of charge as soon as reasonably practicable after they are electronically
filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our
website address in this prospectus is an inactive textual reference only.
HUMBL,
INC.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm for HUMBL, Inc.
|
F-2
|
Balance Sheets - December 31, 2020 and 2019
|
F-3
|
Statements of Operations for the years ended December 31, 2020 and 2019
|
F-4
|
Statements of Cash Flows for the year ended December 31,2020 and Period May 13, 2019 (Inception) through December 31, 2019
|
F-5
|
Statement of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2020 and 2019
|
F-6
|
Notes to Consolidated Financial Statements
|
F-7
|
|
|
Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020
|
F-20
|
Unaudited Statements of Operations for the Nine Months Ended September 30, 2021 and 2020
|
F-21
|
Unaudited Statements of Operations for the Three Months Ended September 30, 2021 and 2020
|
F-22
|
Unaudited Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020
|
F-23
|
Unaudited Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2021 and 2020
|
F-24
|
Unaudited Notes to Financial Statements
|
F-25
|
TICKERI, INC.
FINANCIAL
STATEMENTS
MARCH
31, 2021 AND 2020
Table
of Contents
TICKERI,
INC.
FINANCIAL
STATEMENTS
DECEMBER
31, 2020
Table
of Contents
MONSTER CREATIVE, LLC
FINANCIAL
STATEMENTS
JUNE
30, 2021 AND 2020
Table
of Contents
MONSTER
CREATIVE, LLC
FINANCIAL
STATEMENTS
DECEMBER
31, 2020 AND 2019
Table
of Contents
UNAUIDTED
PROFORMA FINANCIAL STATEMENTS
Report
of Independent Registered Public Accounting Firm
To
the shareholders and the board of directors of HUMBL, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of HUMBL, Inc. (the “Company”) as of December 31, 2020 and 2019, the related
statement of operations, stockholders’ equity (deficit), and cash flows for the period May 13, 2019 (Inception) through December
31, 2019 and through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In
our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2020 and 2019, and the results of its operations and its cash flows for the period May 13, 2019 (Inception) through December 31,
2019 and through December 31, 2020, in conformity with accounting principles generally accepted in the United States.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/s/
BF Borgers CPA PC
BF
Borgers CPA PC
We
have served as the Company’s auditor since 2021
Lakewood,
CO
April
14, 2021
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
BALANCE
SHEETS
See
notes to financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
STATEMENTS
OF OPERATIONS
YEAR
ENDED DECEMBER 31, 2020 AND PERIOD MAY 13, 2019 (INCEPTION) THROUGH DECEMBER 31,2019
See
notes to financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
STATEMENTS
OF CASH FLOWS
YEAR
ENDED DECEMBER 31, 2020 AND PERIOD MAY 13, 2019 (INCEPTION) THROUGH DECEMBER 31,2019
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(713,263
|
)
|
|
$
|
(281,542
|
)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Shares issued to founders for services
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
-
|
|
|
|
-
|
|
Impairment
expense - goodwill
|
|
|
-
|
|
|
|
-
|
|
Impairment
expense – digital assets
|
|
|
-
|
|
|
|
-
|
|
(Gain)
on sale of digital assets
|
|
|
-
|
|
|
|
-
|
|
Advertising
expense paid for by digital assets
|
|
|
-
|
|
|
|
-
|
|
Sales
commission received in digital assets
|
|
|
-
|
|
|
|
-
|
|
Amortization
of debt discount
|
|
|
2,042
|
|
|
|
-
|
|
Warrants
granted for services
|
|
|
-
|
|
|
|
-
|
|
Stock-based
compensation – common and preferred stock grants
|
|
|
-
|
|
|
|
-
|
|
Bad
debt
|
|
|
-
|
|
|
|
-
|
|
Settlement
|
|
|
-
|
|
|
|
-
|
|
Beneficial
conversion feature on convertible note payable
|
|
|
-
|
|
|
|
-
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
-
|
|
|
|
-
|
|
Intangible
assets – digital currency
|
|
|
-
|
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
(5,050
|
)
|
|
|
(2,395
|
)
|
Increase
(decrease) in amounts due related parties
|
|
|
(157,357
|
)
|
|
|
80,211
|
|
Accounts
payable and accrued expenses
|
|
|
17,311
|
|
|
|
3,081
|
|
Total adjustments
|
|
|
(145,096)
|
|
|
|
80,897
|
|
Net
cash used in operating activities
|
|
|
(856,317
|
)
|
|
|
(200,645
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of intangible assets
|
|
|
-
|
|
|
|
-
|
|
Purchases
of fixed assets
|
|
|
-
|
|
|
|
-
|
|
Cash
received in purchase of Tickeri
|
|
|
-
|
|
|
|
-
|
|
Cash
received in purchase of Monster Creative
|
|
|
-
|
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Member distributions
|
|
|
-
|
|
|
|
|
|
Contribution of equity from shareholder
|
|
|
|
|
|
|
|
|
Proceeds
from sales of membership interests of HUMBL, LLC
|
|
|
1,307,441
|
|
|
|
205,500
|
|
Payments
of notes payable
|
|
|
-
|
|
|
|
-
|
|
Repayment
of amount due to seller
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from convertible notes payable
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from issuance of common stock for cash
|
|
|
-
|
|
|
|
-
|
|
Proceeds
from convertible note payable – related party
|
|
|
225,000
|
|
|
|
-
|
|
Proceeds
from sales of warrants and country rights option (included in deferred revenue)
|
|
|
1,000,000
|
|
|
|
-
|
|
Proceeds
from note payable
|
|
|
40,000
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
2,572,441
|
|
|
|
205,500
|
|
NET
INCREASE IN CASH
|
|
|
1,716,124
|
|
|
|
4,855
|
|
Cash
- beginning of period
|
|
|
4,855
|
|
|
|
-
|
|
Cash
- end of period
|
|
$
|
1,720,979
|
|
|
$
|
4,855
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
3,750
|
|
|
$
|
-
|
|
Cash
paid for income taxes
|
|
$
|
800
|
|
|
$
|
800
|
|
|
|
|
|
|
|
|
|
|
SUMMARY
OF NONCASH ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cancellation
of common shares
|
|
$
|
250
|
|
|
$
|
-
|
|
Effect
of reverse merger
|
|
$
|
10,062
|
|
|
$
|
-
|
|
Debt
discount on convertible notes payable
|
|
$
|
85,939
|
|
|
$
|
-
|
|
Reclassification
of deferred revenue related to warrant purchase
|
|
$
|
-
|
|
|
$
|
-
|
|
Conversion
of common stock into preferred stock
|
|
$
|
-
|
|
|
$
|
-
|
|
Recognition
of discounts at inception of convertible notes payable
|
|
$
|
-
|
|
|
$
|
-
|
|
See
notes to financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
YEAR
ENDED DECEMBER 31, 2020 AND PERIOD MAY 13, 2019 (INCEPTION) THROUGH DECEMBER 31,2019
See
notes to financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
1: NATURE OF OPERATIONS
HUMBL,
Inc. (formerly Tesoro Enterprises, Inc.), an Oklahoma corporation (“Company”), was incorporated November 12, 2009.
The Company was redomiciled on November 30, 2020 to the State of Delaware.
Simultaneously
with the November 12, 2009 incorporation, the Company entered into a share exchange agreement with Fashion Floor Covering and Tile, Inc.
(“FFC&T), whereby the sole stockholder of FFC&T received 125,000 shares of the Company’s restricted shares of common
stock in exchange for all the outstanding shares of FFC&T. FFC&T is a full line (wood, carpet and tile) retail dealer and installer
of floor and hard wall covering materials. FFC&T has been in business for over twenty-five years under the same ownership and management.
On
December 3, 2020, HUMBL, LLC (“HUMBL LLC”) merged into the Company in what is accounted for as a reverse merger. Under the
terms of the Merger Agreement, HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred
Stock. The Series B Preferred shares were issued to the respective members of HUMBL LLC following the approval by FINRA of a one-for-four
reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares, and 10,000,000 preferred
shares.
The
FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume
control of the Company, the former CEO, Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock to Brian Foote, the President
and CEO of HUMBL LLC for a $ note payable. The Series A Preferred Stock is not convertible into common stock; however, it has voting
rights of 10,000 votes per 1 share of stock. After the reverse merger was completed, HUMBL LLC ceased doing business, and all operations
were conducted under Tesoro Enterprises, Inc. which later changed their name to HUMBL, Inc. (“HUMBL” or the “Company”).
All
share figures and per share amounts have been stated retroactively for the reverse stock split.
HUMBL
is a Web 3, digital commerce platform that was built to connect consumers, freelancers and merchants in the digital economy. HUMBL provides
simple tools and packaging for complex new technologies like blockchain, in the same way that previous cycles of e-commerce and cloud
were more simply packaged by companies like Facebook, Apple, Amazon and Netflix (FAANG) over the past several decades.
The
goal of HUMBL is to provide ready built tools, and platforms, for consumers and merchants to seamlessly participate in the digital economy.
HUMBL is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster
connections to the digital economy and each other.
HUMBL
has three interconnected product verticals:
|
●
|
HUMBL
Pay – A mobile app that allows peers, consumers and merchants to connect in the digital economy
|
|
●
|
HUMBL
Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy
|
|
●
|
HUMBL
Financial – Financial products and services, targeted for simplified investing on the blockchain
|
HUMBL
Pay
HUMBL
is developing a mobile application that allows customers to migrate to digital forms of payment, along with services such as maps, ratings,
reviews. The company is also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the world,
as these services migrate into digital and blockchain-based modalities.
●
Individuals - Consumers who want to discover, pay, rate and review experiences digitally vs. paper bills and hardware POS
●
Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS
●
Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills
and hardware POS
HUMBL
Marketplace
HUMBL
is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market audiences, that, when
appropriate, incorporate the benefits of blockchain. HUMBL
provides merchants with the ability to list and sell goods with greater levels of authentication, by using technologies such as the HUMBL
Token Engine and HUMBL Origin Assurance, to improve the merchant ability to trade, track and pay for assets.
HUMBL
is also working to issue NFTs (Non-Fungible Tokens) that allow entities like individual global athletes, celebrities, agencies, artists
and companies to monetize their digital images, multimedia, content and catalogues on the blockchain. The Company will work with clients
to create, list and sell their NFTs across a variety of modalities and platforms.
HUMBL
Financial (officially launched January 25, 2021)
HUMBL
Financial is developing the ability to package the new, digital asset investment markets into “one click” for the customer.
With the total value of the digital asset markets in excess of $2 trillion dollars, there is increased conviction that investment markets
will need to migrate to more digital forms of asset tokenization. This will create opportunities for a new generation of market participants
on the blockchain.
HUMBL
Financial has developed index, active and thematic investment products called Exchange Traded Index (ETX) products that allow customers
to invest in baskets of assets on the blockchain. These products are non-custodial, algorithmically driven software services that allow
customers to purchase and hold digital assets in pre-set allocations through their own digital asset exchange accounts.
The
recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health,
economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global
pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.
Our
ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on
available financing and how we conduct business with our customers and vendors would adversely affect our business.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”)
and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”).
It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statement presentation.
The
Company applies the guidance of Topic 805 Business Combinations of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”).
As
the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders
of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the
ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance
of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical
balances are those of HUMBL as they are the accounting acquirer.
Under
generally accepted accounting principles of the United States, any excess of the fair value of the shares issued by HUMBL over the value
of the net monetary assets of Tesoro Enterprises, Inc. is recognized as a reduction of equity. There was no excess of fair value in this
transaction.
Reclassification
The
Company has reclassified certain amounts in the 2019 financial statements to comply with the 2020 presentation. These principally relate
to classification of certain expenses and liabilities. The reclassifications had no impact on total net loss or net cash flows for the
period ended December 31, 2019.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, liabilities to accrue, and determination of the fair value of stock awards. Actual results could differ from those estimates.
Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of December
31, 2020 and 2019, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank. The Company
does not consider this risk to be material.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Intangible
assets with finite useful lives are stated at cost less accumulated amortization and impairment.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
|
1.
|
Significant
underperformance relative to expected historical or projected future operating results;
|
|
|
|
|
2.
|
Significant
changes in the manner of use of the acquired assets or the strategy for the overall business; and
|
|
|
|
|
3.
|
Significant
negative industry or economic trends.
|
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
The
Company tested the carrying value of its long-lived assets for recoverability during the year ended December 31, 2020, and there were
no indicators of impairment noted during this period.
Subsequent
Events
Subsequent
events were evaluated through the date the financial statements were filed.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
The
Company accounts for revenues based on the verticals in which they were earned. The three principal verticals in which the Company operates
today are HUMBL Pay, HUMBL Marketplace and HUMBL Financial.
HUMBL
Pay
The
Company is anticipated to earn transaction revenues primarily from fees charged to merchants and consumers on a transaction basis through
its mobile application. These fees may have a fixed and/or variable component. The variable component is generally a percentage of the
value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions, the variable component
of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company may estimate the amount
of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume of activity processed
on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”). The Company will earn
additional fees on transactions where currency conversion is performed, when cross-border transactions are enabled (i.e., transactions
where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for customers from their HUMBL
account to their debit card or bank account, and other miscellaneous fees. The Company will rely on third party partners to perform all
money transmission services.
The
Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral
fees, subscription fees, gateway fees, ticketing, peer-to-peer payments and other services that will be provided to merchants and consumers.
These contracts typically have one performance obligation which is provided and recognized over the term of the contract. The transaction
price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary to estimate
the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from other value-added
services on a net basis when they are considered the agent with respect to processing transactions.
HUMBL
Marketplace
The
Company will recognize revenue when its transfer control of promised goods or services to customers in an amount that reflects the consideration
to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which
are subsequently remitted to governmental authorities.
Net
transaction revenues
The
net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees
from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise
sellers. The net transaction revenues are reduced by incentives provided to customers.
The
Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the
secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying
this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings,
that are not distinct within the context of the contract. Accordingly, fees for these additional services are recognized when the single
performance obligation is satisfied. Promoted listing fees are recognized when the item is sold and feature and listing fees are recognized
when an item is sold, or when the contract expires.
Further,
to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees,
discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant
judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later
of when revenue is recognized or when the incentive is paid or promise to be paid. Promotions and incentives to most buyers on our Marketplace
platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits
provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when
estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a
significant reversal of revenue will not occur and updated as additional information becomes available.
Marketing
services and other revenues
Marketing
services and other revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements.
Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e.,
the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated
each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.
The Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have
a right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration
to the extent it is probable that a significant reversal of revenue will not occur.
HUMBL
Financial
Revenue
is recognized upon transfer of control of promised services to customers in an amount to which the Company expects to be entitled in
exchange for those services. Service subscription revenue is recognized for the month in which services are provided. If a customer pays
for an annual subscription, revenue is allocated over the months in the subscription and recognized for each month of the service provided.
Accounts
Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of December 31, 2020 and 2019, there were no accounts receivable and therefore no
allowance necessary.
Income
Taxes
Income
taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with
the relevant tax regulations applicable to entity. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for operating loss and tax credit carryforwards. 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 that includes the enactment date.
Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Prior
to the merger with the Company, HUMBL LLC was a partnership. All losses generated were passed through to the individual members, and
there was no provision for income taxes.
Uncertain
Tax Positions
The
Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain
income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
The
Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income
tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were
filed.
Vacation
and Paid-Time-Off
The
Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable
to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.
Share-Based
Compensation
The
Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation
(Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested,
based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values.
The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche
of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.
The
Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld
for tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable,
prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair
value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The
Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.
Earnings
(Loss) Per Share of Common Stock
Basic
net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share
(“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable
pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings
per share when the Company reports a loss because to do so would be anti-dilutive for periods presented, so only the basic weighted average
number of common shares are used in the computations.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates
all of the Company’s financial instruments, including convertible notes and warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the
derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including
whether such instruments should be recorded as liabilities, is remeasured at the end of each reporting period.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level
1 inputs: Quoted prices for identical instruments in active markets.
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level
3 inputs: Instruments with primarily unobservable value drivers.
Segment
Reporting
The
Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments
based on the manner in which management disaggregates the Company in making internal operating decisions.
For
the year ended December 31, 2020 and period May 13, 2019 through December 31, 2019, the Company and its chief operating decision makers
determined that the Company operated in one segment as they were developing their business model. Effective 2021, the Company has established
four distinct operating segments: HUMBL Marketplace; HUMBL Pay; HUMBL Financial; and HUMBL Ticketing. All operations for the year ended
December 31, 2020 and period May 13, 2019 through December 31, 2019 were based in the United States, therefore there was no segment reporting
required for geographical locations.
Related-Party
Transactions
Parties
are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management,
members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company
may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material
related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.
NOTE
3: REVERSE MERGER
HUMBL
LLC
On
December 3, 2020, HUMBL LLC merged into the Company in what is accounted for as a reverse merger. Under the terms of the Merger Agreement,
HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred
shares were issued to the respective members of HUMBL LLC following the approval by FINRA of the one-for-four reverse stock split of
the common shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase
in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume control of the Company, the former CEO,
Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock to Brian Foote, the President and CEO of HUMBL LLC for a $
note payable. The Series A Preferred Stock is not convertible into common stock, however, it has voting rights of 10,000 votes per 1
share of stock. After the reverse merger was completed, HUMBL LLC ceased doing business, and all operations were conducted under Tesoro
Enterprises, Inc. which later changed its name to HUMBL.
As
the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders
of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the
ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance
of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical
balances are those of HUMBL as they are the accounting acquirer.
There
were no outstanding liabilities of Tesoro Enterprises, Inc. that remained at the time of the merger so no amounts were assumed by HUMBL.
NOTE
4: PROMISSORY NOTE
NOTE 4: NOTES PAYABLE
The
Company entered into a promissory note as follows as of December 31, 2020 and 2019:
SCHEDULE
OF NOTES PAYABLE
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Note
payable, at 8% interest, maturing December 31, 2021
|
|
$
|
40,000
|
|
|
$
|
-
|
|
Interest
expense for the year ended December 31, 2020 and accrued at December 31, 2020 was $552.
NOTE
5: CONVERTIBLE PROMISSORY NOTES
The
Company entered into convertible promissory notes as follows as of December 31, 2020 and 2019:
SCHEDULE
OF CONVERTIBLE PROMISSORY NOTES
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Convertible
note, at 8% interest, maturing December 23, 2021 convertible into common shares at $0.15 per share
|
|
$
|
112,500
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note, at 8% interest, maturing December 23, 2021 convertible into common shares at $0.15 per share
|
|
|
112,500
|
|
|
|
-
|
|
Long term debt, gross
|
|
|
225,000
|
|
|
|
-
|
|
Less:
Debt discount
|
|
|
(83,897
|
)
|
|
|
-
|
|
Total
|
|
$
|
141,103
|
|
|
$
|
-
|
|
Interest
expense for the year ended December 31, 2020 and accrued at December 31, 2020 was $394.
