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EX-32.2 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF FINANCIAL OFFICER - Life On Earth, Inc.exhibit_32-2.htm
EX-32.1 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF EXECUTIVE OFFICER - Life On Earth, Inc.exhibit_32-1.htm
EX-31.1 - SECTION 302 CERTIFICATION BY THE CORPORATION'S CHIEF EXECUTIVE OFFICER - Life On Earth, Inc.exhibit_31-1.htm
EX-31.2 - SECTION 302 CERTIFICATION BY THE CORPORATION'S CHIEF FINANCIAL OFFICER - Life On Earth, Inc.exhibit_31-2.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


 
Form 10-Q
 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2016

 

or

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______.

 

Commission file number 333-190788

 

 
HISPANICA INTERNATIONAL DELIGHTS OF AMERICA, INC.
(Exact name of registrant as specified in its charter)
 


Delaware   46-2552550
(State or other jurisdiction   (I.R.S. Employer Identification No.)
 of incorporation or organization)    


     
575 Lexington Avenue, 4th Floor    
New York, New York   10022
(Address of principal executive offices)   (Zip Code)


Registrant's telephone number including area code 1(866) 928-5070


 
 
(Former Name or Former Address, if changed since last report)

 

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes (  )       No  (X)

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes (  )       No  (X)

 

 


 
 

 

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( )

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes (X) No ( )

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes (X) No ( )

 

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 definition of “ large accelerated filer ” , “ accelerated filer ” and “ smaller reporting company in Rule 12b-2 of the Exchange Act.

 

(Check one)

Large accelerated filer ( ) Accelerated filer ( )

Non-accelerated filer ( ) Smaller reporting company (X)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (  ) No (X)

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of the period ended in this report, February 29, 2016 the registrant had 12,909,471 shares of common stock outstanding. As of the date of filing, April 14, 2016 the registrant had 12,929,471 shares of common stock outstanding.

 

 

 

2


 
 

 

 

 

 

HISPANICA INTERNATIONAL DELIGHTS OF AMERICA, INC.

 

FORM 10-Q

 

 TABLE OF CONTENTS  Page
PART I – FINANCIAL INFORMATION  
Item 1.  Financial Statements  
              Condensed Balance Sheets 5

              Condensed Statements of Operations

6

              Condensed Statements of Cash Flows

7
              Notes to Condensed Financial Statements 8
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Item 3.  Quantitative and Qualitative Disclosures About Market Risk 20
Item 4.  Controls and Procedures 20
   
PART II – OTHER INFORMATION  
Item 1.  Legal Proceedings 21
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3.  Defaults Upon Senior Securities 21
Item 4.  Mining Safety Disclosure 21
Item 5.  Other Information 21
Item 6.  Exhibits 21
   
SIGNATURES 22

 

3

 


 
 

 

 

 

 

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS

 

 

  

 
 
 
 
 
 
HISPANICA INTERNATIONAL DELIGHTS OF AMERICA, INC.
 
FINANCIAL STATEMENTS
 
FEBRUARY 29, 2016
 
 

 

TABLE OF CONTENTS
   
   
   
   
Financial Statements  
   
Balance Sheets 5
   
Statements of Operations 6
   
Statements of Cash Flows 7
   
Notes to Financial Statements 8 - 13

 

 

 

 

4


 
 
Hispanica International Delights of America, Inc.
Condensed Balance Sheets
February 29, 2016 and May 31, 2015
 
ASSETS
   February 29,  May 31,
   2016  2015
   (Unaudited)   
Current Assets:      
Cash and cash equivalents  $22,718   $44,101 
Accounts receivable   16,092    1,206 
Prepaid expenses   400    15,000 
Inventory   17,240    18,879 
Total current assets   56,450    79,186 
           
Other Assets          
Investment   10,000    —   
Capitalized financing costs - net   9,366    —   
Total other assets   19,366    —   
           
Total assets  $75,816   $79,186 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
           
Liabilities          
Accounts payable and accrued expenses  $11,096   $3,718 
Unearned income   —      —   
Loan payable - stockholders   —      20,000 
Convertible note payable   3,000    6,000 
 Total current liabilities   14,096    29,718 
           