NOTE
6: STOCKHOLDERS’ EQUITY (DEFICIT)
Series
A Preferred Stock
Dividends.
Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
There are no conversion rights.
Redemption.
Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the
Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
A Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series A Preferred Stock in cash at a price per share of Series A Preferred Stock equal to 100% of
the Liquidation value.
Voting
Rights. Holders of Series A Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of one thousand (1,000) votes for every share of Series A Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series A Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an
amount equal to the liquidation value of the Series A Preferred Stock before any distribution or payment shall be made to the holders
of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be
distributed to the holders of the Series A Preferred Stock shall be ratably distributed among the holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full.
The
7,000,000 shares were issued to a former officer of the Company and assigned to the new CEO at the time of the reverse merger of HUMBL.
Series
B Preferred Stock
Dividends.
Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at
the office of the Company or any transfer agent for such stock, into ten thousand (10,000) fully paid and nonassessable shares of common
stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.
Redemption.
Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the
Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
B Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series B Preferred Stock in cash at a price per share of Series B Preferred Stock equal to 100% of
the Liquidation value.
Voting
Rights. Holders of Series B Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of ten thousand (10,000) votes for every share of Series B Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series B Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an
amount equal to the liquidation value of the Series B Preferred Stock before any distribution or payment shall be made to the holders
of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be
distributed to the holders of the Series B Preferred Stock shall be ratably distributed among the holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full.
HUMBL
exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares
were issued to the respective members of HUMBL following the approval by FINRA of the one-for-four reverse stock split of the common
shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase in the authorized
common shares and reverse stock split occurred on February 26, 2021. On February 26, 2021, the Company issued 493 shares of Series B
Preferred Stock for services rendered valued at $665,057. As of December 31, 2020, the Company has 0 shares of Series B Preferred Stock
issued and outstanding, respectively.
Series
C Preferred Stock
Dividends.
Shares of Series C Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
Each share of Series C Preferred Stock shall be convertible at the option of the holder thereof at the office of the Company or any transfer
agent for such stock, into five thousand (5,000) fully paid and nonassessable shares of common stock subject to adjustment for any stock
split or distribution of securities or subdivision of the outstanding shares of common stock.
Redemption.
Subject to certain conditions set forth in the Series C Certificate of Designation, in the event of a Change of Control (defined in the
Series C Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
C Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series C Preferred Stock in cash at a price per share of Series C Preferred Stock equal to 100% of
the Liquidation value.
Voting
Rights. Holders of Series C Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of five thousand (5,000) votes for every share of Series C Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”),
the holders of Series C Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an
amount equal to the liquidation value of the Series C Preferred Stock before any distribution or payment shall be made to the holders
of any junior securities, and if the assets of the Company is insufficient to pay in full such amounts, then the entire assets to be
distributed to the holders of the Series C Preferred Stock shall be ratably distributed among the holders in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were paid in full.
As
of December 31, 2020, the Company has 0 shares of Series C Preferred Stock issued and outstanding.
Common
Stock
The
Company had 5,000,000,000 shares
of common stock, par value $0.00001,
authorized. The Company has 974,177,443
and 0
shares issued and outstanding as of December
31, 2020 and 2019, respectively. The Company on February 26, 2021 increased its authorized shares from 5,000,000,000
to 7,450,000,000
shares. Prior to the merger, Tesoro had 1,137,094,777
shares outstanding as of December 31, 2019.
In
December 2020 following the reverse merger, the Company cancelled 25,000,000 shares of common stock for no value received to assist in
completing the merger with HUMBL, and the raising of capital through the purchase of warrants and warrants granted in the convertible
notes.
Prior
to the reverse merger with the Company, HUMBL received $1,307,441 and $205,500 for the year ended December 31, 2020 and period May 13,
2019 through December 31, 2019 from investors. These investors will receive Series B Preferred Shares of the Company.
Warrants
On
December 4, 2020, the Company granted 250,000,000 warrants to two separate holders at a price of $400,000. These warrants have a term
of 2 years and are exercisable into shares of common stock at a price of $0.20 per share. On December 23, 2020, the Company granted 12,500,000
warrants which were part of a country rights option HUMBL granted. These warrants have a term of 1 year and are exercisable into shares
of common stock at a price of $1.00 per share.
On
December 23, 2020, the Company entered into two separate convertible note agreements that are convertible into shares of common stock
at $0.60 per share. The note holders were each granted 112,500 warrants under the convertible note agreements. These warrants have a
term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share.
The
following represents a summary of warrants as of December 31, 2020 and 2019:
SCHEDULE
OF WARRANTS ACTIVITIES
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
|
|
Number
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
|
|
|
Weighted
Average
Exercise Price
|
|
Beginning
balance
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
262,725,000
|
|
|
|
0.23875
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending
balance
|
|
|
262,725,000
|
|
|
$
|
0.23875
|
|
|
|
-
|
|
|
$
|
-
|
|
Intrinsic value of
warrants
|
|
$
|
104,800,000
|
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
1.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE
7: RELATED-PARTY TRANSACTIONS
Since
May 13, 2019 when HUMBL was incorporated, they relied on entities that had common ownership to HUMBL for either assistance with payment
of bills or for services rendered to assist HUMBL in bringing their products to market.
NOTE
8: COUNTRY RIGHTS OPTION
On
December 23, 2020, the Company and Tuigamala Group Pty Ltd, an Australian corporation (“TGP”), entered into a Securities
Purchase Agreement whereby TGP agreed to purchase an option to purchase territory rights to 15 countries in the Oceania region (“Option”).
The purchase price for this Option was $5,600,000, payable in two payments. The initial payment was $600,000 and was paid on December
23, 2020. The second payment of $5,000,000 is due on or before March 31, 2021. The Option will immediately expire should the second payment
fail to be made by March 31, 2021.
In
addition to receiving the Option, TGP was granted a warrant to purchase 12,500,000 shares of common stock of the Company at an exercise
price of $1.00 per share. The warrant expires one-year from the grant date, December 23, 2021. As the warrant and the Option were granted
for one price, the Company calculated the relative fair values of each instrument and recognized $556,757 of the $600,000 paid as the
value of the warrant, and the remaining $43,243 as the value of the Option, which is reflected as deferred revenue on the Consolidated
Balance Sheet as the criteria for revenue recognition under ASC 606 has not been satisfied to be recognized as revenue as of December
31, 2020. There is no guarantee that TGP will be able to make the second payment under the Option by the deadline of March 31, 2021.
On
February 26, 2021, the Company and TGP entered into a term sheet to revise the Option. The revised terms of the Option are that the Company
will form a subsidiary in the Oceania region. TGP will purchase a 35% ownership interest in the subsidiary and 3,750,000 shares of common
stock for an aggregate purchase price of $15,000,000. The subsidiary shares and common shares will be purchased as follows: (a) by March
31, 2021, 1,250,000 shares will be issued for $5,000,000 and 33.33% of the subsidiary shares are to be sold to TGP; and (b) by September
30, 2021 with reasonable extensions to be determined, 2,500,000 shares will be issued for $10,000,000 and the remaining 66.66% of the
subsidiary shares are to be sold to TGP. As a result of the revised terms, it is anticipated that the $600,000 paid on December 23, 2020,
will be used in its entirety to pay for the warrants described below, and the deferred revenue recognized will be reflected as additional
paid in capital on February 26, 2021.
NOTE
9: INCOME TAXES
The
following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective
tax rate for financial statement purposes for the years ended December 31, 2020 and 2019:
RECONCILIATION OF DIFFERENCES BETWEEN U.S. FEDERAL STATUTORY AND EFFECTIVE INCOME TAX RATE
|
|
2020
|
|
|
2019
|
|
Federal
income taxes at statutory rate
|
|
|
21.00
|
%
|
|
|
21.00
|
%
|
State
income taxes at statutory rate
|
|
|
6.90
|
%
|
|
|
6.78
|
%
|
Section
382 limitation
|
|
|
0.00
|
%
|
|
|
(0.00
|
)%
|
Permanent
differences
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Change
in valuation allowance
|
|
|
(28.02
|
)%
|
|
|
(28.06
|
)%
|
Totals
|
|
|
(0.12
|
)%
|
|
|
(0.28
|
)%
|
The
following is a summary of the net deferred tax asset (liability) as of December 31, 2020 and 2019:
SUMMARY DEFERRED TAX ASSET AND (LIABILITY)
|
|
As
of December 31, 2020
|
|
|
As of
December
31, 2019
|
|
Deferred
tax assets (liabilities):
|
|
|
|
|
|
|
|
|
Net
operating losses
|
|
$
|
277,704
|
|
|
$
|
79,005
|
|
Other
expense
|
|
|
-
|
|
|
|
-
|
|
Total
deferred tax assets (liabilities)
|
|
|
277,704
|
|
|
|
79,005
|
|
Less:
Valuation allowance
|
|
|
(277,704
|
)
|
|
|
(79,005
|
)
|
|
|
|
|
|
|
|
|
|
Net
deferred tax assets (liabilities)
|
|
$
|
-
|
|
|
$
|
-
|
|
Section
382 of the Internal Revenue Code provides an annual limitation on the amount of federal NOLs and tax credits that may be used in the
event of an ownership change. During 2020, the Company wrote off all of the net operating losses due to an ownership change. The Company
had a net operating loss carryforward totaling approximately $992,381 at December 31, 2020.
The
Company classifies accrued interest and penalties, if any, for unrecognized tax benefits as part of income tax expense. The Company did
not accrue any penalties or interest as of December 31, 2020 and 2019.
The
provision (benefit) for income taxes for the year ended December 31, 2020 and 2019 is as follows and represents minimum state taxes:
SUMMARY
OF PROVISION (BENEFIT) FOR INCOME TAXES
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
800
|
|
|
$
|
800
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
800
|
|
|
$
|
800
|
|
NOTE
10: SUBSEQUENT EVENTS
On
December 3, 2020, HUMBL LLC merged into the Company in what is accounted for as a reverse merger. Under the terms of the Merger Agreement,
HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred
shares were issued to the respective members of HUMBL LLC following the approval by FINRA of the one-for-four reverse stock split of
the common shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase
in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume control of the Company, the former CEO,
Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock to Brian Foote, the President and CEO of HUMBL LLC for a $
note payable. The Series A Preferred Stock is not convertible into common stock, however, it has voting rights of 10,000 votes per 1
share of stock. After the reverse merger was completed, HUMBL LLC ceased doing business, and all operations were conducted under Tesoro
Enterprises, Inc. which later changed its name to HUMBL.
On
February 26, 2021, the Company issued 493 shares of Series B Preferred Stock for services rendered valued at $665,057.
On
February 26, 2021, the Company and TGP entered into a term sheet to revise the Option. The revised terms of the Option are that the Company
will form a subsidiary in the Oceania region. TGP will purchase a 35% ownership interest in the subsidiary and 3,750,000 shares of common
stock for an aggregate purchase price of $15,000,000. The subsidiary shares and common shares will be purchased as follows: (a) by March
31, 2021, 1,250,000 shares will be issued for $5,000,000 and 33.33% of the subsidiary shares are to be sold to TGP; and (b) by September
30, 2021 with reasonable extensions to be determined, 2,500,000 shares will be issued for $10,000,000 and the remaining 66.66% of the
subsidiary shares are to be sold to TGP. As a result of the revised terms, it is anticipated that the $600,000 paid on December 23, 2020,
will be used in its entirety to pay for the warrants described below, and the deferred revenue recognized will be reflected as additional
paid in capital on February 26, 2021. The Company and TGP were unable to come to agreement on new terms of this transaction and have
as of April 14, 2021 have terminated negotiations. TGP still owns the warrants received in December 2020 and continues to have the right
to exercise them. The Company is not obligated to return any of the $600,000 received on December 23, 2020.
On
March 1, 2021, the Company and Aurea Group (“Aurea”) entered into a term sheet for Country Rights in Chile. Under the term
sheet, the Company will form a subsidiary in Chile where Aurea will purchase a 35% ownership interest and 2,000,000 shares of common
stock to be issued for $7,500,000, as follows: (a) at the first closing date, 437,500 shares will be issued for $1,000,000; and (b) nine
months after closing, 1,5562,500 shares will be issued for $6,500,000 and the subsidiary shares will be issued. The Company’s closed
on this transaction on March 15, 2021. The first closing date was March 30, 2021, however due to strict banking regulations in Chile,
the $1,000,000 was received in two tranches of $500,000 each and the funds came in between April 5, 2021 and April 6, 2021.
On
March 1, 2021, the Company entered into a term sheet to acquire Tickeri, Inc. (“Tickeri”) in a debt and stock transaction
totaling $20,000,000. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout
the United States, Latin America and the Caribbean corridor.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
BALANCE SHEETS
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,465,355
|
|
|
$
|
1,720,979
|
|
Accounts
receivable, net
|
|
|
668,469
|
|
|
|
-
|
|
Intangible
assets – digital currency
|
|
|
16,259
|
|
|
|
-
|
|
Due
from related parties, net
|
|
|
-
|
|
|
|
77,146
|
|
Prepaid
expenses and other current assets
|
|
|
114,962
|
|
|
|
7,445
|
|
Total
current assets
|
|
|
3,265,045
|
|
|
|
1,805,570
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
Fixed
assets, net of depreciation
|
|
|
362,062
|
|
|
|
-
|
|
Goodwill
|
|
|
16,593,706
|
|
|
|
-
|
|
Total
non-current assets
|
|
|
16,955,768
|
|
|
|
-
|
|
TOTAL
ASSETS
|
|
$
|
20,220,813
|
|
|
$
|
1,805,570
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
1,294,557
|
|
|
$
|
20,392
|
|
Deferred
revenue
|
|
|
-
|
|
|
|
43,243
|
|
Due
to seller
|
|
|
327,412
|
|
|
|
-
|
|
Note
payable
|
|
|
606,488
|
|
|
|
40,000
|
|
Current
portion of notes payable – related parties
|
|
|
500,000
|
|
|
|
-
|
|
Current
portion of convertible notes payable, net of discount
|
|
|
3,311,707
|
|
|
|
141,103
|
|
Total
current liabilities
|
|
|
6,040,164
|
|
|
|
244,738
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES
|
|
|
|
|
|
|
|
|
Notes
payable, net of current portion
|
|
|
150,000
|
|
|
|
-
|
|
Convertible
notes payable, net of discount and net of current portion
|
|
|
1,861,816
|
|
|
|
-
|
|
Notes
payable – related parties, net of current portion
|
|
|
10,486,250
|
|
|
|
-
|
|
Convertible
notes payable – related parties, net of current portion
|
|
|
7,500,000
|
|
|
|
-
|
|
Total
non-current liabilities
|
|
|
19,998,066
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
26,038,230
|
|
|
|
244,738
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Preferred
stock, 7,000,000 shares Series A Preferred stock authorized, 900,000 Series B Preferred stock authorized, and 150,000 Series C Preferred
stock authorized
|
|
|
|
|
|
|
|
|
Series
A Preferred stock, par value $0.00001; 7,000,000 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
|
|
|
70
|
|
|
|
70
|
|
Series
B Preferred stock, par value $0.00001; 552,913 and 0 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
|
|
|
6
|
|
|
|
-
|
|
Series
C Preferred stock, par value $0.00001; 0 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
|
|
|
-
|
|
|
|
-
|
|
Preferred Stock Value
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.00001; 7,450,000,000 and 5,000,000,000 shares authorized, 919,911,833 and 974,177,443 shares issued and outstanding
as of September 30, 2021 and December 31, 2020, respectively
|
|
|
9,199
|
|
|
|
9,742
|
|
Additional
paid in capital
|
|
|
30,112,530
|
|
|
|
2,545,825
|
|
Accumulated
deficit
|
|
|
(35,939,222
|
)
|
|
|
(994,805
|
)
|
Total
stockholders’ equity (deficit)
|
|
|
(5,817,417
|
)
|
|
|
1,560,832
|
|
MEMBERS’ EQUITY
|
|
|
|
|
|
|
|
|
Members’ equity
|
|
|
|
|
|
|
|
|
Total Members’ Equity
|
|
|
|
|
|
|
362,989
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
$
|
20,220,813
|
|
|
$
|
1,805,570
|
|
See
notes to consolidated financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
NINE
MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
See
notes to consolidated financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
THREE
MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
1,198,270
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
COST
OF REVENUES
|
|
|
460,352
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
737,918
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Development
costs
|
|
|
713,993
|
|
|
|
19,640
|
|
Professional
fees
|
|
|
928,761
|
|
|
|
95,756
|
|
Stock-based
compensation
|
|
|
8,619,429
|
|
|
|
-
|
|
Impairment
– digital assets
|
|
|
33,464
|
|
|
|
-
|
|
General
and administrative expenses
|
|
|
2,074,467
|
|
|
|
6,845
|
|
Total
operating expenses
|
|
|
12,370,114
|
|
|
|
122,241
|
|
LOSS
FROM OPERATIONS BEFORE OTHER EXPENSES
|
|
|
(11,632,196
|
)
|
|
|
(122,241
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(391,294
|
)
|
|
|
-
|
|
Amortization
of discounts
|
|
|
(342,595
|
)
|
|
|
-
|
|
Gain
on sale of digital assets
|
|
|
29,029
|
|
|
|
-
|
|
Other
income
|
|
|
25,000
|
|
|
|
-
|
|
Total
other income (expense)
|
|
|
(679,860
|
)
|
|
|
10,000
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
NET
LOSS
|
|
$
|
(12,312,056
|
)
|
|
$
|
(122,241
|
)
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SHARES
USED IN CALCULATION OF NET LOSS PER SHARE
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
915,923,982
|
|
|
|
-
|
|
See
notes to consolidated financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE
MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(34,944,417
|
)
|
|
$
|
(289,191
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Shares issued to founders for services
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
5,514
|
|
|
|
-
|
|
Impairment
expense - goodwill
|
|
|
12,141,062
|
|
|
|
-
|
|
Impairment
expense – digital assets
|
|
|
33,464
|
|
|
|
-
|
|
(Gain)
on sale of digital assets
|
|
|
(29,029
|
)
|
|
|
-
|
|
Advertising
expense paid for by digital assets
|
|
|
79,724
|
|
|
|
-
|
|
Sales
commission received in digital assets
|
|
|
(5,168
|
)
|
|
|
-
|
|
Amortization
of discounts
|
|
|
489,848
|
|
|
|
-
|
|
Warrants
granted for services
|
|
|
1,380,721
|
|
|
|
-
|
|
Stock-based
compensation – common and preferred stock grants
|
|
|
8,804,776
|
|
|
|
-
|
|
Bad
debt
|
|
|
88,693
|
|
|
|
-
|
|
Settlement
|
|
|
1,870,000
|
|
|
|
-
|
|
Beneficial
conversion feature on convertible note payable
|
|
|
3,300,000
|
|
|
|
-
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(265,870
|
)
|
|
|
-
|
|
Intangible
assets – digital currency
|
|
|
(95,250
|
)
|
|
|
-
|
|
Prepaid
expenses and other current assets
|
|
|
(107,517
|
)
|
|
|
-
|
|
Increase
(decrease) in amounts due related parties
|
|
|
(11,547
|
)
|
|
|
(35,915
|
)
|
Accounts
payable and accrued expenses
|
|
|
888,340
|
|
|
|
3,343
|
|
Total adjustments
|
|
|
408,156
|
|
|
|
(32,572
|
)
|
Net
cash used in operating activities
|
|
|
(6,376,656
|
)
|
|
|
(321,763
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(367,576
|
)
|
|
|
-
|
|
Cash
received in purchase of Tickeri
|
|
|
127,377
|
|
|
|
-
|
|
Cash
received in purchase of Monster Creative
|
|
|
3,017
|
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(237,182
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Member distributions
|
|
|
-
|
|
|
|
|
|
Contribution of equity from shareholder
|
|
|
|
|
|
|
|
|
Proceeds from notes payable - related parties
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
|
|
|
|
|
|
Proceeds
from sales of membership interests of HUMBL, LLC
|
|
|
10,000
|
|
|
|
411,500
|
|
Payments
of notes payable
|
|
|
(186
|
)
|
|
|
-
|
|
Repayment
of amount due to seller
|
|
|
(51,600
|
)
|
|
|
-
|
|
Proceeds
from convertible notes payable
|
|
|
6,400,000
|
|
|
|
-
|
|
Proceeds
from issuance of common stock for cash
|
|
|
1,000,000
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
7,358,214
|
|
|
|
411,500
|
|
NET
INCREASE IN CASH
|
|
|
744,376
|
|
|
|
89,737
|
|
Cash
- beginning of period
|
|
|
1,720,979
|
|
|
|
4,855
|
|
Cash
- end of period
|
|
$
|
2,465,355
|
|
|
$
|
94,592
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES:
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
35
|
|
|
$
|
-
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUMMARY
OF NONCASH ACTIVITIES:
|
|
|
|
|
|
|
|
|
Reclassification
of deferred revenue related to warrant purchase
|
|
$
|
43,243
|
|
|
$
|
-
|
|
Conversion
of common stock into preferred stock
|
|
$
|
796
|
|
|
$
|
-
|
|
Recognition
of discounts at inception of convertible notes payable
|
|
$
|
1,857,428
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUMMARY
OF TICKERI ACQUISITION:
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
23,587
|
|
|
$
|
-
|
|
Goodwill
|
|
|
20,086,664
|
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
(87,071
|
)
|
|
|
-
|
|
EIDL
loan
|
|
|
(150,000
|
)
|
|
|
-
|
|
Due
to seller
|
|
|
(379,012
|
)
|
|
|
-
|
|
Notes
payable - officers
|
|
|
(486,250
|
)
|
|
|
-
|
|
PPP
loan
|
|
|
(557
|
)
|
|
|
-
|
|
Notes
payable issued
|
|
|
(10,000,000
|
)
|
|
|
-
|
|
Convertible
notes issued
|
|
|
(7,500,000
|
)
|
|
|
-
|
|
Common
shares issued
|
|
|
(10,000,000
|
)
|
|
|
-
|
|
Net
cash received in acquisition of Tickeri
|
|
$
|
(127,377
|
)
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUMMARY
OF MONSTER CREATIVE ACQUISITION:
|
|
|
|
|
|
|
Accounts
receivable
|
|
$
|
379,012
|
|
|
$
|
-
|
|
Goodwill
|
|
|
8,648,104
|
|
|
|
-
|
|
Accounts
payable and accrued expenses
|
|
|
(98,754
|
)
|
|
|
-
|
|
Due
to seller
|
|
|
(379,012
|
)
|
|
|
-
|
|
Notes
payable - officers
|
|
|
(486,250
|
)
|
|
|
-
|
|
PPP
loan
|
|
|
(66,117
|
)
|
|
|
-
|
|
Notes
payable issued
|
|
|
(500,000
|
)
|
|
|
-
|
|
Convertible
notes issued
|
|
|
(7,500,000
|
)
|
|
|
-
|
|
Net
cash received in acquisition of Monster Creative
|
|
$
|
(3,017
|
)
|
|
$
|
-
|
|
See
notes to consolidated financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
NINE
MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
*There
was no Series C Preferred stock activity during these periods
See
notes to consolidated financial statements.