Convertible note payable - non-current   87,500    —   
           
     Total liabilities   101,596    29,718 
           
Commitments and Contingencies   —      —   
           
Stockholders' Equity:          
Series A Preferred stock, $0.001 par value; 10,000,000 shares authorized, 1,200,000 and 1,000,000 shares issued and outstanding, respectively   1,200    1,000 
Common stock, $0.001 par value; 100,000,000 shares authorized, 12,909,471 and 12,168,905 shares issued and outstanding, respectively   12,929    12,169 
Additional paid in capital   658,524    450,641 
Accumulated deficit   (698,433)   (414,342)
Total stockholders' equity (deficiency)   (25,780)   49,468 
           
Total liabilities and stockholders' equity (deficiency)  $75,816   $79,186 

 

See accompanying notes to condensed financial statements

 

5


 
 

 

Hispanica International Delights of America, Inc.
Condensed Statements of Operations
(Unaudited)
             
   For the Three Months Ended February 29, 2016  For the Three Months Ended February 28, 2015  For the Nine Months Ended February 29, 2016  For the Nine Months Ended February 28, 2015
          
             
Sales, net  $42,027   $79,071   $209,861   $140,968 
Cost of goods sold   22,059    77,341    193,723    149,901 
Gross income (loss)   19,968    1,730    16,138    (8,933)
                     
Expenses:                    
Officer's compensation   2,500    —      130,200    —   
Advertising and promotion   2,500    —      4,500    317 
Professional fees   14,454    3,875    144,731    126,508 
Travel   309    321    2,954    1,391 
Other   2,944    905    8,932    8,136 
    22,707    5,101    291,317    136,352 
                     
Net (loss) before other income and expenses  (2,739)   (3,371)   (275,179)   (145,285)
                     
Other (expenses)                    
Financing costs   (1,630)   —      (3,134)   —   
Interest expense - net   (2,287)   (735)   (5,778)   (1,175)
    (3,917)   (735)   (8,912)   (1,175)
                     
Net (loss)  $(6,656)  $(4,106)  $(284,091)  $(146,460)
                     
Basic and diluted (loss) per share  $(0.00)  $(0.00)  $(0.02)  $(0.01)
                     
                    
Basic and diluted weighted average number of shares outstanding   12,891,285    11,896,350    12,591,882    10,986,783 
                     

 

See accompanying notes to condensed financial statements

 

6


 
 

 

Hispanica International Delights of America, Inc.
Condensed Statements of Cash Flows
(Unaudited)
 
   For the Nine Months Ended February 29, 2016  For the Nine Months Ended February 28, 2015
Cash flows from operating activities:      
Net (loss)  $(284,091)  $(146,460)
Adjustments to reconcile net loss to net cash (used in) operating activities:          
Stock based compensation   175,026    96,800 
Amortization of capitalized financing costs   3,134    —   
Accounts receivable   (14,886)   13,591 
Prepaid expenses   14,600    —   
Inventory   1,639    (61,729)
Accounts payable and accrued expenses   8,195    (32,058)
Net cash (used in) operating activities   (96,383)   (129,856)
           
Cash flows from financing activities:          
Proceeds from issuance of common stock   13,000    99,500 
Proceeds from convertible notes payable, net of financing costs   75,000    6,000 
Repayment of convertible notes payable   (3,000)   —   
Repayment of loans payable - stockholders   (10,000)   —   
Proceeds from loan payable - related party   —      20,000 
Stockholder contribution   —      3,000 
Net cash provided by financing activities   75,000    128,500 
           
Net decrease in cash and cash equivalents   (21,383)   (1,356)
Cash and equivalents at beginning of period   44,101    21,136 
Cash and equivalents at end of period  $22,718   $19,780 
           
Supplemental cash flow information:          
Cash paid during the period for:          
Interest  $1,697   $—   
           
Non-cash transactions:          
Supplemental Schedule of non-cash investing and          
financing activities:          
Shares issued upon settlement of debt  $10,817   $—   
           
Shares issued for investment  $10,000   $—   

 

 See accompanying notes to condensed financial statements

 

7


 
 

Hispanica International Delights of America, Inc.

Notes to Condensed Financial Statements

February 29, 2016

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations

Hispanica International Delights of America, Inc. (the "Company") was incorporated in Delaware in April 2013. The Company has not generated significant sales to date. The Company currently markets and sells traditional Hispanic beverages and ethnic food packaged products and will license and/or acquire existing brands and distributors of Hispanic products.

 

Basis of Presentation

The accompanying interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, all adjustments considered necessary for a fair presentation of the interim periods presented have been included. All such adjustments are of a normal recurring nature. The accompanying condensed financial statements and the information included under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company's audited financial statements and related notes included in the Company's Form 10-K as of May 31, 2015. Interim results are not necessarily indicative of the results of a full year.

 

Revenue Recognition

In general, the Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. The following policies reflect specific criteria for the various revenues streams of the Company.

 

Revenue is recognized at the time the product is delivered or services are performed. Provision for sales returns will be estimated based on the Company's historical return experience. Revenue is presented net of returns.

 

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed balance sheets and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Net Loss Per Common Share

The Company calculates net income (loss) per share based on the authoritative guidance. Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. As of February 29, 2016, the convertible notes payable, which could be converted into 43,044 shares of common stock, were outstanding.

 

8


 
 

Hispanica International Delights of America, Inc.

Notes to Condensed Financial Statements

February 29, 2016

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Income Taxes

The Company utilizes the accrual method of accounting for income taxes. Under the accrual method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and the tax basis of the assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

 

The Company recognizes the financial statement benefit of an uncertain tax position only after considering the probability that a tax authority would sustain the position in an examination. For tax positions meeting a “more-likely-than-not” threshold, the amount recognized in the financial statements is the benefit expected to be realized upon settlement with the tax authority. For tax positions not meeting the threshold, no financial statement benefit is recognized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. The Company did not have any unrecognized tax benefits as of February 29, 2016, and does not expect this to change significantly over the next 12 months.

 

Stock-Based Compensation

The Company accounts for equity instruments issued to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on the fair value on the issuance date.

 

Equity instruments granted to non-employees are accounted for in accordance with ASC 505, Equity. The final measurement date for the fair value of equity instruments with performance criteria is the date that each performance commitment for such equity instrument is satisfied or there is a significant disincentive for non-performance.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

 

Accounts Receivable

The Company extends credit to its customers in the normal course of business and performs ongoing credit evaluations of its customers, maintaining an allowance for potential credit losses. Uncollectible accounts are written off at the time they are deemed uncollectible. Accounts receivable is reported net of the allowance for doubtful accounts. The allowance is based on management's estimate of the amount of receivables that will actually be collected. As of February 29, 2016 and May 31, 2015, an allowance for doubtful accounts was not necessary.

 

Inventory

Inventory consists of finished goods and is stated at the lower of cost (first-in, first-out) or market value.

 

9


 
 

Hispanica International Delights of America, Inc.

Notes to Condensed Financial Statements

February 29, 2016

 

Note 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Recent Pronouncements

In May 2014, FASB and IASB issued a new joint revenue recognition standard that supersedes nearly all GAAP guidance on revenue recognition. The core principle of the standard is that revenue recognition should depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The new standard is effective for the Company for the fiscal year beginning June 1, 2017, and the effects of the standard on the Company’s condensed financial statements are not known at this time.

 

Management does not believe that any other recently issued, but not yet effective accounting pronouncement, if adopted, would have a material effect on the accompanying condensed financial statements.

 

Note 2. CONCENTRATION OF CREDIT RISK

 

Sales and Accounts Receivable

For the nine months ended February 29, 2016, sales to four customers accounted for approximately 92% of the Company's net sales. One customer accounted for approximately 97% of the Company's accounts receivable balances at February 29, 2016.

 

For the nine months ended February 28, 2015, sales to three customers accounted for 79% of the Company's net sales. One customer accounted for approximately 95% of the Company's accounts receivable balances at February 28, 2015.

Note 3. LOANS PAYABLE - STOCKHOLDERS

 

In February 2014, a stockholder lent the Company $10,000. Under the terms of the agreement, the note matured on February 28, 2015 and had an interest rate of 5% per annum on the unmatured principal balance. As per the terms of the agreement, interest on the matured but unpaid principal balance increased to 12% per annum. In September 2015, the note was renegotiated to lower the interest to 5% and the Company issued 43,226 shares of common stock at $0.25 per share to repay the note plus accrued interest of $817.

 

In February 2015, a stockholder and officer lent the Company $20,000. The loan had an interest rate of 36% per annum. Under the terms of the agreement, the note matured on May 20, 2015. In April 2015, the Company repaid $10,000 of the loan balance. The Company repaid the remaining principal and accrued interest in September 2015.

 

 

 

 

10


 
 

Hispanica International Delights of America, Inc.