HUMBL,
INC.
(FORMERLY
TESORO ENTERPRISES, INC.)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021
NOTE
1: NATURE OF OPERATIONS
HUMBL,
Inc. (formerly Tesoro Enterprises, Inc.), an Oklahoma corporation (“Company”) was incorporated November 12, 2009. The Company
was redomiciled on November 30, 2020 to the State of Delaware.
Simultaneously
with the November 12, 2009 incorporation, the Company entered into a share exchange agreement with Fashion Floor Covering and Tile, Inc.
(“FFC&T), whereby the sole stockholder of FFC&T received 125,000 shares of the Company’s restricted shares of common
stock in exchange for all the outstanding shares of FFC&T. FFC&T is a full line (wood, carpet and tile) retail dealer and installer
of floor and hard wall covering materials. FFC&T has been in business for over twenty-five years under the same ownership and management.
On
December 3, 2020, HUMBL, LLC (“HUMBL LLC”) merged into the Company in what is accounted for as a reverse merger. Under the
terms of the Merger Agreement, HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred
Stock. The Series B Preferred shares were issued to the respective members of HUMBL LLC following the approval by FINRA of a one-for-four
reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares, and 10,000,000 preferred
shares.
The
FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume
control of the Company, the former CEO, Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock as well as 550,000,000
shares of common stock to Brian Foote, the President and CEO of HUMBL LLC for a $ note payable. The Series A Preferred Stock is
not convertible into common stock; however, it has voting rights of 10,000 votes per 1 share of stock. After the reverse merger was completed,
HUMBL LLC ceased doing business, and all operations were conducted under Tesoro Enterprises, Inc. which later changed their name to HUMBL,
Inc. (“HUMBL” or the “Company”).
All
share figures and per share amounts have been stated retroactively for the reverse stock split.
On
June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri
became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists
throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of
which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value
equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending
with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez
and Javier Gonzalez, 4,672,897 shares of our common stock each. We also issued to each of Juan and Javier Gonzalez a secured promissory
note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the
rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory
note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri
free and clear of any claims or encumbrances by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until
the promissory notes are paid in full. We agreed to register on Form S-1 within three months from the closing the shares issued to Juan
and Javier Gonzalez and have the registration statement declared effective within six months of the closing date. Following the closing,
Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and
CTO of HUMBL, respectively.
On
June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in
producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate
with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was
paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate
principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress
in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at
5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate
amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress
each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and
Kevin Childress was appointed as its President and Creative Director.
HUMBL
is a Web 3, digital commerce platform that was built to connect consumers, freelancers and merchants in the digital economy. HUMBL provides
simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the
cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades.
The
goal of HUMBL is to provide ready built tools, and platforms for consumers and merchants to seamlessly participate in the digital economy.
HUMBL is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster
connections to the digital economy and each other.
HUMBL
has three interconnected product verticals:
●
HUMBL Pay – A mobile app that allows peers, consumers and merchants to connect in the digital economy;
●
HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy;
and
●
HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.
HUMBL
Pay
HUMBL
is developing a mobile application that allows customers to migrate to digital forms of payment, along with services such as maps, ratings,
and reviews. The Company is also working rapidly to integrate the use of search, discovery, peer-to-peer cash and ticketing around the
world, as these services migrate into digital and blockchain-based modalities. The mobile application is designed to provide functionality
to the following groups:
●
Individuals - Consumers who want to discover, pay, rate and review experiences digitally vs. paper bills and hardware point-of-sale
(“POS”)
●
Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS;
and
●
Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.
HUMBL
Marketplace
Through
its online marketplace, HUMBL is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market
audiences, that, where appropriate, incorporate the benefits of blockchain. HUMBL provides merchants with the ability to list and sell
goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve
the merchant’s ability to trade, track and pay for assets.
HUMBL
launched its NFT Marketplace to issue NFTs (Non-Fungible Tokens) that allow entities and individuals such as athletes, celebrities, agencies,
artists and companies to monetize their digital images, multimedia, content and catalogues on the blockchain. The Company will work with
clients to create, list and sell their NFTs across a variety of modalities and platforms. The Company had performed some beta testing
of minting NFTs for future endeavors, and currently contracts with third parties to place their NFTs on the HUMBL NFT Gallery for sales
to consumers. Sales of these NFTs are those of the designers, and HUMBL receives a commission for the sale.
In
September of 2021, HUMBL launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live
events across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and HUMBL earns a commission
for each sale. In addition to its subsidiary Tickeri, the Company will continue to work with clients to merge the realms of NFTs, event
tickets and blockchain authentication.
HUMBL
Financial
HUMBL
Financial was developed to package step-function technologies such as blockchain into “several clicks” for the customer.
With the total value of digital assets in excess of $1 trillion, there is increased conviction that investment markets will need to migrate
to more digital forms of asset ownership. This will create opportunities for a new generation of market participants and provide access
to markets that have been historically reserved for high-net-worth individuals.
HUMBL
Financial has created BLOCK ETX products to simplify digital asset investing for customers and institutions seeking exposure to a new,
24/7 digital asset class. We have launched this product in over 100 countries. HUMBL Financial has developed proprietary, multi-factor
blockchain indexes, trading algorithms and financial services for the new digital asset trading markets. to accommodate index, active
and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically driven software services that allow customers
to purchase and hold digital assets in pre-set allocations through their own digital asset exchange accounts. BLOCK ETXs are compatible
for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US. BLOCK ETXs are also available to non-US customers
who have accounts with Bittrex Global. BLOCK ETXs will be served first on the desktop and web version of the HUMBL platform, with the
goal of future applications inside the HUMBL mobile application. HUMBL Financial is open to the licensing of the BLOCK ETXs to institutions
and exchanges. HUMBL Financial also plans to offer trusted, third party financial services in areas such as payments, investments, credit
card services and lending across the HUMBL platform over time.
Our
ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on
available financing and how we conduct business with our customers and vendors would adversely affect our business.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”)
and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”).
It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statement presentation.
As
the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders
of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the
ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance
of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical
balances are those of HUMBL as they are the accounting acquirer.
Under
generally accepted accounting principles of the United States, any excess of the fair value of the shares issued by HUMBL over the value
of the net monetary assets of Tesoro Enterprises, Inc. is recognized as a reduction of equity. There was no excess of fair value in this
transaction.
Principles
of Consolidation
The
consolidated financial statements include the accounts of HUMBL, Inc. and its subsidiaries, collectively referred to as “the Company”.
All significant intercompany accounts and transactions have been eliminated in consolidation. HUMBL, Inc. holds 100% of Tickeri and Monster.
The Company formed two additional subsidiaries in Singapore and Australia that are inactive and have no activity.
The
Company applies the guidance of Topic 805 Business Combinations of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”).
For
Tickeri and Monster, the Company accounted for these acquisitions as business combinations and the difference between the consideration
paid and the net assets acquired was first attributed to identified intangible assets and the remainder of the difference was applied
to goodwill.
Reclassification
The
Company has reclassified certain amounts in the 2020 financial statements to comply with the 2021 presentation. These principally relate
to classification of certain expenses and liabilities. The reclassifications had no impact on total net loss or net cash flows for the
period ended September 30, 2020.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, liabilities to accrue, and determination of the fair value of stock awards. Actual results could differ from those estimates.
Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of September
30, 2021 and December 31, 2020, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank.
The Company does not consider this risk to be material.
Inventories
NFTs
and merchandise inventories are carried at the lower of cost (first-in-first-out (FIFO)) or net realizable value. Inventory costs include
expenditures and other charges directly and indirectly incurred in bringing the inventory to its existing condition and location. Currently
the Company does not maintain any inventory. For the merchandise, the Company utilizes a third-party manufacturer that ships direct to
the end user. For NFTs, the Company had performed some beta testing of minting NFTs for future endeavors, and currently contracts with
third parties to place their NFTs on the HUMBL NFT Gallery for sales to consumers. Sales of these NFTs are those of the designers, and
HUMBL receives a commission for the sale.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Fixed
assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more
depending on circumstances.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
1.
Significant underperformance relative to expected historical or projected future operating results;
2.
Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
Subsequent
Events
Subsequent
events were evaluated through the date the financial statements were filed.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
The
Company accounts for revenues based on the verticals in which they were earned. The three principal verticals in which the Company operates
today are HUMBL Pay, HUMBL Marketplace, and HUMBL Financial.
HUMBL
Pay
The
Company is anticipated to earn transaction revenues primarily from fees charged to merchants and consumers on a transaction basis through
the Company’s mobile application. These fees may have a fixed and/or variable component. The variable component is generally a
percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions,
the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company
may estimate the amount of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume
of activity processed on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”).
The Company will earn additional fees on transactions where currency conversion is performed, when cross-border transactions are enabled
(i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for customers
from their HUMBL account to their debit card or bank account, and other miscellaneous fees. The Company will rely on third party partners
to perform all money transmission services.
The
Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral
fees, subscription fees, gateway fees, ticketing, peer-to-peer payments and other services that will be provided to merchants and consumers.
These contracts typically have one performance obligation which is provided and recognized over the term of the contract.
The
transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary
to estimate the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from
other value-added services on a net basis when they are considered the agent with respect to processing transactions.
HUMBL
Marketplace
The
Company will recognize revenue when its transfer control of promised goods or services to customers in an amount that reflects the consideration
to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which
are subsequently remitted to governmental authorities.
Net
transaction revenues
The
net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees
from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise
sellers. The net transaction revenues are reduced by incentives provided to customers.
The
Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the
secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying
this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings,
that are not distinct within the context of the contract.
Accordingly,
fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized
when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.
Further,
to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees,
discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant
judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later
of when revenue is recognized or when the incentive is paid or promise to be paid. Promotions and incentives to most buyers on our Marketplace
platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits
provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when
estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a
significant reversal of revenue will not occur and updated as additional information becomes available.
Ticketing
Revenues
The
Company with the acquisition of Tickeri and launch of HUMBL Tickets will recognize revenues from their ticketing services primarily from
service fees, commissions and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from
providing certain creators with account management services and customer support. Our customers are primarily event creators who use
our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers,
in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by
estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment
processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized
over the period from the date of the sale of the ticket to the date of the event.
We
evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control
of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk,
and have the latitude in establishing pricing and selecting suppliers, among other factors.
We
determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing
the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled.
Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and
process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service,
we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment
and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis
related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing
the transactions are included in cost of net revenues in the consolidated statements of operations.
Revenue
is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated
uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility
of that creator.
If
a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is
also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing
and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the
creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.
Marketing
services and other revenues
Marketing
services and other revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements.
Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e.,
the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated
each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.
The
Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have a
right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration
to the extent it is probable that a significant reversal of revenue will not occur.
HUMBL
Financial
Revenue
is recognized upon transfer of control of promised services to customers in an amount to which the Company expects to be entitled in
exchange for those services. Service subscription revenue is recognized for the month in which services are provided. If a customer pays
for an annual subscription, revenue is allocated over the months in the subscription and recognized for each month of the service provided.
Accounts
Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of September 30, 2021 and December 31, 2020, there was no allowance necessary.
Income
Taxes
Income
taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with
the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for operating loss and tax credit carryforwards. 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 that includes the enactment
date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Prior
to the merger with the Company, HUMBL LLC was a partnership. All losses generated were passed through to the individual members, and
there was no provision for income taxes.
Uncertain
Tax Positions
The
Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income
tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
The
Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income
tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were
filed.
Vacation
and Paid-Time-Off
The
Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable
to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.
Share-Based
Compensation
The
Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic
718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based
on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company
policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each
award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.
The
Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for
tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable,
prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair
value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The
Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.
Earnings
(Loss) Per Share of Common Stock
Basic
net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share
(“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable
pursuant to the exercise of stock options and warrants.
Common
stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so
would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates
all of the Company’s financial instruments, including convertible notes and warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives. The Company generally uses a Black-Scholes model, as applicable, to value the
derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including
whether such instruments should be recorded as liabilities, is remeasured at the end of each reporting period.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands
disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level
1 inputs: Quoted prices for identical instruments in active markets.
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level
3 inputs: Instruments with primarily unobservable value drivers.
Segment
Reporting
The
Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based
on the manner in which management disaggregates the Company in making internal operating decisions.
For
the nine months ended September 30, 2020 the Company and its chief operating decision makers determined that the Company operated in
one segment as they were developing their business model. Effective 2021, the Company has established three distinct operating segments:
HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. All operations for the nine months ended September 30, 2021 and 2020, respectively
were conducted in North America.
Less
than 4% of the Company’s sales were from outside of North America, therefore the Company has determined that segment reporting
by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if
it is feasible to report segment information by location.
Related-Party
Transactions
Parties
are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management,
members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company
may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material
related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.
Recent
Accounting Pronouncements
In
August, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06,
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.
The
ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning
after December 15, 2020, and interim periods within those fiscal years. The Company is currently evaluating the impact that this new
guidance will have on its financial statements.
The
Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition,
results of operations, cash flows or disclosures.
NOTE
3: REVERSE MERGER
HUMBL
LLC
On
December 3, 2020, HUMBL LLC merged into the Company in what is accounted for as a reverse merger. Under the terms of the Merger Agreement,
HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred
shares were issued to the respective members of HUMBL LLC following the approval by FINRA of the one-for-four reverse stock split of
the common shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase
in the authorized common shares and reverse stock split occurred on February 26, 2021.
To
assume control of the Company, the former CEO, Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock to Brian Foote,
the President and CEO of HUMBL LLC for a $ note payable. The Series A Preferred Stock is not convertible into common stock, however,
it has voting rights of 10,000 votes per 1 share of stock. After the reverse merger was completed, HUMBL LLC ceased doing business, and
all operations were conducted under Tesoro Enterprises, Inc. which later changed its name to HUMBL.
As
the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders
of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the
ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance
of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical
balances are those of HUMBL as they are the accounting acquirer.
There
were no outstanding liabilities of Tesoro Enterprises, Inc. that remained at the time of the merger so no amounts were assumed by HUMBL.