Notes to Condensed Financial Statements

February 29, 2016

Note 4. CONVERTIBLE NOTES PAYABLE

In September 2014, the Company issued a convertible debenture for the principal amount of $6,000. The debenture had an original due date of December 31, 2014. In January 2015, the holder signed an amendment that made the debenture and accrued interest payable on demand. Interest accrues at 10% per annum. The debenture holder has the option of converting the debenture in whole or in part into the Company's common stock at the rate of $0.25 per share at any time prior to redemption. In October 2015, the Company repaid $3,000 of note principal. At February 29, 2016 and May 31, 2015, accrued interest on the debenture was $117 and $438, respectively, and is reported as accounts payable and accrued expenses.

 

In September 2015, the Company issued a convertible note payable for the principal amount of $87,500 including an original issue discount ("OID") of $7,500 and loan costs of $5,000. The OID and loan costs are being amortized over 23 months and are being expensed as interest and loan cost expense, respectively. The note has a maturity date 23 months after inception at which time all accrued interest and principal are due and payable. There is a prepayment premium of 125% of the loan balance being paid prior to the maturity date. Interest accrues at 10% per annum. The note holder has the option of converting the note principal and accrued interest in whole or in part into the Company's common stock at the rate of $3.00 per share at any time prior to redemption. At February 29, 2016, accrued interest on the note was $4,229 and is reported as accounts payable and accrued expenses.

 

Note 5. STOCKHOLDERS' EQUITY

The Company has authorized 100,000,000 shares of common stock with a par value of $0.001 per share. There were 12,909,471 and 12,168,905 shares of common stock issued and outstanding at February 29, 2016 and May 31, 2015, respectively.

 

The Company has authorized 10,000,000 shares of Series A preferred stock with a par value of $0.001 per share. There were 1,200,000 and 1,000,000 shares of Series A preferred stock issued and outstanding at February 29, 2016 and May 31, 2015, respectively. The preferred stock has preferential voting rights of 50 votes per outstanding share.

 

Effective October 30, 2015, the Company entered into a Share Exchange Agreement (“Exchange Agreement”) and a Distribution Agreement with Just Buns, Inc., a New York corporation, (“Just Buns”), the creator of sweet buns sold under the brand name “Swirly Buns”. Under the terms of the Exchange Agreement, the Company acquired a 20% equity interest in Just Buns in exchange for the issuance of 20,000 shares of the Company’s Common Stock, which were valued at $0.50 per share at the time of the exchange. As of February 29, 2016, $10,000 related to the transaction is reported as Investment on the balance sheet. As of April 14, 2016, the 20,000 common shares have not been issued to Just Buns.

 

During the nine months ended February 29, 2016, the Company issued 619,300 shares of common stock, including 500,000 common shares issued to the president of the Company, at $0.25 per share and 40,000 shares of common stock at $0.50 per share for services provided to the Company.

During the nine months ended February 29, 2016, the Company issued 24,000 shares of common stock at $0.25 per share and 14,000 shares of common stock at $0.50 per share.

 

During the nine months ended February 29, 2016, the Company issued 43,266 shares of common stock at $0.25 per share to repay a note payable (Note 3).

 

During the nine months ended February 29, 2016, the Company issued 200,000 shares of Series A preferred stock at $0.001 per share to the president of the Company.

 

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Hispanica International Delights of America, Inc.

Notes to Condensed Financial Statements

February 29, 2016

 

Note 6. COMMITMENTS AND CONTINGENCIES

 

The Company currently leases its offices on a month-to-month basis from the Company's Chief Executive Officer and stockholder for $750 per month.

 

Rent expense for the three and nine months ended February 29, 2016 totaled $2,250 and $6,750, respectively. Rent expense for the three and nine months ended February 28, 2015 totaled $1,500 and $4,500, respectively. As of February 29, 2016, unpaid rent of $6,750 is reported as accounts payable and accrued expenses.

 

Note 7. INCOME TAXES

 

The deferred tax asset consists of the following:

 

   February 29, 2016
(Unaudited)
  May 31, 2015
       
Net operating loss carryforward  $279,000   $165,000 
Valuation allowance   (279,000)   (165,000)
Deferred tax asset, net  $—     $—   

 

The income tax benefit differs from the amount computed by applying the statutory federal and state income tax rates to the loss before income taxes. The sources and tax effects of the differences are as follows:

   February 29, 2016
(Unaudited)
  May 31, 2015
       
Statutory federal income tax rate   34%   34%
State income taxes, net of federal taxes   6%   6%
Valuation allowance   (40)%   (40)%
Effective income tax rate   0%   0%

 

As of February 29, 2016, the Company has net operating loss carryforwards of approximately $698,000 to reduce future federal and state taxable income through 2035.