Pursuant
to ASC 805-40-45-2, the presentation of the consolidated financial statements represents the continuation of the legal acquiree (HUMBL),
except for the legal capital structure in a reverse acquisition. Historical shareholders’ equity of the accounting acquirer (legal
acquiree) prior to the reverse acquisition is retrospectively adjusted (a recapitalization) for the equivalent number of shares received
by the accounting acquirer after giving effect to any difference in par value of the issuer’s and acquirer’s stock (Tesoro)
with any such difference recognized in equity. Retained earnings (deficiency) of the accounting acquirer are carried forward after the
acquisition. Operations prior to the merger are those of the accounting acquirer (HUMBL). Earnings per share for periods prior to the
merger are retrospectively adjusted to reflect the number of equivalent shares received by the accounting acquirer.
NOTE
4: REVENUE
The
following table disaggregates the Company’s revenue by major source for the nine months ended September 30, 2021 and 2020:
SCHEDULE
OF DISAGGREGATION OF REVENUE
|
|
2021
|
|
|
2020
|
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
Revenue:
|
|
|
|
|
|
|
Financial
Services
|
|
$
|
192,600
|
|
|
$
|
-
|
|
Merchandise
|
|
|
181,771
|
|
|
|
-
|
|
Tickets
|
|
|
48,618
|
|
|
|
-
|
|
Merchant
Fees
|
|
|
459,103
|
|
|
|
-
|
|
NFTs
|
|
|
23,275
|
|
|
|
-
|
|
Service
- Production
|
|
|
675,119
|
|
|
|
-
|
|
Total revenue
|
|
$
|
1,580,486
|
|
|
$
|
-
|
|
There
were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value
of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections
of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE
5: FIXED ASSETS AND GOODWILL
As
of September 30, 2021 and December 31, 2020, the Company has the following fixed assets:
SCHEDULE
OF FIXED ASSETS
|
|
September
30, 2021
|
|
|
December
31,
2020
|
|
Non-residential
property – 20 year-life
|
|
$
|
345,497
|
|
|
$
|
-
|
|
Equipment
– 5 year-life
|
|
|
5,772
|
|
|
|
-
|
|
Furniture
and fixtures – 5 year-life
|
|
|
16,307
|
|
|
|
-
|
|
Fixed
assets gross
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
(5,514
|
)
|
|
|
-
|
|
Fixed
assets
|
|
$
|
362,062
|
|
|
$
|
-
|
|
In
June 2021, the Company purchased some equipment and furniture as well as a commercial property in the form of a suite at a luxury hotel.
The Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company
has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used.
Depreciation
expense for the nine months ended September 30, 2021 was $5,514, as the property was placed into service on July 1, 2021.
As
of September 30, 2021 and December 31, 2020, the Company has recorded goodwill as follows:
SCHEDULE
OF GOODWILL
|
|
September
30, 2021
|
|
|
December
31,
2020
|
|
Tickeri
|
|
$
|
7,945,602
|
|
|
$
|
-
|
|
Monster
Creative
|
|
|
8,648,104
|
|
|
|
-
|
|
Goodwill
|
|
$
|
16,593,706
|
|
|
$
|
-
|
|
For
the nine months ended September 30, 2021, the Company recognized $12,141,062 in impairment expense.
NOTE
6: INTANGIBLE ASSETS – DIGITAL CURRENCY
In
2021, the Company purchased Ethereum, a digital currency to create NFTs for beta testing to determine whether they would be able to place
them onto the HUMBL Marketplace’s NFT Gallery in addition to the NFTs others create that are on the NFT Gallery. The Company purchased
$95,250 in digital currency in the nine months ended September 30, 2021. The Company expensed $79,724 in the digital currency to create
NFTs as beta testing for future endeavors and for payment of expenses, received commissions on sales of NFTs of $5,168, reflected $33,464
in impairment of the intangible asset for digital currency, and recognized a gain on sale of digital assets of $29,029. The value of
the intangible asset as of September 30, 2021 is $16,259.
NOTE
7: NFT INVENTORY
The
Company does not currently have inventory. The NFTs created and listed on the NFT Gallery are created by third parties and the Company
will receive commissions on sales of those NFTs. The Company has explored the beta testing of the creation of NFTs, but they are not
currently held for sale.
NOTE
8: NOTES PAYABLE
The
Company entered into notes payable as follows as of September 30, 2021 and December 31, 2020:
SCHEDULE
OF NOTES PAYABLE
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Note
payable, at 8% interest, maturing December 31, 2021 for merger with Tesoro Enterprises Inc. (see Note 1)
|
|
$
|
40,000
|
|
|
$
|
40,000
|
|
|
|
|
|
|
|
|
|
|
Notes
payable ($250,000 each), at 2% interest, maturing July 30, 2022 (see Note 15)
|
|
|
500,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
PPP
SBA loan - Tickeri
|
|
|
371
|
|
|
|
-
|
|
PPP
loan – Monster
|
|
|
66,117
|
|
|
|
-
|
|
EIDL
loan - Tickeri
|
|
|
150,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
756,488
|
|
|
|
40,000
|
|
Less:
Current portion
|
|
|
(606,488
|
)
|
|
|
(40,000
|
)
|
Long-term
debt
|
|
$
|
150,000
|
|
|
$
|
-
|
|
SCHEDULE
OF MATURITIES NOTES PAYABLE
Maturities
of notes payable for the next two years as of September 30 are as follows:
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
|
|
$
|
606,488
|
|
2023
|
|
|
|
|
|
|
150,000
|
|
Total
|
|
|
|
|
|
$
|
756,628
|
|
In
the acquisition of Tickeri, the Company assumed a PPP loan and an EIDL loan. If these amounts are forgiven in the future, they will adjust
the purchase price and the goodwill acquired in this transaction. Interest expense for the nine months ended September 30, 2021 and 2020
was $6,619 and $0, respectively. Accrued interest at September 30, 2021 was $7,166.
NOTE
9: NOTES PAYABLE – RELATED PARTIES
The
Company entered into notes payable as follows as of September 30, 2021 and December 31, 2020:
SCHEDULE
OF NOTES PAYABLE RELATED PARTIES
|
|
September
30, 2021
|
|
|
December
31, 2020
|
Notes
payable ($5,000,000 each), at 5% interest, maturing December 3, 2022 for acquisition of Tickeri (see Note 17)
|
|
$
|
10,000,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Notes
payable ($435,000 and $65,000), at 5% interest, maturing April 1, 2022 for acquisition of Monster (see Note 17)
|
|
|
500,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Note
payable – family members of Monster ($271,250 and $215,000), at 3% interest, maturing December 31, 2022
|
|
|
486,250
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,986,250
|
|
|
|
-
|
|
Less:
Current portion
|
|
|
(500,000
|
)
|
|
|
-
|
|
Long-term
debt
|
|
$
|
10,486,250
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE
OF MATURITIES NOTES PAYABLE - RELATED PARTIES
Maturities of notes payable – related parties for the next two years as of September 30 are as follows:
|
|
2022
|
|
|
|
|
|
$
|
500,000
|
|
2023
|
|
|
|
|
|
|
10,486,250
|
|
|
|
|
|
|
|
$
|
10,986,250
|
|
Interest
expense for the nine months ended September 30, 2021 and 2020 was $172,962 and $0, respectively. Accrued interest at September 30, 2021
was $172,962.
NOTE
10: CONVERTIBLE PROMISSORY NOTES
The
Company entered into convertible promissory notes as follows as of September 30, 2021 and December 31, 2020:
SCHEDULE
OF CONVERTIBLE PROMISSORY NOTES
|
|
September
30, 2021
|
|
|
December
31, 2020
|
|
Convertible
note, at 8% interest, maturing December 23, 2021 convertible into common shares at $0.15 per share
|
|
$
|
112,500
|
|
|
$
|
112,500
|
|
|
|
|
|
|
|
|
|
|
Convertible
note, at 8% interest, maturing December 23, 2021 convertible into common shares at $0.15 per share
|
|
|
112,500
|
|
|
|
112,500
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 10% interest, maturing July 14, 2022 convertible into common shares at $3.15 per share ($300,000 original issue discount)
|
|
|
3,300,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)
|
|
|
382,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($8,250 original issue discount)
|
|
|
420,750
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing March 17, 2023 convertible into common shares at $1.00 per share ($20,000 original issue discount)
|
|
|
1,020,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing March 19, 2023 convertible into common shares at $1,00 per share ($9,750 original issue discount)
|
|
|
497,250
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($1,500 original issue discount)
|
|
|
76,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($3,000 original issue discount)
|
|
|
153,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)
|
|
|
382,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount)
|
|
|
382,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Convertible
note at 8% interest, maturing June 30, 2023 convertible into common shares at $0.90 per share ($3,000 original issue discount)
|
|
|
153,000
|
|
|
|
-
|
|
Long
term debt, gross
|
|
|
6,993,000
|
|
|
|
225,000
|
|
Less:
Discounts
|
|
|
(1,819,477
|
)
|
|
|
(83,897
|
)
|
Total
|
|
$
|
5,173,523
|
|
|
$
|
141,103
|
|
On
April 14, 2021 we received bridge financing in the form of a loan in the principal amount of $3,300,000 from Brighton Capital Partners,
LLC (“Brighton Capital” or “BCP”) for which we issued them a convertible promissory note due 15 months after
April 14, 2021 (July 14, 2022). The note bears interest at 10% per annum and is convertible at Brighton Capital’s election at a
fixed price of $3.15 per share.
Under
the terms of the note, Brighton Capital has a right of redemption commencing on the earlier of an effective date of a Registration Statement
and the 12-month anniversary of the note, to cause us to redeem all or any portion of the note in cash or shares of our common stock,
at the Company’s election.
Any
redemption with shares of our common stock shall be at the “market price” which is defined as 80% of our lowest closing trade
price for the 10 consecutive trading days prior to the date on which the market price is measured. The note serves as a bridge loan to
a $50,000,000 Equity Financing Agreement. The Company recognized a beneficial conversion feature on this note in the amount of $3,300,000.
Under
the terms of the Equity Financing Agreement, Brighton Capital agreed to purchase up to $50,000,000 of our common stock during a 12-month
period commencing upon (i) a registration statement filed with the Securities and Exchange Commission registering the shares underlying
the EPA has been declared effective; (ii) the above $3,300,000 bridge note issued by us to Brighton Capital having been repaid in full
and (iii) we shall have up-listed to the OTCQB or OTCQX. We have the right, but not the obligation, to sell our shares of common stock
to Brighton Capital. If we elect to cause Brighton Capital to purchase our shares of common stock under a put option, the put option
price shall be equal to 80% of the lowest trading price in the ten-trading day period immediately prior to the delivery of the Put Notice.
Unless
we and Brighton Capital agree to a greater amount, each Put Notice shall not exceed the lesser of (a) $3,500,000; and (b) 100% of the
average daily trading dollar volume of the previous five days provided that the number of shares sold to Brighton Capital shall not cause
the aggregate number of shares of our common stock beneficially owned by Brighton Capital and its affiliates to exceed 4.99% of the outstanding
shares of our common stock. Each Put Notice shall be conditional upon the continued effectiveness of a registration statement to allow
Brighton Capital to freely sell our shares of common stock that it will hold. The Company was required to file a registration statement
within 60 days of the execution of a Rights Agreement entered into on April 14, 2021. The Company was granted a waiver of that requirement
so long as the registration statement is filed by August 1, 2021, which it was.
The
Company has agreed to pay Brighton Capital a commitment fee equal to 1% of the commitment amount which will be paid in shares of our
common stock that will piggyback on a registration statement.
On
October 26, 2021, the Company and BCP agreed to terminate the Equity Financing Agreement.
On
May 13, 2021, the Company issued a convertible promissory note to investors for $382,500 with an original issue discount of $7,500, for
a term of twenty-two months maturing March 13, 2023. In addition, the Company issued warrants to the same investors to purchase up to
750,000 warrant shares with the convertible note.
On
May 13, 2021, the Company issued a convertible promissory note to an investor for $420,750 with an original issue discount of $8,250,
for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 825,000 warrant shares with the convertible note.
On
May 17, 2021, the Company issued a convertible promissory note to an investor for $1,020,000 with an original issue discount of $20,000,
for a term of twenty-two months maturing March 17, 2023.
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $497,250 with an original issue discount of $9,750,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 975,000 warrant shares with the convertible note.
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $76,500 with an original issue discount of $1,500,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 150,000 warrant shares with the convertible note.
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 300,000 warrant shares with the convertible note.
On
June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500,
for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 750,000 warrant shares with the convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible
note that is being amortized over the life of the convertible note.
On
June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500,
for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 750,000 warrant shares with the convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible
note that is being amortized over the life of the convertible note.
On
August 30, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000,
for a term of twenty-two months maturing June 30, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 375,000 warrant shares with the convertible note.
Maturities
of convertible promissory notes for the next two years as of September 30 are as follows (with discount):
SCHEDULE
OF MATURITIES OF CONVERTIBLE PROMISSORY NOTES
|
|
|
|
|
|
2022
|
|
|
$
|
3,311,707
|
|
2023
|
|
|
|
1,861,816
|
|
Total
|
|
|
$
|
5,173,523
|
|
Interest
expense for the nine months ended September 30, 2021 and 2020 was $259,953 and $0, respectively. Amortization of debt discount, original
issue discount and BCF discount was $489,848 and $0 for the nine months ended September 30, 2021 and 2020, respectively. Accrued interest
at September 30, 2021 was $260,348.
NOTE
11: CONVERTIBLE PROMISSORY NOTES – RELATED PARTIES
The
Company entered into convertible promissory notes as follows as of September 30, 2021 and December 31, 2020:
SCHEDULE
OF CONVERTIBLE PROMISSORY NOTES RELATED PARTIES
|
|
September
30, 2021
|
|
|
December
31,
2020
|
|
Convertible
note at 5% interest, maturing December 31, 2022 convertible into common shares at $1.20 per share (two notes – one for $6,525,000
and one for $975,000) for the acquisition of Monster Creative, LLC (see Note 17)
|
|
$
|
7,500,000
|
|
|
$
|
-
|
|
Long
term debt, gross
|
|
|
7,500,000
|
|
|
|
-
|
|
Less:
Current portion
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
7,500,000
|
|
|
$
|
-
|
|
Maturities
of convertible promissory notes – related parties for the next two years as of September 30 are as follows:
SCHEDULE
OF MATURITIES OF CONVERTIBLE PROMISSORY NOTES RELATED PARTIES
|
|
|
|
|
|
2022
|
|
|
$
|
-
|
|
2023
|
|
|
|
7,500,000
|
|
Total
|
|
|
$
|
7,500,000
|
|
On
June 30, 2021, the Company acquired Monster Creative, LLC. The Monster Purchase Price included: (a) a convertible note to Phantom Power,
LLC in the amount of $6,525,000 that bears interest at 5% per annum, and matures December 31, 2022, convertible into the Company’s
common stock at $1.20 per share; and (b) a convertible note to Kevin Childress in the amount of $975,000 that bears interest at 5% per
annum, and matures December 31, 2022, convertible into the Company’s common stock at $1.20 per share.
Interest
expense for the nine months ended September 30, 2021 and 2020 was $94,521 and $0, respectively, and accrued interest as of September
30, 2021 was $94,521.
NOTE
12: STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
The
Company has 10,000,000 shares of Preferred Stock authorized, designated as follows: 7,000,000 shares of Series A Preferred Stock authorized,
900,000 shares of Series B Preferred Stock authorized, and 150,000 shares of Series C Preferred Stock authorized. All shares of preferred
stock have a par value of $0.00001.
Series
A Preferred Stock
Dividends.
Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
There are no conversion rights.
Redemption.
Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the
Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
A Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series A Preferred Stock in cash at a price per share of Series A Preferred Stock equal to 100% of
the liquidation value.
Voting
Rights. Holders of Series A Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of one thousand (1,000) votes for every share of Series A Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value
of the Series A Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the
assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series
A Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full.
The
7,000,000 shares were issued to a former officer of the Company and assigned to the new CEO at the time of the reverse merger of HUMBL.
Series
B Preferred Stock
Prior
to the amendment of the Certificate of Incorporation on October 29, 2021, the criteria established for the Series B Preferred Stock was
as follows:
Dividends.
Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at
the office of the Company or any transfer agent for such stock, into ten thousand (10,000) fully paid and nonassessable shares of common
stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.
Redemption.
Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the
Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
B Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series B Preferred Stock in cash at a price per share of Series B Preferred Stock equal to 100% of
the liquidation value.
Voting
Rights. Holders of Series B Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of ten thousand (10,000) votes for every share of Series B Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series B Preferred
Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value
of the Series B Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the
assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series
B Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full.
HUMBL
exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares
were issued to the respective members of HUMBL following the approval by FINRA of the one-for-four reverse stock split of the common
shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase in the authorized
common shares and reverse stock split occurred on February 26, 2021. These shares that were issued in the reverse merger had a value
of $39,967. These shares have a lock-up provision that prevents the holders to convert into common stock for a period of one-year from
the date of the merger of December 3, 2020, with the exception of those held by the CEO who has a two-year lock up provision. In addition,
officers and directors that received these shares are subject to strict selling limitations, where the number of shares sold within the
preceding three months cannot exceed the greater of: (a) 1% of the total outstanding common shares; and (b) the average weekly reported
trading volume for the previous four weeks.
On
February 26, 2021, the Company issued 493 shares of Series B Preferred Stock for services rendered that were cancelled. On April 15,
2021, the Company revised their issuances and issued with an effective date of March 31, 2021, 2,272 Series B Preferred shares for services
rendered. Of the 2,272 shares issued, 528 are vested immediately, 1,219 are vested over one year, and 525 are vested over two years.
The vesting period commenced January 1, 2021. All of the Series B Preferred Shares issued have one-year lock up provisions to convert
into common stock from the date of the merger of December 3, 2020.
Between
May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These
shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two
years.
On
July 6, 2021, the CEO of the Company cancelled 9,350 shares of Series B Preferred Stock (93,500,000 if converted into common stock) for
no consideration.
As
of September 30, 2021 and December 31, 2020, the Company has 552,913 and 0 shares of Series B Preferred Stock issued and outstanding,
respectively.
On
October 29, 2021, the Company by Board consent approved an amendment to their Certificate of Amendment for the Series B Preferred Stock
to (a) reduce the number of authorized shares of Series B Preferred stock to 570,000 and (b) for Series B Preferred shareholders holding
greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders
shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred
stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from
February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred
shares held by them. This action was approved by Series B Shareholder consent.
Series
C Preferred Stock
Dividends.
Shares of Series C Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
Each share of Series C Preferred Stock shall be convertible at the option of the holder thereof at the office of the Company or any transfer
agent for such stock, into five thousand (5,000) fully paid and nonassessable shares of common stock subject to adjustment for any stock
split or distribution of securities or subdivision of the outstanding shares of common stock.
Redemption.
Subject to certain conditions set forth in the Series C Certificate of Designation, in the event of a Change of Control (defined in the
Series C Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
C Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series C Preferred Stock in cash at a price per share of Series C Preferred Stock equal to 100% of
the liquidation value.
Voting
Rights. Holders of Series C Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of five thousand (5,000) votes for every share of Series C Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series C Preferred
Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value
of the Series C Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the
assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series
C Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full.
As
of September 30, 2021 and December 31, 2020, the Company has 0 shares of Series C Preferred Stock issued and outstanding, respectively.
On
October 29, 2021, the Series C Preferred Stock was withdrawn.
Common
Stock
The
Company has 7,450,000,000 shares of common stock, par value $0.00001, authorized. The Company has 919,911,833 and 974,177,443 shares
issued and outstanding as of September 30, 2021 and December 31, 2020, respectively. The Company on February 26, 2021 increased its authorized
shares from 5,000,000,000 to 7,450,000,000 shares.
In
December 2020 following the reverse merger, the Company cancelled 25,000,000 shares of common stock for no value received to assist in
completing the merger with HUMBL, and the raising of capital through the purchase of warrants and warrants granted in the convertible
notes.
In
March 2021 there was an adjustment for 41,156 shares of common stock from the reverse stock split on February 26, 2021.
On
April 26, 2021, the Company, issued 437,500 for the acquisition of the Chile country rights. The value of this transaction was $1,000,000
received in cash.
Between
May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These
shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two
years.
On
June 3, 2021, the Company issued 9,345,794 shares of common stock valued at $10,000,000 using the 10-day VWAP price as part of the consideration
for Tickeri. These shares were issued to the two principals of Tickeri.
Between
June 18 and June 30, 2021, the Company issued 5,212,500 shares of common stock to consultants and advisors for services. These shares
were valued at the market price of the Company’s common stock on the respective dates at a value of $6,296,750. These shares will
be expensed as stock-based compensation expense through June 30, 2022. For the nine months ended September 30, 2021, the Company expensed
$3,009,812, and $3,286,938 is yet to be expensed and is reflected as an offset to additional paid in capital as of September 30, 2021.
On
June 30, 2021, the Company issued 1,000,000 shares of common stock in settlement of a liability.
In
the three months ended September 30, 2021, the Company issued 9,322,440 shares of common stock to consultants and advisors for services.
These shares were valued at the market price of the Company’s common stock on the respective dates at a value of $8,603,271. These
shares will be expensed as stock-based compensation expense through June 30, 2025. For the nine months ended September 30, 2021, the
Company expensed $5,427,171, and $3,176,100 is yet to be expensed and is reflected as an offset to additional paid in capital as of September
30, 2021.
Stock
Incentive Plan
On
July 21, 2021, the Company established the HUMBL, Inc. 2021 Stock Incentive Plan (the “Plan”) for a total issuance not to
exceed 20,000,000 shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company
by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the
Company, and (ii) enabling the Company to attract, retain and reward the best-available persons.
The
Plan permits the granting of Stock Options (including incentive stock options qualifying under Code Section 422 and nonqualified stock
options), Stock Appreciation Rights, restricted or unrestricted Stock Awards, Restricted Stock Units, Performance Awards, other stock-based
awards, or any combination of the foregoing.
Warrants
On
December 4, 2020, the Company granted 250,000,000 warrants to two separate holders at a price of $400,000. These warrants have a term
of 2 years and are exercisable into shares of common stock at a price of $0.20 per share. In October 2021, 20,000,000 of these warrants
have been exercise for $4,000,000.
On
December 23, 2020, the Company granted 12,500,000 warrants which were part of a country rights option HUMBL granted. These warrants have
a term of 1 year and are exercisable into shares of common stock at a price of $1.00 per share.
On
December 23, 2020, the Company entered into two separate convertible note agreements that are convertible into shares of common stock
at $0.60 per share. The note holders were each granted 112,500 warrants under the convertible note agreements. These warrants have a
term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share.
On
May 13, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $1.00
per share. The note holders were granted 1,575,000 warrants under the convertible note agreements. These warrants have a term of 2 years
and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $540,815 was
recognized as a debt discount and is being amortized over the life of the convertible notes.
On
May 19, 2021, the Company entered into three separate convertible note agreements that are convertible into shares of common stock at
$1.00 per share. The note holders were granted 1,425,000 warrants under the convertible note agreements. These warrants have a term of
2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $464,127
was recognized as a debt discount and is being amortized over the life of the convertible notes.
On
May 21, 2021, the Company entered into a consulting agreement and granted 25,000,000 warrants under this agreement. The warrants have
a term of 5 years and expire May 21, 2026. The value of the warrants are $19,132,393 and are being expensed over the 5 year period.
On
June 21, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at
$1.00 per share. The note holders were granted 1,500,000 warrants under the convertible note agreements. These warrants have a term of
2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $548,344
was recognized as a debt discount and is being amortized over the life of the convertible notes.
On
August 30, 2021, the Company entered into a convertible note agreement that is convertible into shares of common stock at $0.90 per share.
The note holder was granted 375,000 warrants under the convertible note agreement. These warrants have a term of 2 years. The relative
fair value of the warrants of $102,486 was recognized as a debt discount and is being amortized over the life of the convertible notes.
The
following represents a summary of the warrants:
SCHEDULE
OF WARRANTS ACTIVITIES
|
|
Nine
Months Ended
September 30, 2021
|
|
|
Year
Ended
December 31, 2020
|
|
|
|
Number
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
|
|
|
Weighted
Average
Exercise Price
|
|
Beginning
balance
|
|
|
262,725,000
|
|
|
$
|
0.23875
|
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
29,875,000
|
|
|
|
0.77114
|
|
|
|
262,725,000
|
|
|
|
0.23875
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Ending
balance
|
|
|
292,600,000
|
|
|
$
|
0.30866
|
|
|
|
262,725,000
|
|
|
$
|
0.23875
|
|
Intrinsic
value of warrants
|
|
$
|
152,500,000
|
|
|
|
|
|
|
$
|
104,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Remaining Contractual Life (Years)
|
|
|
1.44
|
|
|
|
|
|
|
|
1.88
|
|
|
|
|
|
For
the nine months ended September 30, 2021 and 2020, the Company expensed $1,380,721 and $0, respectively for the warrants.
NOTE
13: RELATED-PARTY TRANSACTIONS
Since
May 13, 2019 when HUMBL was incorporated, they relied on entities that had common ownership to HUMBL for either assistance with payment
of bills or for services rendered to assist HUMBL in bringing their products to market. The Company has not relied on these entities
since early 2021 for this assistance. The amounts were largely for shared services that have ceased in 2021.
NOTE
14: COUNTRY RIGHTS OPTION
Tuigamala
Group Pty Ltd
On
December 23, 2020, the Company and Tuigamala Group Pty Ltd, an Australian corporation (“TGP”), entered into a Securities
Purchase Agreement whereby TGP agreed to purchase an option to purchase territory rights to 15 countries in the Oceania region (“Option”).
The purchase price for this Option was $5,600,000, payable in two payments. The initial payment was $600,000 and was paid on December
23, 2020. The second payment of $5,000,000 was due on or before March 31, 2021.
In
addition to receiving the Option, TGP was granted a warrant to purchase 12,500,000 shares of common stock of the Company at an exercise
price of $1.00 per share. The warrant expires one-year from the grant date, December 23, 2021. As the warrant and the Option were granted
for one price, the Company calculated the relative fair values of each instrument and recognized $556,757 of the $600,000 paid as the
value of the warrant, and the remaining $43,243 as the value of the Option, which is reflected as deferred revenue on the Consolidated
Balance Sheet as the criteria for revenue recognition under ASC 606 has not been satisfied to be recognized as revenue as of December
31, 2020. There was no guarantee that TGP would be able to make the second payment under the Option by the deadline of March 31, 2021.
On
February 26, 2021, the Company and TGP entered into a term sheet to revise the Option. The revised terms of the Option are that the Company
would form a subsidiary in the Oceania region. TGP would purchase a 35% ownership interest in the subsidiary and 3,750,000 shares of
common stock for an aggregate purchase price of $15,000,000. The subsidiary shares and common shares would be purchased as follows: (a)
by March 31, 2021, 1,250,000 shares will be issued for $5,000,000 and 33.33% of the subsidiary shares are to be sold to TGP; and (b)
by September 30, 2021 with reasonable extensions to be determined, 2,500,000 shares will be issued for $10,000,000 and the remaining
66.66% of the subsidiary shares are to be sold to TGP. As a result of the revised terms, the $600,000 paid on December 23, 2020, will
be used in its entirety to pay for the warrants described below, and the deferred revenue recognized will be reflected as additional
paid in capital on February 26, 2021.
The
Company and TGP were unable to come to agreement on new terms of this transaction and have as of April 14, 2021 have terminated negotiations.
TGP still owns the warrants received in December 2020 and continues to have the right to exercise them. The Company is not obligated
to return any of the $600,000 received on December 23, 2020.
These
warrants were assigned to Archumbl Pty Ltd. in May 2021.
Aurea
Group
On
March 1, 2021, the Company and Aurea Group (“Aurea”) entered into a term sheet for Country Rights in Chile. Under the term
sheet, the Company will form a subsidiary in Chile where Aurea will purchase a 35% ownership interest and 2,000,000 shares of common
stock to be issued for $7,500,000, as follows: (a) at the first closing date, 437,500 shares will be issued for $1,000,000; and (b) nine
months after closing, either (i) 1,562,500 shares for $6,500,000 or (ii) the number of shares as determined by taking $6,500,000 divided
by the closing price of the Company’s common stock on the date prior to the execution of a call option. The Company closed on this
transaction on March 15, 2021. The first closing date was March 30, 2021, however due to strict banking regulations in Chile, the $1,000,000
was received in two tranches of $500,000 each and the funds came in between April 5, 2021 and April 6, 2021, and the 437,500 shares were
issued on April 26, 2021.
NOTE
15: COMMITMENTS
On
March 1, 2021, the Company entered into a term sheet to acquire Tickeri, in a debt and stock transaction totaling $20,000,000. Tickeri
is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists throughout the United States, Latin
America and the Caribbean corridor. This transaction closed on June 3, 2021.
On
May 7, 2021, the Company entered into a binding term sheet to acquire Monster Creative, LLC, (“Monster”) an advertising agency
in the entertainment space. Monster will assist the Company in collaborating on creating multimedia NFTs and ticketing for clients in
the sports, music, entertainment, fashion, gaming and photography fields. The purchase price for this acquisition is anticipated to be
$8,000,000 in the form of convertible and non-convertible promissory notes. This transaction closed on June 30, 2021.
On
June 30, 2021, the Company settled with two former associates of HUMBL LLC for the cash payment of $200,000 ($100,000 each), promissory
notes of $500,000 ($250,000 each), and the issuance of 1,000,000 shares (500,000 each) of common stock with a value of $1,170,000 for
a total settlement of $1,870,000.
In
the nine months ended September 30, 2021, the Company entered into Employment Agreements with executive officers and key management.
The agreements provide for base annual base compensation, and a discretionary bonus. The CEO’s employment agreement provides for
an annual salary of $1 with a discretionary bonus.
On
July 29, 2021, the Company entered into a Development Services Agreement with Red Rock Development Group, LLC (“Red Rock”).
The Company intends to purchase and/or develop a portfolio of real estate assets and then potentially tokenize the interest in the portfolio.
The Company has engaged Red Rock to advise them with respect to that process. As part of the foregoing strategy, the Company purchased
a suite at the Hard Rock Hotel in San Diego, California.
The
Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company has
use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used.
The Company is obligated to issue 3,000,000 shares of common stock to Red Rock as payment for its services. As of September 30, 2021,
these shares have been issued.
NOTE
16: SEGMENT REPORTING
The
Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard
requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating
decisions. As of September 30, 2021 and for the nine and three months ended September 30, 2021, the Company operated in three segments.
The segments are HUMBL Marketplace, HUMBL Pay, and HUMBL Financial. For the nine and three months ended September 30, 2020, the Company
operated in one segment.
SCHEDULE OF SEGMENT REPORTING
Nine
Months Ended September 30, 2021
|
|
HUMBL
Pay
|
|
|
HUMBL
Marketplace
|
|
|
HUMBL
Financial
|
|
|
Total
|
|
Segmented
operating revenues
|
|
$
|
13,778
|
|
|
$
|
1,375,205
|
|
|
$
|
191,503
|
|
|
$
|
1,580,486
|
|
Cost
of revenues
|
|
|
-
|
|
|
|
604,217
|
|
|
|
-
|
|
|
|
604,217
|
|
Gross
profit
|
|
|
13,778
|
|
|
|
770,988
|
|
|
|
191,503
|
|
|
|
976,269
|
|
Total
operating expenses net of depreciation, amortization and impairment
|
|
|
9,535,290
|
|
|
|
6,572,498
|
|
|
|
3,365,076
|
|
|
|
19,472,864
|
|
Depreciation,
amortization and impairment
|
|
|
215
|
|
|
|
12,179,771
|
|
|
|
54
|
|
|
|
12,180,040
|
|
Other
(income) expense
|
|
|
2,157,672
|
|
|
|
1,247,041
|
|
|
|
863,069
|
|
|
|
4,267,782
|
|
Income
(loss) from operations
|
|
$
|
(11,679,399
|
)
|
|
$
|
(19,228,322
|
)
|
|
$
|
(4,036,696
|
)
|
|
$
|
(34,944,417
|
)
|
Three
Months Ended September 30, 2021
|
|
HUMBL
Pay
|
|
|
HUMBL
Marketplace
|
|
|
HUMBL
Financial
|
|
|
Total
|
|
Segmented
operating revenues
|
|
$
|
13,778
|
|
|
$
|
1,097,355
|
|
|
$
|
87,137
|
|
|
$
|
1,198,270
|
|
Cost
of revenues
|
|
|
-
|
|
|
|
460,352
|
|
|
|
-
|
|
|
|
460,352
|
|
Gross
profit
|
|
|
13,778
|
|
|
|
637,003
|
|
|
|
87,137
|
|
|
|
737,918
|
|
Total
operating expenses net of depreciation, amortization and impairment
|
|
|
5,894,648
|
|
|
|
4,304,910
|
|
|
|
2,131,578
|
|
|
|
12,330,136
|
|
Depreciation,
amortization and impairment
|
|
|
215
|
|
|
|
38,709
|
|
|
|
54
|
|
|
|
38,978
|
|
Other
(income) expense
|
|
|
363,976
|
|
|
|
170,293
|
|
|
|
145,591
|
|
|
|
679,860
|
|
Income
(loss) from operations
|
|
$
|
(6,245,061
|
)
|
|
$
|
(3,876,909
|
)
|
|
$
|
(2,190,086
|
)
|
|
$
|
(12,312,056
|
)
|
Segmented
assets as of September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
$
|
14,087
|
|
|
$
|
344,429
|
|
|
$
|
3,546
|
|
|
$
|
362,062
|
|
Intangible
assets – digital assets
|
|
$
|
-
|
|
|
$
|
16,259
|
|
|
$
|
-
|
|
|
$
|
16,259
|
|
Goodwill
|
|
$
|
-
|
|
|
$
|
16,593,706
|
|
|
$
|
-
|
|
|
$
|
16,593,706
|
|
Capital
expenditures
|
|
$
|
14,301
|
|
|
$
|
349,675
|
|
|
$
|
3,600
|
|
|
$
|
367,576
|
|
NOTE
17: ACQUISITIONS
Tickeri
On
June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri
became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists
throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of
which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value
equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending
with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez
and Javier Gonzalez, 4,672,897 shares of our common stock each. We also issued to each of Juan and Javier Gonzalez a secured promissory
note in the face amount of $5,000,000.
The
promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the
equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the
right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances
by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until the promissory notes are paid in full. We
agreed to register on Form S-1 within three months from the closing the shares issued to Juan and Javier Gonzalez and have the registration
statement declared effective within six months of the closing date. Following the closing, Juan Gonzalez and Javier Gonzalez, entered
into employment agreements having a term of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.
The
Company acquired the assets and liabilities noted below in in accordance with ASC 805. Based on the fair values at the effective date
of acquisition the purchase price was recorded as follows (subject to adjustment):
SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED
|
|
|
|
|
Cash
|
|
$
|
127,377
|
|
Accounts
receivables
|
|
|
23,587
|
|
Goodwill
|
|
|
20,086,664
|
|
Accounts
payable and accrued expenses
|
|
|
(87,071
|
)
|
Due
to seller
|
|
|
|
|
Notes payable - related parties
|
|
|
|
|
SBA
EIDL
|
|
|
(150,000
|
)
|
PPP
loan
|
|
|
(557
|
)
|
|
|
$
|
20,000,000
|
|
The
consideration paid for the acquisition of Tickeri was as follows:
SCHEDULE
OF CONSIDERATION PAID FOR ACQUISITION
|
|
|
|
|
Common
stock
|
|
$
|
10,000,000
|
|
Notes
payable
|
|
|
10,000,000
|
|
Total
consideration
|
|
$
|
20,000,000
|
|
The
Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total
acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair
values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market
data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based
on historical inputs and data as of June 3, 2021. The preliminary allocation of the purchase price is based on the best information available
and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible assets acquired;
(ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the valuation of accounts
payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
The
Company will have up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained
during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation
of assets and liabilities is necessary, the Company will adjust these figures.
The
goodwill is not expected to be deductible for tax purposes.
Monster
Creative, LLC
On
June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in
producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate
with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was
paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate
principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress
in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at
5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate
amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress
each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and
Kevin Childress was appointed as its President and Creative Director.
The
Company acquired the assets and liabilities noted below in in accordance with ASC 805. Based on the fair values at the effective date
of acquisition the purchase price was recorded as follows (subject to adjustment):
SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED
|
|
|
|
|
Cash
|
|
$
|
3,017
|
|
Accounts
receivables
|
|
|
379,012
|
|
Goodwill
|
|
|
8,648,104
|
|
Due
to seller
|
|
|
(379,012
|
)
|
Accounts
payable and accrued expenses
|
|
|
(98,754
|
)
|
Notes
payable – related parties
|
|
|
(486,250
|
)
|
PPP
loan
|
|
|
(66,117
|
)
|
|
|
$
|
8,000,000
|
|
The
consideration paid for the acquisition of Monster Creative, LLC was as follows:
SCHEDULE OF CONSIDERATION PAID FOR ACQUISITION
|
|
|
|
|
Convertible
notes payable
|
|
$
|
7,500,000
|
|
Non-convertible
notes payable
|
|
|
500,000
|
|
Total
consideration
|
|
$
|
8,000,000
|
|
The
Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total
acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair
values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market
data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based
on historical inputs and data as of June 30, 2021. The preliminary allocation of the purchase price is based on the best information
available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible
assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the
valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
The
Company will have up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained
during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation
of assets and liabilities is necessary, the Company will adjust these figures.