 

The Company currently has no federal or state tax examinations in progress, nor has it had any federal or state examinations since its inception. All of the Company's tax years are subject to federal and state tax examinations.

 

12


 
 

Hispanica International Delights of America, Inc.

Notes to Condensed Financial Statements

February 29, 2016

 

Note 8. RELATED PARTY TRANSACTIONS

The Company purchases its inventory from a supplier related through common ownership and management. The Chief Executive Officer and Chairman of the Company is the supplier's President. In addition, the Chief Financial Officer and Director of the Company has a minority interest in the supplier. The amount of inventory purchased from the supplier during the nine months ended February 29, 2016 and February 28, 2015 was approximately $175,000 and $200,000, respectively. As of February 29, 2016 and February 28, 2015, accounts payable to this supplier of $-0- and $26,000, respectively, were reported as accounts payable and accrued expenses.

 

Note 9. BASIS OF REPORTING

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.

 

The Company has incurred losses from inception of approximately $698,000, which, among other factors, raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon management's plans to raise additional capital from the sale of stock and receive additional loans from related parties. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.

 

 

 

 

 

 

 

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS

 

This Form 10-Q contains forward-looking statements rather than historical facts that involve risks and uncertainties. You can identify these statements by the use of forward- looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Such forward-looking statements discuss our current expectations of future results of operations or financial condition. However, there may be events in the future that we are unable to accurately predict or control and there may be risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, which could have a material adverse effect on our business, operating results and financial condition. The forward-looking statements included herein are only made as of the date of the filing of this Form 10-Q, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

 

BASIS OF PRESENTATION

 

The unaudited financial statements of Hispanica International Delights of America, Inc. (“HISP,” the “Company,” “our” or “we”), should be read in conjunction with the notes thereto. In the opinion of management, the unaudited financial statements presented herein reflect all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation. Interim results are not necessarily indicative of results to be expected for the entire year.

 

We prepare our financial statements in accordance with U.S. generally accepted accounting principles, which require that management make estimates and assumptions that affect reported amounts. Actual results could differ from these estimates.

 

COMPANY OVERVIEW

 

Hispanica International Delights of America, Inc. was incorporated on April 15, 2013 and is a Delaware company that is dedicated to building one of the premier distributors of ethnic inspired food and beverages throughout the United States. HISP has already begun to distribute fruit juices, nectars, and milk based products and intends to distribute teas, carbonated drinks, dry goods, preserves and bakery products. These brands emulate the flavors, tastes and traditions which have been known for generations among the Hispanic and other ethnic groups which are now becoming part of the American mainstream diet. The brands distributed are under a proprietary basis (through distribution agreements and/or exclusive licensing arrangements). In October 2013, the Company signed a distribution agreement with Gran Nevada Beverage, Inc. (“Gran Nevada” or “GN”), an entity related through common management. The agreement provides the Company with the right to sell and distribute Gran Nevada’s beverages in Texas and California with purchase prices at the then applicable wholesale prices charged to Gran Nevada’s distributors. The agreement is for an initial term of five years with automatic renewals of successive five year terms unless terminated. HISP initiated sales and distribution operations in March 2014.

 

Our principal executive offices are located at 575 Lexington Avenue, 4th Floor, New York NY 10022 and our telephone number is (866) 928-5070.

 

14


 
 

 

CURRENT OPERATIONS

 

Sales

 

HISP currently markets and sells traditional Hispanic beverages. The Company currently markets and sells traditional Hispanic and ethnic food packaged products and will license and/or acquire existing brands and distributors of Hispanic products. Brands sought by HISP and re primarily engaged in the business of developing, manufacturing, marketing and selling unique, premium, non-alcoholic beverages as well as all natural food products that are targeted towards Hispanic and ethnic-neutral consumers.

  

Production and Distribution

 

The Company buys prepackaged goods for distribution through various channels. The Company began distributing the beverage products of Gran Nevada in the third fiscal quarter of 2014. Gran Nevada is the sole manufacturer for the Company’s product line, and there are no alternate suppliers in the event that Gran Nevada or its suppliers are unable or unwilling to provide HISP with the products needed to meet demand.