The
goodwill is not expected to be deductible for tax purposes.
The
following table shows the unaudited pro-forma results for the nine months ended September 30, 2021 and 2020, as if the acquisitions had
occurred on January 1, 2020. These unaudited pro forma results of operations are based on the historical financial statements and related
notes of Tickeri, Monster and the Company.
SCHEDULE
OF PRO FORMA INFORMATION
|
|
Nine
Months Ended
September 30,
2021
|
|
|
|
|
(Unaudited)
|
|
Revenues
|
|
$
|
2,179,071
|
|
Net
loss
|
|
$
|
(35,563,233
|
)
|
Net
loss per share
|
|
$
|
(0.04
|
)
|
|
|
Nine
Months Ended
September 30,
2020
|
|
|
|
|
(Unaudited)
|
|
Revenues
|
|
$
|
1,807,638
|
|
Net
loss
|
|
$
|
(164,976
|
)
|
Net
loss per share
|
|
$
|
N/A
|
|
NOTE
18: SUBSEQUENT EVENTS
The
following is a list of events that have occurred between October 1, 2021 and November 9, 2021:
In
October 2021, the Company granted 350,000 shares to consultants.
On
October 20, 2021, 20,000,000 warrants purchased by an investor were exercised for $4,000,000.
On
October 26, 2021, the Company and BCP agreed to terminate their Equity Finance Agreement.
On
October 29, 2021, the Company by Board consent approved an amendment to their Certificate of Amendment for the Series B Preferred Stock
to (a) reduce the number of authorized shares of Series B Preferred stock to 570,000 and (b) for Series B Preferred shareholders holding
greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders
shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred
stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from
February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred
shares held by them. This action was approved by Series B Shareholder consent.
Additionally,
on October 29, 2021, the Series C Preferred Stock was withdrawn.
TICKERI, INC.
BALANCE SHEETS
MARCH
31, 2021 (UNAUDITED) AND DECEMBER 31, 2020
The
accompanying notes are an integral part of the financial statements.
TICKERI, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND PERIOD JANUARY 2, 2020 (INCEPTION)
THROUGH MARCH 31, 2020
The
accompanying notes are an integral part of the financial statements.
TICKERI, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND PERIOD JANUARY 2, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020
The accompanying notes are an integral part of the financial statements.
TICKERI, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND PERIOD JANUARY 2, 2020 (INCEPTION)
THROUGH MARCH 31, 2020
The
accompanying notes are an integral part of the financial statements.
TICKERI,
INC.
NOTES
TO FINANCIAL STATEMENTS
MARCH
31, 2021 AND 2020
NOTE
1: NATURE OF OPERATIONS
Tickeri,
Inc. (the “Company” or “Tickeri”) is a leading ticketing, live events and box office SaaS platform featuring
Latin events and artists throughout the United States, Latin America, and the Caribbean corridor.
The
Company, a Delaware corporation was formed on January 2, 2020.
On
June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which
Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in
their common stock and $10,000,000 iss paid through two promissory notes. The shares had a deemed value equal to the volume weighted
average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading
day ending two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897
shares of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of
$5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are
secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez
have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims
or encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term
of 18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and
has not generated significant revenues as of yet as they are still in the very early stages of their business.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Impact
of COVID-19
The
recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health,
economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global
pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.
Our
ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on
the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, and liabilities to accrue. Actual results could differ from those estimates.
Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of March
31, 2021 and December 31, 2020, respectively.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Fixed
assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more
depending on circumstances.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
|
1.
|
Significant
underperformance relative to expected historical or projected future operating results;
|
|
|
|
|
2.
|
Significant
changes in the manner of use of the acquired assets or the strategy for the overall business; and
|
|
|
|
|
3.
|
Significant
negative industry or economic trends.
|
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
Subsequent
Events
Subsequent
events were evaluated through the date the financial statements were filed.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
Ticketing
Revenues
The
Company recognizes revenues from their ticketing services primarily from service fees and payment processing fees charged at the time
a ticket for an event is sold. We also derive revenues from providing certain creators with account management services and customer
support. Our customers are primarily event creators who use our platform to sell tickets to attendees. Revenue is recognized when control
of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for
those goods or services. We allocate the transaction price by estimating a standalone selling price for each performance obligation using
a cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account
management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of
the event.
We
evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control
of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk,
and have the latitude in establishing pricing and selecting suppliers, among other factors.
We
determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing
the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled.
Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and
process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service,
we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment
and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis
related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing
the transactions are included in cost of net revenues in the consolidated statements of operations.
Revenue
is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated
uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility
of that creator.
If
a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is
also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing
and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the
creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.
Accounts
Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of March 31, 2021 and December 31, 2020, there was no allowance necessary.
Income
Taxes
Income
taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with
the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for operating loss and tax credit carryforwards. 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 that includes the enactment
date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Uncertain
Tax Positions
The
Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain
income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
The
Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income
tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were
filed.
Vacation
and Paid-Time-Off
The
Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable
to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.
Share-Based
Compensation
The
Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation
(Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested,
based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values.
The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche
of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.
The
Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld
for tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable,
prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair
value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The
Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level
1 inputs: Quoted prices for identical instruments in active markets.
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level
3 inputs: Instruments with primarily unobservable value drivers.
Related-Party
Transactions
Parties
are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management,
members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company
may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material
related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.
NOTE
3: REVENUE
All
revenue for the three months ended March 31, 2021 and period January 2, 2020 through March 31, 2020 was for ticketing services.
There
were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value
of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections
of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE
4: NOTES PAYABLE
The
Company entered into notes payable as follows as of March 31, 2021 and December 31, 2020:
SCHEDULE
OF NOTES PAYABLE
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
PPP SBA loan - Tickeri
|
|
$
|
42,123
|
|
|
$
|
42,123
|
|
EIDL loan - Tickeri
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
192,123
|
|
|
|
192,123
|
|
Less: Current portion
|
|
|
(192,123
|
)
|
|
|
(192,123
|
)
|
Long-term debt
|
|
$
|
-
|
|
|
$
|
-
|
|
There
was no interest recorded on the loans as they did not start commencing interest.
NOTE
5: STOCKHOLDERS’ EQUITY (DEFICIT)
The
Company has 10,000,000 shares of common stock, par value $0.00001, authorized. The Company has 8,500,000 shares issued and outstanding
as of December 31, 2020. The shares of stock were issued at a value of $468. In addition, in February 2020, the shareholders contributed
$25,000 for working capital purposes.
NOTE
6: SUBSEQUENT EVENTS
On
June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which
Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in
their common stock and $10,000,000 is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average
price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending
two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares
of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000.
The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by
the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have
the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or
encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of
18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.
Report
of Independent Registered Public Accounting Firm
To
the shareholders and the board of directors of Tickeri, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying balance sheet of Tickeri, Inc. (the “Company”) as of December 31, 2020, the related statement
of operations, stockholders’ equity (deficit), and cash flows for the period January 2, 2020 (Inception) through December 31, 2020
and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations
and its cash flows for the period January 2, 2020 (Inception) through December 31, 2020, in conformity with accounting principles generally
accepted in the United States.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue
as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/S/
BF Borgers CPA PC
BF
Borgers CPA PC
We
have served as the Company’s auditor since 2021
Lakewood,
CO
November
10, 2021
TICKERI,
INC.
BALANCE
SHEET
DECEMBER
31, 2020
The
accompanying notes are an integral part of the financial statements.
TICKERI, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 2, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020
The
accompanying notes are an integral part of the financial statements.
TICKERI, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 2, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020
The
accompanying notes are an integral part of the financial statements.
TICKERI, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD JANUARY 2, 2020 (INCEPITON) THROUGH DECEMBER 31, 2020
The
accompanying notes are an integral part of the financial statements.
TICKERI,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020
NOTE
1: NATURE OF OPERATIONS
Tickeri,
Inc. (the “Company” or “Tickeri”) is a leading ticketing, live events and box office SaaS platform featuring
Latin events and artists throughout the United States, Latin America, and the Caribbean corridor.
The
Company, a Delaware corporation was formed on January 2, 2020.
On
June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which
Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in
their common stock and $10,000,000 is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average
price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending
two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares
of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000.
The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by
the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have
the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or
encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of
18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and
has not generated significant revenues as of yet as they are still in the very early stages of their business.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Impact
of COVID-19
The
recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health,
economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global
pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.
Our
ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on
the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, and liabilities to accrue. Actual results could differ from those estimates.
Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of December
31, 2020.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Fixed
assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more
depending on circumstances.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
1.
Significant underperformance relative to expected historical or projected future operating results;
2.
Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
Subsequent
Events
Subsequent
events were evaluated through the date the financial statements were filed.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
Ticketing
Revenues
The
Company recognizes revenues from their ticketing services primarily from service fees and payment processing fees charged at the time
a ticket for an event is sold. We also derive revenues from providing certain creators with account management services and customer
support. Our customers are primarily event creators who use our platform to sell tickets to attendees. Revenue is recognized when control
of the promised goods or services is transferred to customers, in an amount that reflects the consideration we receive in exchange for
those goods or services. We allocate the transaction price by estimating a standalone selling price for each performance obligation using
a cost plus a margin approach. For service fees and payment processing fees, revenue is recognized when the ticket is sold. For account
management services and customer support, revenue is recognized over the period from the date of the sale of the ticket to the date of
the event.
We
evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control
of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk,
and have the latitude in establishing pricing and selecting suppliers, among other factors.
We
determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing
the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled.
Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and
process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service,
we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment
and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis
related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing
the transactions are included in cost of net revenues in the consolidated statements of operations.
Revenue
is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated
uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility
of that creator.
If
a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is
also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing
and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the
creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.
Accounts
Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of December 31, 2020, there was no allowance necessary.
Income
Taxes
Income
taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with
the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for operating loss and tax credit carryforwards. 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 that includes the enactment
date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Uncertain
Tax Positions
The
Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain
income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
The
Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income
tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were
filed.
Vacation
and Paid-Time-Off
The
Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable
to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.
Share-Based
Compensation
The
Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation
(Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested,
based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values.
The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche
of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.
The
Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld
for tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable,
prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair
value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The
Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level
1 inputs: Quoted prices for identical instruments in active markets.
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level
3 inputs: Instruments with primarily unobservable value drivers.
Related-Party
Transactions
Parties
are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management,
members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company
may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material
related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.
NOTE
3: REVENUE
All
revenue for the period January 2, 2020 through December 31, 2020 was for ticketing services.
There
were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value
of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections
of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE
4: NOTES PAYABLE
The
Company entered into notes payable as follows as of December 31, 2020:
SCHEDULE OF NOTES PAYABLE
|
|
December
31, 2020
|
|
PPP SBA loan - Tickeri
|
|
$
|
42,123
|
|
EIDL loan - Tickeri
|
|
|
150,000
|
|
|
|
|
|
|
Total
|
|
|
192,123
|
|
Less: Current portion
|
|
|
(192,123
|
)
|
Long-term debt
|
|
$
|
-
|
|
There
was no interest recorded on the loans as they did not start commencing interest.
NOTE
5: STOCKHOLDERS’ EQUITY (DEFICIT)
The
Company has 10,000,000 shares of common stock, par value $0.00001, authorized. The Company has 8,500,000 shares issued and outstanding
as of December 31, 2020. The shares of stock were issued at a value of $468. In addition, in February 2020, the shareholders contributed
$25,000 for working capital purposes.
NOTE
6: SUBSEQUENT EVENTS
On
June 3, 2021 HUMBL, Inc. (“HUMBL”) acquired the Company in a debt and stock transaction totaling $20,000,000 following which
Tickeri became a subsidiary of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in
their common stock and $10,000,000 is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average
price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending
two trading days prior to the closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares
of our common stock each. HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000.
The promissory notes are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by
the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have
the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or
encumbrances by HUMBL. Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of
18 months, appointing them CEO of Tickeri and CTO of HUMBL, respectively.
MONSTER
CREATIVE, LLC
BALANCE
SHEETS
JUNE
30, 2021 (UNAUDITED) AND DECEMBER 31, 2020
The
accompanying notes are an integral part of these financial statements.
MONSTER
CREATIVE, LLC
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
The
accompanying notes are an integral part of these financial statements.
MONSTER
CREATIVE, LLC
STATEMENT
OF CHANGES IN MEMBERS’ EQUITY (DEFICIT) (UNAUDITED)
FOR
THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
The
accompanying notes are an integral part of these financial statements.
MONSTER
CREATIVE, LLC
STATEMENTS
OF CASH FLOWS (UNAUDITED)
FOR
THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020
The
accompanying notes are an integral part of these financial statements.
MONSTER
CREATIVE, LLC.
NOTES
TO FINANCIAL STATEMENTS
JUNE
30, 2021 AND 2020
NOTE
1: NATURE OF OPERATIONS
Monster
Creative, LLC. (the “Company” or “Monster”) is a Hollywood production studio that specializes in producing movie
trailers and other related content.
The
Company, a California limited liability corporation was formed on September 18, 2018.
On
June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will
collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in
Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress
in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and
Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share
of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and
Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022.
Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed
as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and
has not generated significant revenues as of yet as they are still in the very early stages of their business.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Impact
of COVID-19
The
recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health,
economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global
pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.
Our
ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on
the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, and liabilities to accrue. Actual results could differ from those estimates.
Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of June
30, 2021 and December 31, 2020, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank.
The Company does not consider this risk to be material.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Fixed
assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more
depending on circumstances.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
1.
Significant underperformance relative to expected historical or projected future operating results;
2.
Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
Subsequent
Events
Subsequent
events were evaluated through the date the financial statements were filed.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
Accounts
Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of June 30, 2021 and December 31, 2020, there was no allowance necessary.
Income
Taxes
The
Company is taxed as a partnership for Federal income tax purposes. Therefore, the Company will record no provision or liability for Federal
income tax. Partners are individually taxed on their proportionate share of the Company’s earnings.
Vacation
and Paid-Time-Off
The
Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable
to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.
Share-Based
Compensation
The
Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation
(Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested,
based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values.
The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche
of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.
The
Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld
for tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable,
prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair
value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The
Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level
1 inputs: Quoted prices for identical instruments in active markets.
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level
3 inputs: Instruments with primarily unobservable value drivers.
Related-Party
Transactions
Parties
are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management,
members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company
may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material
related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.
NOTE
3: REVENUE
All
of the Company’s revenue for the years ended December 31, 2020 and 2019 were generated from video content production.
There
were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value
of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections
of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE
4: NOTES PAYABLE
The
Company entered into notes payable as follows as of June 30, 2021 and December 31, 2020:
SCHEDULE
OF NOTES PAYABLE
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
PPP SBA loan
|
|
$
|
66,117
|
|
|
$
|
66,117
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
66,117
|
|
|
|
66,117
|
|
Less: Current portion
|
|
|
(66,117
|
)
|
|
|
(66,117
|
)
|
Long-term debt
|
|
$
|
-
|
|
|
$
|
-
|
|
There
was no interest expense for the six months ended June 30, 2021 and 2020 related to this loan.
NOTE
5: NOTES PAYABLE – RELATED PARTIES
The
Company entered into notes payable as follows as of June 30, 2021 and December 31, 2020:
SCHEDULE
OF NOTES PAYABLE RELATED PARTIES
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
Officer
|
|
$
|
-
|
|
|
$
|
399,512
|
|
Childress
|
|
|
215,000
|
|
|
|
380,500
|
|
Brandt
|
|
|
271,250
|
|
|
|
199,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
486,250
|
|
|
|
979,012
|
|
Less: Current portion
|
|
|
(486,250
|
)
|
|
|
(979,012
|
)
|
Long-term debt
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
expense for the six months ended June 30, 2021 and 2020 was $18,707 and $29,150 respectively. Accrued interest at June 30, 2021 was $0.
NOTE
6: RELATED-PARTY TRANSACTIONS
An
officer of the Company from time to time has funded operations at various points in unsecured advances. These advances as well as advances
with relatives of the officers accrue interest at 5% interest per annum. All interest is paid through the six months ended June 30, 2021
and 2020. There are no other related party transactions in these years.
NOTE
7: ACQUISITION
ACQUISITIONS
On
June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will
collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in
Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress
in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and
Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share
of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and
Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022.
Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed
as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.
Report
of Independent Registered Public Accounting Firm
To
the shareholders and the board of directors of Monster Creative, LLC
Opinion
on the Financial Statements
We
have audited the accompanying balance sheets of Monster Creative, LLC as of December 31, 2020 and 2019, the related statements of operations,
stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company
as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States.
Substantial
Doubt about the Company’s Ability to Continue as a Going Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company’s minimal net income raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides
a reasonable basis for our opinion.
/S/
BF Borgers CPA PC
BF
Borgers CPA PC
We
have served as the Company’s auditor since 2021
Lakewood,
CO
November
10, 2021
MONSTER CREATIVE, LLC
BALANCE SHEETS
DECEMBER
31, 2020 AND 2019
The
accompanying notes are an integral part of these financial statements.
MONSTER CREATIVE, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
The
accompanying notes are an integral part of these financial statements.
MONSTER CREATIVE, LLC
STATEMENT OF CHANGES IN MEMBERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
The accompanying notes are an integral part of these financial statements.
MONSTER CREATIVE, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
The
accompanying notes are an integral part of these financial statements.
MONSTER
CREATIVE, LLC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2020 AND 2019
NOTE
1: NATURE OF OPERATIONS
Monster
Creative, LLC. (the “Company” or “Monster”) is a Hollywood production studio that specializes in producing movie
trailers and other related content.
The
Company, a California limited liability corporation was formed on September 18, 2018.
On
June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will
collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in
Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress
in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and
Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share
of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and
Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022.
Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed
as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has suffered losses and
has not generated significant revenues as of yet as they are still in the very early stages of their business.
The
financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Impact
of COVID-19
The
recent unprecedented events related to COVID-19, the disease caused by the novel coronavirus (SARS-CoV-2), have had significant health,
economic, and market impacts and may have short-term and long-term adverse effects on our business that we cannot predict as the global
pandemic continues to evolve. The extent and effectiveness of responses by governments and other organizations also cannot be predicted.
Our
ability to maintain existing operations has been affected during the COVID-19 pandemic. Going forward any possible adverse effects on
the business are uncertain given any possible limitations on how we conduct business with our customers and vendors.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, and liabilities to accrue. Actual results could differ from those estimates.
Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of December
31, 2020 and 2019, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank. The Company
does not consider this risk to be material.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill
Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Fixed
assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more
depending on circumstances.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
|
1.
|
Significant
underperformance relative to expected historical or projected future operating results;
|
|
|
|
|
2.
|
Significant
changes in the manner of use of the acquired assets or the strategy for the overall business; and
|
|
|
|
|
3.
|
Significant
negative industry or economic trends.
|
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
Subsequent
Events
Subsequent
events were evaluated through the date the financial statements were filed.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
Accounts
Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of December 31, 2020 and 2019, there was no allowance necessary.
Income
Taxes
The
Company is taxed as a partnership for Federal income tax purposes. Therefore, the Company will record no provision or liability for Federal
income tax. Partners are individually taxed on their proportionate share of the Company’s earnings.
Vacation
and Paid-Time-Off
The
Company follows ASC 710-10 Compensation – General. The Company records liabilities and expense when obligations are attributable
to services already rendered, will be paid even if an employee is terminated, payment is probable, and the amount can be estimated.
Share-Based
Compensation
The
Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation
(Topic 718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested,
based on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values.
The Company policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche
of each award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made.
The
Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld
for tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable,
prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair
value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The
Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level
1 inputs: Quoted prices for identical instruments in active markets.
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level
3 inputs: Instruments with primarily unobservable value drivers.
Related-Party
Transactions
Parties
are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal stockholders of the Company, its management,
members of the immediate families of principal stockholders of the Company and its management and other parties with which the Company
may deal where one-party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all material
related-party transactions. All transactions shall be recorded at fair value of the goods or services exchanged.
NOTE
3: REVENUE
All
of the Company’s revenue for the years ended December 31, 2020 and 2019 were generated from video content production.
There
were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value
of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections
of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE
4: NOTES PAYABLE
The
Company entered into notes payable as follows as of December 31, 2020 and 2019:
SCHEDULE OF NOTES PAYABLE
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
PPP SBA loan
|
|
$
|
66,117
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
66,117
|
|
|
|
-
|
|
Less: Current portion
|
|
|
(66,117
|
)
|
|
|
-
|
|
Long-term debt
|
|
$
|
-
|
|
|
$
|
-
|
|
There
was no interest expense for the years ended December 31, 2020 and 2019 related to this loan.
NOTE
5: NOTES PAYABLE – RELATED PARTIES
The
Company entered into notes payable as follows as of December 31, 2020 and 2019:
SCHEDULE OF NOTES PAYABLE RELATED PARTIES
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
Officer
|
|
$
|
399,512
|
|
|
$
|
860,513
|
|
Childress
|
|
|
380,500
|
|
|
|
373,000
|
|
Brandt
|
|
|
199,000
|
|
|
|
193,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
979,012
|
|
|
|
1,426,513
|
|
Less: Current portion
|
|
|
(979,012
|
)
|
|
|
(1,426,513
|
)
|
Long-term debt
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
expense for the years ended December 31, 2020 and 2019 was $49,977 and $60,128, respectively. Accrued interest at December 31, 2020 was
$0.
NOTE
6: RELATED-PARTY TRANSACTIONS
An
officer of the Company from time to time has funded operations at various points in unsecured advances. These advances as well as advances
with relatives of the officers accrue interest at 5% interest per annum. All interest is paid through the years ended December 31, 2020
and 2019. There are no other related party transactions in these years.
NOTE
7: SUBSEQUENT EVENTS
On
June 30, 2021, HUMBL, Inc. (“HUMBL”) acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will
collaborate with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in
Monster was paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress
in the aggregate principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and
Kevin Childress in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share
of HUMBL, bear interest at 5% per annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and
Kevin Childress in the aggregate amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022.
Doug Brandt and Kevin Childress each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed
as the CEO of Monster and Kevin Childress was appointed as its President and Creative Director.
HUMBL,
INC.
PRO
FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The
following unaudited pro forma consolidated financial statements give effect to the acquisition of Tickeri, Inc. (“Tickeri”)
on June 3, 2021 and Monster Creative, LLC (“Monster”) on June 30, 2021 by HUMBL, Inc. (“HUMBL” and the “Company”)
and are based on estimates and assumptions set forth herein and in the notes to such pro forma statements.
On
June 3, 2021 HUMBL acquired the Company in a debt and stock transaction totaling $20,000,000 following which Tickeri became a subsidiary
of HUMBL The purchase price for the stock purchase was $20,000,000 of which HUMBL must pay $10,000,000 in their common stock and $10,000,000
is paid through two promissory notes. The shares had a deemed value equal to the volume weighted average price per share of HUMBL common
stock on the OTC Markets for the ten consecutive trading days ending with the complete trading day ending two trading days prior to the
closing. HUMBL issued the two shareholders of Tickeri, Juan Gonzalez and Javier Gonzalez, 4,672,897 shares of our common stock each.
HUMBL also issued to each of Juan and Javier Gonzalez a secured promissory note in the face amount of $5,000,000. The promissory notes
are due and payable on or before December 31, 2022, bear interest at the rate of 5% per annum and are secured by the equity interests
of Tickeri. In the event of an uncured default by HUMBL under the promissory note, Juan and Javier Gonzalez have the right to recover
the ownership of Tickeri and re-commence the business and operations of Tickeri free and clear of any claims or encumbrances by HUMBL.
Following the closing, Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them
CEO of Tickeri and CTO of HUMBL, respectively.
On
June 30, 2021, HUMBL acquired Monster. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate with HUMBL in
the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was paid through
the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate principal
amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress in the aggregate
principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share of HUMBL, bear interest at 5% per
annum and are due in 18 months from issuance. HUMBL issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate
amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress
each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and
Kevin Childress was appointed as its President and Creative Director.
These
transactions are being accounted for as an acquisition. No cash was paid relating to the acquisitions.
The
following unaudited pro forma consolidated statements of operations for the year ended December 31, 2020 of the Company, Tickeri and
Monster gives effect to the above as if the transactions had occurred at the beginning of the period. The unaudited pro forma consolidated
statements of operations for the three months ended March 31, 2021 of the Company, Tickeri and Monster gives effect to the above as if
the transactions had occurred at the beginning of the period. The unaudited pro forma consolidated balance sheet at March 31, 2021 assumes
the effects of the above as if this transaction had occurred as of January 1, 2020.
HUMBL,
INC.
PRO
FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The
unaudited pro forma consolidated financial statements are based upon, and should be read in conjunctions with the Company, Tickeri and
Monster’s audited consolidated financial statements as of and for the year ended December 31, 2020 and the unaudited consolidated
financial statements of the Company as of June 30, 2021, Tickeri as of March 31, 2021 and Monster as of June 30, 2021.
The
unaudited pro forma consolidated financial statements and notes thereto contained forward-looking statements that involve risks and uncertainties.
Therefore, our actual results may vary materially from those discussed herein. The unaudited pro forma consolidated financial statements
do not purport to be indicative of the results that would have been reported had such events actually occurred on the dates specified,
nor is it indicative our future results. We refer you to the above referenced financial statements for additional disclosure regarding
these acquisitions.
HUMBL,
INC.
NOTES
TO UNAUDITED PRO FORMA
CONSOLIDATED
FINANCIAL STATEMENTS
FOR
THE YEAR ENDED DECEMBER 31, 2020
FOR
THE THREE MONTHS ENDED MARCH 31, 2021
NOTE
A – ACCOUNTING TREATMENT APPLIED AS A RESULT OF THIS TRANSACTION
The
acquisition of Tickeri and Monster are being accounted for as a business combination, whereby HUMBL is the acquirer.
NOTE
B – ADJUSTMENT
|
(1)
|
To
record the acquisition of Tickeri (June 3, 2021). Tickeri was acquired for $20,000,000, comprising
of 9,345,794 shares of common stock and two promissory notes totaling $10,000,000 ($5,000,000
each).
|
|
(2)
|
To
record the acquisition of Monster (June 30, 2021). Monster was acquired for $8,000,000, comprising
of two convertible promissory notes totaling $7,500,000 and two promissory notes (non-convertible)
totaling $500,000.
|
|
(3)
|
Represents
material increases in the three months ended June 30, 2021 for HUMBL, Inc. as follows: (a)
$364,545 purchases of fixed assets; (b) net digital currency purchases of $98,535; (c) increases
of Ethereum inventory of $20,530; (d) additional notes payable of $500,000; (e) $6,590,000
in additional convertible notes payable; (f) 6,212,500 shares of stock issued for services
of $2,272,000 net of prepaid expenses; and (g) 79,625,000 common shares exchanged for 7,962
shares of Series B Preferred shares.
|
|
(4)
|
Represents
estimated change in interest expense as a result of the conversion/repayment of debt that
has occurred through June 30, 2021, estimated at $615,000 annually ($153,750 quarterly).
|
|
(5)
|
One
time impairment charge of $12,141,062 on the Tickeri acquisition.
|
NOTE
C – PRO FORMA WEIGHTED AVERAGES SHARES OUTSTANDING
Pro
forma shares outstanding assuming the transaction occurred as of December 31, 2020:
HUMBL
Weighted Average Shares Outstanding
|
|
|
982,108,478
|
|
|
|
|
|
|
Pro
forma adjustments
|
|
|
(64,066,706
|
)
|
|
|
|
|
|
Pro
forma shares outstanding
|
|
|
908,695,978
|
|
HUMBL,
INC.
PRO
FORMA CONSOLIDATED BALANCE SHEETS
MARCH
31, 2021
|
|
|
|
|
|
|
|
Monster
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
HUMBL,
Inc.
|
|
|
Tickeri,
Inc.
|
|
|
Creative,
LLC
|
|
|
|
Adjustments
|
|
|
HUMBL,
Inc.
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
852,712
|
|
|
$
|
36,657
|
|
|
$
|
973,668
|
(3
|
)
|
|
$
|
6,580,540
|
|
|
$
|
8,443,577
|
|
Accounts
receivable, net of allowance
|
|
|
-
|
|
|
|
13,113
|
|
|
|
-
|
(1
|
)
|
|
|
-
|
|
|
|
13,113
|
|
Inventory
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(3
|
)
|
|
|
20,530
|
|
|
|
20,530
|
|
Prepaid
expenses and other current assets
|
|
|
7,445
|
|
|
|
106
|
|
|
|
50,445
|
(1
|
)
|
|
|
-
|
|
|
|
57,996
|
|
Total
current assets
|
|
|
860,157
|
|
|
|
49,876
|
|
|
|
1,024,113
|
|
|
|
|
6,601,070
|
|
|
|
8,535,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(1
|
)
|
|
|
20,217,919
|
|
|
|
15,931,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
7,854,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
(12,141,062
|
)
|
|
|
|
|
Property
and equipment, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(3
|
)
|
|
|
364,545
|
|
|
|
364,545
|
|
Intangible
assets - digital currency
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(3
|
)
|
|
|
98,535
|
|
|
|
98,535
|
|
Total
non-current assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
16,394,564
|
|
|
|
16,394,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
860,157
|
|
|
$
|
49,876
|
|
|
$
|
1,024,113
|
|
|
|
$
|
22,995,634
|
|
|
$
|
24,929,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
261,602
|
|
|
$
|
49,822
|
|
|
$
|
9,367
|
(4
|
)
|
|
$
|
615,000
|
|
|
$
|
1,089,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
153,750
|
|
|
|
|
|
Current
portion of convertible promissory notes, net of discount
|
|
|
161,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
161,700
|
|
Note
payable - related parties
|
|
|
-
|
|
|
|
-
|
|
|
|
803,256
|
(2
|
)
|
|
|
500,000
|
|
|
|
1,303,256
|
|
Note
payable
|
|
|
40,000
|
|
|
|
192,123
|
|
|
|
66,117
|
(3
|
)
|
|
|
500,000
|
|
|
|
798,240
|
|
Total
current liabilities
|
|
|
463,302
|
|
|
|
241,945
|
|
|
|
878,740
|
|
|
|
|
1,768,750
|
|
|
|
3,352,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt, net of current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(1
|
)
|
|
|
10,000,000
|
|
|
|
10,000,000
|
|
Convertible
promissory notes, net of current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(3
|
)
|
|
|
6,590,000
|
|
|
|
6,590,000
|
|
Convertible
promissory notes - related parties, net of current portion
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
(2
|
)
|
|
|
7,500,000
|
|
|
|
7,500,000
|
|
Total
current liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
24,090,000
|
|
|
|
24,090,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
Total
liabilities
|
|
|
463,302
|
|
|
|
241,945
|
|
|
|
878,740
|
|
|
|
|
25,858,750
|
|
|
|
27,442,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY (DEFICIT) (Numbers of shares rounded to thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.00001 par value
|
|
|
76
|
|
|
|
-
|
|
|
|
-
|
(3
|
)
|
|
|
-
|
|
|
|
76
|
|
Common
stock, $0.00001 par value
|
|
|
9,742
|
|
|
|
85
|
|
|
|
-
|
(1
|
)
|
|
|
93
|
|
|
|
9,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
(796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
-
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
2,818,704
|
|
|
|
25,383
|
|
|
|
-
|
(1
|
)
|
|
|
9,999,907
|
|
|
|
15,091,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(25,383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
2,271,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
796
|
|
|
|
|
|
Accumulated
deficit/members’ equity
|
|
|
(2,431,667
|
)
|
|
|
(217,537
|
)
|
|
|
145,373
|
(1
|
)
|
|
|
217,537
|
|
|
|
(17,613,479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
(145,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
(2,272,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(615,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(153,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5
|
)
|
|
|
(12,141,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity (deficit)
|
|
|
396,855
|
|
|
|
(192,069
|
)
|
|
|
145,373
|
|
|
|
|
(2,863,116
|
)
|
|
|
(2,512,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
$
|
860,157
|
|
|
$
|
49,876
|
|
|
$
|
1,024,113
|
|
|
|
$
|
22,995,634
|
|
|
$
|
24,929,780
|
|
HUMBL,
INC.
PRO
FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR
THE YEAR ENDED DECEMBER 31, 2020
|
|
|
|
|
|
|
|
Monster
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
HUMBL,
Inc.
|
|
|
Tickeri,
Inc.
|
|
|
Creative,
LLC
|
|
|
|
|
Adjustments
|
|
|
HUMBL,
Inc.
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTINUING
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
166,644
|
|
|
$
|
2,209,072
|
|
|
|
|
$
|
-
|
|
|
$
|
2,375,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
-
|
|
|
|
41,282
|
|
|
|
1,324,685
|
|
|
|
|
|
-
|
|
|
|
1,365,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
-
|
|
|
|
125,362
|
|
|
|
884,387
|
|
|
|
|
|
-
|
|
|
|
1,009,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
costs
|
|
|
96,567
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
96,567
|
|
Professional
fees
|
|
|
539,568
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
539,568
|
|
General
and administrative
|
|
|
69,589
|
|
|
|
319,892
|
|
|
|
689,624
|
|
(5
|
)
|
|
|
12,141,062
|
|
|
|
13,220,167
|
|
Total
operating expenses
|
|
|
705,724
|
|
|
|
319,892
|
|
|
|
689,624
|
|
|
|
|
|
12,141,062
|
|
|
|
13,856,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(705,724
|
)
|
|
|
(194,530
|
)
|
|
|
194,763
|
|
|
|
|
|
(12,141,062
|
)
|
|
|
(12,846,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
(6,739
|
)
|
|
|
-
|
|
|
|
(49,977
|
)
|
(4
|
)
|
|
|
(615,000
|
)
|
|
|
(671,716
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(6,739
|
)
|
|
|
-
|
|
|
|
(49,977
|
)
|
|
|
|
|
(615,000
|
)
|
|
|
(671,716
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES
|
|
|
(712,463
|
)
|
|
|
(194,530
|
)
|
|
|
144,786
|
|
|
|
|
|
(12,756,062
|
)
|
|
|
(13,518,269
|
)
|
Provision
for income taxes
|
|
|
(800
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
(800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(713,263
|
)
|
|
$
|
(194,530
|
)
|
|
$
|
144,786
|
|
|
|
|
$
|
(12,756,062
|
)
|
|
$
|
(13,519,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted loss per share:
|
|
$
|
(0.0007
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.0147
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
982,108,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
918,041,772
|
|
HUMBL,
INC.
PRO
FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR
THE THREE MONTHS ENDED MARCH 31, 2021
|
|
|
|
|
|
|
|
Monster
|
|
|
|
|
|
|
|
Pro
Forma
|
|
|
|
HUMBL,
Inc.
|
|
|
Tickeri,
Inc.
|
|
|
Creative,
LLC
|
|
|
|
|
Adjustments
|
|
|
HUMBL,
Inc.
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTINUING
OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
156,260
|
|
|
$
|
71,500
|
|
|
$
|
64,540
|
|
|
|
|
$
|
-
|
|
|
$
|
292,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
104,743
|
|
|
|
21,871
|
|
|
|
207,256
|
|
|
|
|
|
-
|
|
|
|
333,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit (loss)
|
|
|
51,517
|
|
|
|
49,629
|
|
|
|
(142,716
|
)
|
|
|
|
|
-
|
|
|
|
(41,570
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development
costs
|
|
|
102,303
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
102,303
|
|
Professional
fees
|
|
|
914,878
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
914,878
|
|
General
and administrative
|
|
|
445,373
|
|
|
|
72,636
|
|
|
|
165,241
|
|
(5
|
)
|
|
|
12,141,062
|
|
|
|
12,824,312
|
|
Total
operating expenses
|
|
|
1,462,554
|
|
|
|
72,636
|
|
|
|
165,241
|
|
|
|
|
|
12,141,062
|
|
|
|
13,841,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,411,037
|
)
|
|
|
(23,007
|
)
|
|
|
(307,957
|
)
|
|
|
|
|
(12,141,062
|
)
|
|
|
(13,883,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
(25,825
|
)
|
|
|
-
|
|
|
|
(9,658
|
)
|
(4
|
)
|
|
|
(153,750
|
)
|
|
|
(189,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(25,825
|
)
|
|
|
-
|
|
|
|
(9,658
|
)
|
|
|
|
|
(153,750
|
)
|
|
|
(189,233
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES
|
|
|
(1,436,862
|
)
|
|
|
(23,007
|
)
|
|
|
(317,615
|
)
|
|
|
|
|
(12,294,812
|
)
|
|
|
(14,072,296
|
)
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,436,862
|
)
|
|
$
|
(23,007
|
)
|
|
$
|
(317,615
|
)
|
|
|
|
$
|
(12,294,812
|
)
|
|
$
|
(14,072,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted loss per share:
|
|
$
|
(0.0015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.0155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
974,218,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
910,151,884
|
|
OUTSIDE
BACK COVER OF PROSPECTUS
We
have not authorized any dealer, salesperson or any other person to give any information or to represent anything other than those contained
in this prospectus in connection with the offer contained herein, and, if given or made, you should not rely upon such information or
representations as having been authorized by HUMBL, Inc. This prospectus does not constitute an offer of any securities other than those
to which it relates or an offer to sell, or a solicitation of an offer to buy, to those to which it relates in any state to any person
to whom it is not lawful to make such offer in such state. The delivery of this prospectus at any time does not imply that the information
herein is correct as of any time after the date of this prospectus.