 

As of February 2016, Gran Nevada had eight SKUs that are manufactured in North America. Gran Nevada intends to expand to 13 SKUs by adding five new product lines of popular existing flavors in larger formats. HISP currently sells 70% of its products through distributors to grocery stores, which want larger containers for home consumption and food service markets rather than just the current eight single serve products. Ya Ya Foods will package the Horchata de Morro and Mexican Horchata one liter Tetra Pack cartons. Mrs. Clark’s has been selected to bottle Gran Nevada’s Tamarind, Mango and Guava flavors in 64 ounce PET containers. The Gran Nevada products distributed are all-natural not-from-concentrate, preservative free Aguas Frescas (Mexican Horchata, Horchata de Morro, Tamarindo, Hibiscus, Mango, Guava, Pineapple, and Limeade). These products are geared towards the Hispanic market, but may appeal to almost any palate. An important part of HISP’s overall strategy will be expansion through the acquisition of distributors.

 

HISP has sales through several distributors and regularly seeks to broaden its distribution channels. The Company has engaged third party sales and marketing brokers in many areas of the country. The Company also intends to sell directly to retailers, including large chain stores.

 

Intellectual Property

 

The Company is in the process of securing a trademark for its name and logo. HISP does not have a trademark for Hispanica International Delights of America as of February 2016.

 

Competition

 

As a distributor of Hispanic and ethnic packaged food products, the Company expects to have a portfolio of products that will not only include beverages. The main competitors of the Company include Goya Foods, Marquez Brothers International, Diaz Foods, La Fe Foods International, Grace Foods, as well as other regional/ethnic food distributors. HISP will focus on selecting brands of all-natural packaged foods. Although some competitors are selling and distributing similar products, they use different packaging options and market foods that have high contents of artificial flavors, colors, and sweeteners as well high sodium contents. Additionally, our competitors import the majority of their distributed products, which are made with lower quality and price point raw materials. HISP will focus on distributing all-natural products as well as obtaining exclusive rights to brands that can be manufactured closer to its U.S. market base. HISP is committed to building long-term relationships with its consumers by offering superior, high quality products at the most competitive prices.

 

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The packaged beverage market is highly competitive. Competitors in our market compete for brand recognition, ingredient sourcing, qualified personnel, distribution and product shelf space. As a developing company, a majority of our competitors are more established and better capitalized than HISP. The packaged beverage market is generally dominated by the largest beverage providers, including The Coca-Cola Company and PepsiCo, Inc. Many of our competitors enjoy significant brand recognition and consumer confidence and are able to readily secure shelf space and media attention for their products. Many of our competitors also have existing relationships with the same distribution channels and retailers through which we sell our products. We intend to compete in the market by offering consumers affordable products that taste better and possess a longer shelf life than most products in the market.

 

Government Regulation

 

Packaged beverage and juice products are governed by the U.S. Food and Drug Administration. As such, it is necessary for the Company to ensure its products distributed establish, maintain and make available for inspection, records and labels with nutrition information that meet legal food labeling requirements. The Company’s products are manufactured by contracted production facilities that are subject to many regulations, including Food Facility Registration, recordkeeping, Good Manufacturing Practice Requirements, reporting, preventive controls and inspections.

 

Employees

 

As of February 29, 2016, the Company’s president was its sole employee. Other positions are being filled with paid independent contractors or insider owners who do not receive cash compensation but may receive stock compensation. The Company mitigates the need for a production staff by purchasing finished inventory. The Company has contracted with food brokers to represent Gran Nevada to retail stores nationally. In certain regions of the United States, we utilize the services of direct sales and distribution companies, which sell our products through their distribution channels. This can mitigate the need for a large sales and merchandising force. The Company also outsources its logistics to third-parties, which can reduce the need for employees in these roles.

 

Emerging Growth Company

 

The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Stamps Act of 2012 (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act, and exemptions from the requirements of Sections 14A(a) and (b) of the Securities Exchange Act of 1934 to hold a nonbinding advisory vote of shareholders on executive compensation and any golden parachute payments not previously approved.

 

The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

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We will remain an “emerging growth company: until the earliest of (1) the last day of the fiscal year during which our revenues exceed $1 billion, (2) the date on which we issue more than $1 billion non-convertible debt in a three year period, (3) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement filed pursuant to the Securities Act of 1933, as amended, or (4) when the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

 

To the extent that we continue to qualify as a “smaller reporting company”, as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging growth company may continue to be available to us as a smaller reporting company, including (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirements to provide only two years of audited financial statements, instead of three years. 