DEALER
PROSPECTUS DELIVERY REQUIREMENT
Until
_______________, 2022 [90 days from the date of this prospectus], all dealers that effect transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to
deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
HUMBL,
INC.
_______
Shares
Common
Stock
PROSPECTUS
_______
___, 2021
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The
following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being
registered. None of the following expenses are payable by the Selling Stockholders. All of the amounts shown are estimates, except for
the SEC registration fee.
SEC registration fee
|
|
$
|
*
|
|
Legal fees and expenses
|
|
|
*
|
|
Accounting fees and expenses
|
|
|
*
|
|
Miscellaneous
|
|
|
*
|
|
TOTAL
|
|
$
|
*
|
|
|
|
|
|
|
*To be filed by amendment
|
|
|
|
|
ITEM
14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware
General Corporation Law (“DGCL”) Section 145 provide us with the power to indemnify any of our directors, officers, employees
and agents. The person entitled to indemnification must have conducted himself in good faith, and must reasonably believe that his conduct
was in, or not opposed to, our best interests. In a criminal action, the director, officer, employee or agent must not have had reasonable
cause to believe that his conduct was unlawful.
Under
DGCL section 145, advances for expenses may be made by agreement if the director or officer affirms in writing that he has met the standards
for indemnification and will personally repay the expenses if it is determined that such officer or director did not meet those standards.
Our
bylaws include an indemnification provision under which we have the power to indemnify our directors, officers, former directors and
officers, employees and other agents (including heirs and personal representatives) against all costs, charges and expenses actually
and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which a director or officer is made a
party by reason of being or having been a director or officer of the Company. Our bylaws further provide for the advancement of all expenses
incurred in connection with a proceeding upon receipt of an undertaking by or on behalf of such person to repay such amounts if it is
determined that the party is not entitled to be indemnified under our bylaws. No advance will be made by the Company to a party if it
is determined that the party acting in bad faith. These indemnification rights are contractual, and as such will continue as to a person
who has ceased to be a director, officer, employee or other agent, and will inure to the benefit of the heirs, executors and administrators
of such a person.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable.
Our
Corporate Bylaws at Article IX, provide that the Corporation has accepted a provision indemnifying to the full extent permitted by the
law, thereby eliminating or limiting the personal liability of directors, officers, employees or corporate agents for damages for breach
of fiduciary duty as a director or officer, but such provision must not eliminate or limit the liability of a director or officer for
(a) acts or omissions involving willful misconduct, gross negligence, fraud, or knowing violation of law; or (b) the payments of distributions
in violation of Delaware General Corporation Law.
INSOFAR
AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO OUR DIRECTORS, OFFICERS AND CONTROLLING
PERSONS PURSUANT TO THE FORGOING PROVISIONS OR OTHERWISE, WE HAVE BEEN ADVISED THAT, IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION,
SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THAT ACT AND IS, THEREFORE, UNENFORCEABLE.
ITEM
15. RECENT SALES OF UNREGISTERED SECURITIES.
Since
December 31, 2017, we have issued the following unregistered securities:
Common
Stock and Convertible Note Issuances
On
December 23, 2020, we issued two convertible notes, one to Kevin Levine and the other to Judith Levine, each in the principal amount
of $112,500 convertible into shares of our common stock at $0.60 per share.
On
April 14, 2021, we issued a convertible note to Brighton Capital Partners, LLC in the amount of $3,300,000. The note is convertible into
shares of our common stock at $3.15 per share.
On
May 13, 2021, we issued a convertible note to Next Generation Wealth Management LLC in the amount of $382,500. The note is convertible
into shares of our common stock at $1.00 per share. On June 24, 2021, the note was split into two separate notes and assigned to The
Strider Lir Trust and Scottish Isles Investing, LLC.
On
May 13, 2021, we issued a convertible note to Maize and Gray, LLC in the amount of $402,750. The note is convertible into shares of our
common stock at $1.00 per share.
On
May 19, 2021, we issued a convertible note to KWP 50, LLC in the amount of $497,250.00. The note is convertible into shares of our common
stock at $1.00 per share.
On
May 19, 2021, we issued a convertible note to North Falls Investments, L.P. in the amount of $153,000. The note is convertible into shares
of our common stock at $1.00 per share.
On
May 19, 2021, we issued a convertible note to CMP76, LLC in the amount of $76,500. The note is convertible into shares of our common
stock at $1.00 per share.
On
June 21, 2021, we issued a convertible note to Infinity Blocks Investments, LLC in the amount of $382,500. The note is convertible into
shares of our common stock at $1.00 per share.
On
June 21, 2021, we issued a convertible note to Murtaugh Group LLC in the amount of $382,500. The note is convertible into shares of our
common stock at $1.00 per share.
On
August 30, 2021, we issued a convertible note to Hahanakai, LLC in the amount of $153,000. The note is convertible into shares of our
common stock at $0.90 per share.
On
November 12, 2021, we issued a convertible note to Joy Corbin in the amount of $306,000. The note is convertible into share of common
stock at $0.60 per share.
Securities
Issued in Connection with Acquisitions
On
February 26, 2021, we issued 552,029 shares of our Series B preferred stock to the former members of HUMBL LLC in connection with the
merger of Tesoro Enterprises, Inc. and HUMBL LLC.
Warrants
Issued
On
December 4, 2020 we issued a warrant to purchase 125,000,000 post-split shares of our common stock to Forwardly, Inc., at an exercise
price of $0.20 per share that is exercisable for two years from the date of issuance.
On
December 4, 2020 we issued a warrant to purchase 125,000,000 post-split shares of our common stock to Forwardly, Inc., at an exercise
price of $0.20 per share that is exercisable for two years from the date of issuance.
On
December 23, 2020, we issued a warrant to purchase 12,500,000 post-split shares of our common stock to Tuigamala Group Pty Ltd (“Tuigamala
Group”), at an exercise price of $1.00 per share that is exercisable for one year from the date of issuance. On May 10, 2021, the
Tuigamala Group assigned the warrant to Archumbl Pty Ltd (“Archumbl”). On May 17, 2021, HUMBL and Archumbl amended the warrant
to make the warrant exercisable for two years from the date of issuance.
On
December 23, 2020, each of Kevin Levine and Judith Levine was issued a warrant to purchase 112,500 shares of our common stock at an exercise
price of $1.00 per share that is exercisable for two years.
On
May 13, 2021, we issued a warrant to purchase 750,000 post-split shares of our common stock to Next Generation Wealth Management LLC,
at an exercise price of $1.00 per share that is exercisable for two years from the date of issuance. On June 24, 2021, the warrant was
split into two and assigned to The Strider Lir Trust and Scottish Isles Investing, LLC.
On
May 13, 2021, we issued a warrant to purchase 825,000 post-split shares of our common stock to Maize and Gray, LLC at an exercise price
of $1.00 per share that is exercisable for two years from the date of issuance.
On
May 19, 2021, we issued a warrant to purchase 975,000 post-split shares of our common stock to KWP 50, LLC at an exercise price of $1.00
per share that is exercisable for two years from the date of issuance.
On
May 19, 2021, we issued a warrant to purchase 300,000 post-split shares of our common stock to North Falls Investments, L.P. at an exercise
price of $1.00 per share that is exercisable for two years from the date of issuance.
On
May 19, 2021, we issued a warrant to purchase 150,000 post-split shares of our common stock to CMP76, LLC at an exercise price of $1.00
per share that is exercisable for two years from the date of issuance.
On
June 21, 2021, we issued a warrant to purchase 750,000 post-split shares of our common stock to Infinity Block Investments, LLC at an
exercise price of $1.00 per share that is exercisable for two years from the date of issuance.
On
June 21, 2021, we issued a warrant to purchase 750,000 post-split shares of our common stock to Murtaugh Group, LLC at an exercise price
of $1.00 per share that is exercisable for two years from the date of issuance
On
August 30, 2021, we issued a warrant to purchase 375,000 post-split shares of our common stock to Hahanakai, LLC at an exercise
price of $0.90 per share that is exercisable for two years from the date of issuance.
On
November 12, 2021, we issued a warrant to purchase 1,000,000 post-split shares of our common stock to Joy Corbin at an exercise price
of $0.90 per share that is exercisable for two years from the date of issuance.
None
of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. We believe the
offers, sales and issuances of the above securities were exempt from registration under the Securities Act (or Regulation D or Regulation
S promulgated thereunder) by virtue of Section 4(a)(2) of the Securities Act because the issuance of securities to the recipients did
not involve a public offering, or in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts
relating to compensation as provided under such rule. The recipients of the securities in each of these transactions represented their
intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof,
and appropriate legends were placed upon the stock certificates issued in these transactions. All recipients had adequate access, through
their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.
ITEM
16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)
Exhibits
See
the Exhibit Index immediately preceding the signature page hereto for a list of exhibits filed as part of this registration statement
on Form S-1, which Exhibit Index is incorporated herein by reference.
(b)
Financial Statement Schedules
All
financial statement schedules are omitted because the information called for is not required or is shown either in the consolidated financial
statements or in the notes thereto.
ITEM
17. UNDERTAKINGS.
The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers, or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement;
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other
than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first use.
(5)
That, for the purpose of determining any liability under the Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424 (§ 230.424 of this chapter);
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant. The portion of any other free writing prospectus relating to the offering containing material information
about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iii)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(6)
(i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time
it was declared effective.
(i)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(7)
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication
of such issue.
EXHIBIT
INDEX
Exhibit
No.
|
|
Description
|
2.1
|
|
Plan of Merger and Securities Exchange Agreement, dated as of December 2, 2020, by and between Tesoro Enterprises, Inc. and HUMBL LLC.
|
|
|
|
2.2
|
|
Certificate of Merger of Tesoro Enterprises, Inc. and HUMBL LLC dated December 3, 2020
|
|
|
|
3.1
|
|
Certificate of Incorporation
|
|
|
|
3.2
|
|
Amendment to Certificate of Incorporation
|
|
|
|
3.3
|
|
Amendment to Certificate of Incorporation – Series B
|
|
|
|
3.4
|
|
Certificate of Withdrawal – Series C
|
|
|
|
3.5
|
|
Bylaws of HUMBL, Inc.
|
|
|
|
5.1*
|
|
Opinion
of Culhane Meadows PLLC
|
|
|
|
10.1
|
|
Stock Purchase Agreement dated November 4, 2020 among Tesoro Enterprises, Inc., Henry J. Boucher and Brian Foote.
|
|
|
|
10.2
|
|
Warrant dated December 4, 2020 issued to Forwardly, Inc.
|
|
|
|
10.3
|
|
Warrant dated December 4, 2020 issued to Charger Corporation
|
|
|
|
10.4
|
|
Convertible Promissory Note dated December 23, 2020 issued to Kevin Levine
|
|
|
|
10.5
|
|
Warrant dated December 23, 2020 issued to Kevin Levine
|
|
|
|
10.6
|
|
Convertible Promissory Note dated December 23, 2020 Issued to Judith Levine
|
|
|
|
10.7
|
|
Warrant dated December 23, 2020 issued to Judith Levine
|
|
|
|
10.8
|
|
Warrant dated December 23, 2020 issued to Tuigamala Pty Ltd and subsequently assigned to Archumbl Pty Ltd
|
|
|
|
10.9
|
|
Securities Purchase Agreement dated March 15, 2021 between HUMBL, Inc. and HUMBL CL SpA
|
|
|
|
10.10
|
|
Securities Purchase Agreement dated April 14, 2021 between HUMBL, Inc. and Brighton Capital Partners, LLC
|
|
|
|
10.11
|
|
Convertible Promissory Note dated April 14, 2021 issued to Brighton Capital Partners, LLC
|
|
|
|
10.12
|
|
Equity Financing Agreement dated April 14, 2021 between HUMBL, Inc. and Brighton Capital Partners, LLC
|
|
|
|
10.13
|
|
Registration Rights Agreement dated April 14, 2021 between HUMBL, Inc. and Brighton Capital Partners, LLC
|
|
|
|
10.14
|
|
Convertible Promissory Note with an original issuance date of May 13, 2021 issued to The Strider Lir Trust
|
|
|
|
10.15
|
|
Warrant with an original issuance date of May 13, 2021 issued to The Strider Lir Trust
|
10.16
|
|
Convertible Promissory Note with an original issuance date of May 13, 2021 issued to Scottish Isles Investing, LLC
|
|
|
|
10.17
|
|
Warrant with an original issuance date of May 13, 2021 issued to Scottish Isle Investing, LLC
|
|
|
|
10.18
|
|
Convertible Promissory Note dated May 13, 2021 issued to Maize and Gray, LLC
|
|
|
|
10.19
|
|
Warrant dated May 13, 2021 issued to Maize and Gray, LLC
|
|
|
|
10.20
|
|
Convertible Promissory Note issued on May 17, 2021 to Archura Capital Pty Ltd
|
|
|
|
10.21
|
|
Convertible Promissory Note dated May 19, 2021 issued to KWP50, LLC
|
|
|
|
10.22
|
|
Warrant dated May 19, 2021 issued to KWP50, LLC
|
|
|
|
10.23
|
|
Convertible Promissory Note dated May 19, 2021 issued to North Falls Investments, L.P.
|
|
|
|
10.24
|
|
Warrant dated May 19, 2021 issued to North Falls Investments, L.P.
|
|
|
|
10.25
|
|
Convertible Promissory Note dated May 19, 2021 issued to CMP76, LLC
|
|
|
|
10.26
|
|
Warrant dated May 19, 2021 issued to CMP76, LLC
|
|
|
|
10.27
|
|
Agreement and Plan of Merger dated June 3, 2021 among HUMBL, Inc., Tickeri, Inc., Tickeri I Acquisition Corp., Tickeri II Acquisition Corp., Javier Gonzalez and Juan Luis Gonzalez
|
|
|
|
10.28
|
|
Secured Promissory Note dated June 3, 2021 issued to Juan Luis Gonzalez
|
|
|
|
10.29
|
|
Secured Promissory Note dated June 3, 2021 issued to Javier Gonzalez
|
|
|
|
10.30
|
|
Stock Pledge Agreement dated June 3, 2021 among HUMBL, Inc., Javier Gonzalez and Juan Luis Gonzalez.
|
|
|
|
10.31
|
|
Employment Agreement dated June 3, 2021 between Tickeri, Inc. and Juan Luis Gonzalez
|
|
|
|
10.32
|
|
Employment Agreement dated June 3, 2021 between HUMBL, Inc. and Javier Gonzalez
|
|
|
|
10.33
|
|
Convertible Promissory Note dated June 21, 2021 issued to Infinity Block Investments, LLC
|
|
|
|
10.34
|
|
Warrant dated June 21, 2021 issued to Infinity Block Investments, LLC
|
|
|
|
10.35
|
|
Convertible Promissory Note dated June 21, 2021 issued to Murtaugh Group, LLC
|
|
|
|
10.36
|
|
Warrant dated June 21, 2021 issued to Murtaugh Group, LLC
|
|
|
|
10.37
|
|
Warrant dated May 21, 2021 issued to Athletes First, LLC
|
|
|
|
10.38
|
|
Membership Interest Purchase Agreement dated June 30, 2021 among HUMBL, Inc., Phantom Power, LLC and Kevin Childress
|
|
|
|
10.39
|
|
Convertible Promissory Note dated June 30, 2021 issued to Phantom Power, LLC
|
|
|
|
10.40
|
|
Convertible Promissory Note dated June 30, 2021 issued to Kevin Childress
|
10.41
|
|
Promissory Note dated June 30, 2021 issued to Phantom Power, LLC
|
|
|
|
10.42
|
|
Promissory Note dated June 30, 2021 issued to Kevin Childress
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10.43
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Employment Agreement dated June 30, 2021 between HUMBL, Inc. and Doug Brandt
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10.44
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Employment Agreement dated June 30, 2021 between HUMBL, Inc. and Kevin Childress
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10.45
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Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Brian Foote
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10.46
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Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Jeffrey Hinshaw
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10.47
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Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Michele Rivera
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10.48
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Employment Agreement dated July 13, 2021 between HUMBL, Inc. and Karen Garcia
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10.49
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Development Services Agreement dated July 29, 2021 between HUMBL, Inc. and Red Rock Development Group, LLC as amended on November 15, 2021
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10.50
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Convertible Promissory Note dated August 30, 2021 issued to Hahanakai, LLC
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10.51
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Warrant dated August 30, 2021 issued to Hahanakai, LLC
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10.52
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Convertible Promissory Note dated November 13, 2021 issued to Joy Corbin
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10.53
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Warrant dated November 13, 2021 issued to Joy Corbin
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10.54
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Warrant dated November 22, 2021 issued to Charger Corporation
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10.55
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Warrant dated November 22, 2021 issued to Konop Enterprises Inc.
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10.56
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Warrant dated November 22, 2021 issued to Adel Wakil
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10.57
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Warrant dated November 22, 2021 issued to Antonio Dutra
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10.58
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Engagement Agreement for Advisory Services dated November 18, 2021 between HUMBL, Inc. and George Sharp
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21.1
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Subsidiaries of HUMBL, Inc.
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23.1
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Consent of B.F. Borgers CPA PC regarding HUMBL, Inc.
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23.2*
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Consent
of Culhane Meadows PLLC (included in Exhibit 5.1)
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24.1
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Power of Attorney (included on the signature page to this Registration Statement)
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*
To be filed by amendment
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of San Diego, California, on the 29th day of November, 2021.
|
HUMBL,
INC.
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By:
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/s/
Brian Foote
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Name:
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Brian
Foote
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Title:
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Chief
Executive Officer
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POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brian Foote as their true and
lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for them and in their name, place and stead,
in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to
sign any registration statement for the same offering covered by this registration statement that is to be effective on filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated.
Signature
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Title
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Date
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/s/
Brian Foote
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President,
CEO (principal executive officer)
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|
November
29, 2021
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Brian
Foote
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and
Director
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|
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/s/
Jeffrey Hinshaw
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COO,
CFO (principal financial officer)
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|
November
29, 2021
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|
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and
Director
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/s/
Michele Rivera
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Vice
President, Global Partnerships
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|
November
29, 2021
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and
Director
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/s/ William B. Hoagland
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Director
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November 29, 2021
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/s/ Peter Schulte
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Director
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November 29, 2021
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|
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*/s/
Brian Foote
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As
Attorney-In-Fact*
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|
November
29, 2021
|
Brian
Foote
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|
|
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