 

GOING CONCERN QUALIFICATION

 

Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. The Company has incurred net losses of $284,091 and $146,460 for the nine months ended February 29, 2016 and 2015, respectively, has limited revenues and requires additional financing in order to finance its business activities on an ongoing basis. The Company’s future capital requirements will depend on numerous factors including, but not limited to, continued progress in finding business opportunities. In September 2015, the Company completed a private financing transaction and issued its Secured Convertible Promissory Note ("Note") in the principal amount of $87,500 to a private lender, including an original issue discount of $7,500 and reimbursed fees of $5,000. The Note matures 23 months from the date of the Note. Under the terms of the Note, the Company can borrow from the lender a maximum of $225,000 in three tranches. In September 2015, the Company exercised its right to request the first tranche and received $75,000. The Note grants the lender the right to convert the outstanding balance owed on the tranches into common stock of the Company at a conversion price of $3.00 per share. However, in the event the Company's market capitalization falls below $20 million, the conversion price will equal the lower of $3.00 per share or the market price of the Company's common stock as of the conversion date.

 

At February 29, 2016, we had cash on hand of $22,718, and an accumulated deficit of $698,433. See “Liquidity and Capital Resources.”

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. The amounts of assets and liabilities reported in our balance sheet and the amounts of revenues and expenses reported for each of our fiscal periods, are affected by estimates and assumptions which are used for, but not limited to, the accounting for allowance for doubtful accounts, goodwill and intangible asset impairments, restructurings, inventory and income taxes. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of our financial statements.

 

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Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

Inflation

 

The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

 

LIQUIDITY AND CAPITAL RESOURCES

 

During the nine months ended February 29, 2016 and 2015, the Company received cash proceeds of $13,000 and $99,500, respectively, as a result of the Company’s sale of common stock. The Company utilized these funds for operations.

 

In September 2015, the Company received $75,000, net of $12,500 in financing costs under the terms of the Secured Convertible Promissory Note.

 

CASH FLOW

 

Our primary source of liquidity has been cash from sales of shares and the issuance of a convertible promissory note.

 

WORKING CAPITAL

 

As of February 29, 2016 the Company had total current assets of $56,450 and total current liabilities of $14,096 resulting in working capital of $42,354. As of May 31, 2015, the Company had total current assets of $79,186 and total current liabilities of $29,718 resulting in a working capital of $49,468. 

 

RESULTS OF OPERATIONS

 

FOR THE THREE MONTHS ENDED FEBRUARY 29, 2016.

 

The following table summarizes the results of our operations during the three months ended February 29, 2016 and February 28, 2015 and provides information regarding the dollar and percentage increase or (decrease) from the three month period ended February 29, 2016 to the same period of 2015.

 

    For the Three Months Ended February 29, 2016
(Unaudited)
  For the Three Months Ended February 28, 2015
(Unaudited)
  Increase/ (Decrease) $   Increase/ (Decrease) %
Sales, net  $42,027   $79,071   $(37,044)   (46.8)%
Cost of goods sold  22,059    77,341    (55,282)   (71.5)%
Selling, general, and administrative expenses  22,707   5,101   17,606    345.1%
Financing costs  (1,630)  —     (1,630)   (100.0)%
Interest expense - net  (2,287)  (735)  (1,552)   211.2%
Net (loss)  $(6,656)  $(4,106)  $(2,550)   62.1%
Earnings (Loss) per common share  $—    $—    $—     0.0%

 

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The Company had a net loss of $6,656 for the three months ended February 29, 2016 as compared to

$4,106 for the three months ended February 29, 2015. The increase in the net loss of $2,550 or 62% is primarily the result of decreased sales of $37,044 or 47% and increased expenses of $17,606 or 345% that were partially offset by decreased cost of goods sold of $55,282 or 72%. The decrease in cost of goods sold is reflective in the decrease in sales.

 

The Company’s expenses increased by $17,606 or 345% during the three months ended February 29, 2016 as compared with the three months ended February 28, 2015 as a result of (i) increased compensation paid to an officer of the Company in the amount of $2,500; (ii) increased marketing expenses of $2,500; (iii) increased professional fees expenses of $10,579, including $4,000 of stock compensation granted for consulting services; and, (iv) increased selling general and administrative expenses of $2,039. We expect selling, general, and administrative expenses to continue to increase in future periods as we initiate a number of marketing and promotional activities.

 

During the three months ended February 29, 2016, the Company recorded $1,630 of finance costs as amortization of the original issue discount of $7,500 and the reimbursed fees of $5,000 incurred as a result of the issuance of the Secured Convertible Promissory Note ("Note") in the principal amount of $87,500 to a private lender.

 

The Company’s interest expense increased by $1,552 during the three months ended February 29, 2016 as compared to the three months ended February 28, 2015. The increase reflects the increased debt incurred by the Company to finance operations.

 

FOR THE NINE MONTHS ENDED FEBRUARY 29, 2016.

 

The following table summarizes the results of our operations during the nine months ended February 29, 2016 and February 28, 2015 and provides information regarding the dollar and percentage increase or (decrease) from the nine month period ended February 29, 2016 to the same period of 2015.

 

   For the Nine Months Ended February 29, 2016 (Unaudited)  For the Nine Months Ended February 28, 2015 (Unaudited)  Increase/ (Decrease) $  Increase/ (Decrease) %
Sales, net  $209,861   $140,968   $68,893    48.9%
Cost of goods sold   193,723    149,901    43,822    29.2%
Selling, general and administrative expenses   291,317    136,352    154,965    113.6%
Financing costs   (3,134)   —      (3,134)   (100.0)%
Interest expense - net   (5,778)   (1,175)   (4,603)   391.7%
                     
Net (loss)  $(284,091)  $(146,460)  $(137,631)   94.0%
                     
(Loss) per common share  $(0.02)  $(0.01)  $(0.01)   100.0%

 

 

For the nine months ended February 29, 2016 and February 28, 2015, we had net sales of $209,861 and $140,968, respectively, an increase of 49%.

 

Cost of goods sold for the nine months ended February 29, 2016 and February 28, 2015, was $193,723 and $149,901, respectively, an increase of 29%. The increase is reflective of the increase in sales.

 

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The Company’s expenses increased by $154,965 or 114% during the nine months ended February 29, 2016 as compared with the nine months ended February 28, 2015 primarily as a result of (i) increased compensation paid to an officer of the Company in the amount of $2,500, and, an additional $127,700 of officer’s compensation (of which $125,200 was paid through the issuance of the Company’s common and preferred stock); (ii) increased marketing expenses of $4,183; (iii) increased professional fees expenses of $18,223. Professional fees for the nine months ended February 29, 2016, totaled $144,731 of which $99,731 was paid in cash and $45,000 was paid through the issuance of the Company’s common stock. Professional fees for the nine months ended February 28, 2015, totaled $126,508 of which $29,707 was paid in cash and $96,801 was through the issuance of the Company’s common stock. We expect selling, general, and administrative expenses to continue to increase in future periods as we initiate a number of marketing and promotional activities.

 

Financing costs for the nine months ended February 29, 2016 and February 28, 2015 was $3,134 and $-0-, respectively. Financing costs reflect the amortization of the costs incurred to sell the Company’s secured convertible promissory note in September 2015.

 

Interest expense for the nine months ended February 29, 2016 and 2015 was $5,778 and $1,175, respectively. Interest expense increased 392% in the nine months ended February 29, 2016 as compared to the same period the previous year. The increase reflects the increased debt incurred by the Company to finance operations.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

We maintain disclosure controls and procedures that are designed to ensure the information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As of February 29, 2016, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. 

 

MANAGEMENT’S QUARTERLY REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

There have been no changes in our internal controls over financial reporting during the quarter ended February 29, 2016 that have materially affected, or are reasonably likely to materially affect our internal controls.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None. 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINING SAFETY DISCLOSURE

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHBITS

 

 

Exhibit Number Description
31.1 Certification of the Chief Executive Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant to Rule 13a-14 or 15d-14 of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS * XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document

 

 

*Pursuant to Rule 406T of Regulation S-T, these interactive date files are deemed not filed or part of the registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability.

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

  HISPANICA INTERNATIONAL DELIGHTS OF AMERICA, INC.

 

Date: April 14, 2016

By: /s/ Fernando Oswaldo Leonzo

Fernando Oswaldo Leonzo

Chief Executive Officer, and Chairman of the Board

(Principal Executive Officer)

 

 

Date: April 14, 2016

By: /s/ Robert Gunther

Robert Gunther

Chief Operating Officer, and Director

(Principal Financial Officer)

 

 

 

 

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