Good Hemp, Inc. - FORM 10-Q - November 25, 2020

Attached files

file	filename
EX-32.2 - CERTIFICATION - Good Hemp, Inc.	ghmp_ex322.htm
EX-32.1 - CERTIFICATION - Good Hemp, Inc.	ghmp_ex321.htm
EX-31.2 - CERTIFICATION - Good Hemp, Inc.	ghmp_ex312.htm
EX-31.1 - CERTIFICATION - Good Hemp, Inc.	ghmp_ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _________ to ___________

GOOD HEMP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		000-54509		45-2578051
(State of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

20311 Chartwell Center Drive, Suite 1469

Cornelius, North Carolina 28031

1-800-947-9197

(Address of principal executive offices) (Zip code)

(Issuer's telephone number)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Not applicable.	Note applicable.	Not applicable.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Yes ☒ No ☐

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 24, 2020, there were 22,263,829 of shares of common stock, par value $0.001 per share issued, issuable and outstanding.

GOOD HEMP, INC.

(FORMERLY LONE STAR GOLD, INC.)

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

Condensed Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019 (Audited)		3

Condensed Statement of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)		4

Condensed Statement of Stockholders’ Deficit as of September 30, 2020 (unaudited)		5

Condensed Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)		6

Notes to Condensed Financial Statements (unaudited)		7

GOOD HEMP, INC.

(FORMERLY LONE STAR GOLD, INC.)

CONDENSED BALANCE SHEETS

	September 30, 2020			December 31, 2019
	(unaudited)
ASSETS
Current assets
Cash	$	37,752		$	48,088
Accounts receivable		7,210			-
Inventory		172,971			271,462
Prepaid expenses		130,616			-
Total current assets		348,549			319,550

Other assets
Branding agreement		2,700,000			-
Investment		63,433			-
Intellectual property		12,000			12,000
Total assets	$	3,123,982		$	331,550

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Convertible notes, net of discounts	$	286,910		$	62,339
Convertible notes to related parties, net of discounts		400,575			252,608
Notes payable		19,100			-
Accounts payable		145,094			19,035
Interest payable		33,027			28,689
Derivative liabilities		2,173,802			2,026,314
Total current liabilities		3,058,508			2,388,985
Total liabilities		3,058,508			2,388,985

Stockholders' deficit
Preferred stock - Class A - 30,000,000 shares authorized, $0.001 par value, 0 and 0 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		250			-
Common stock - 150,000,000 shares authorized, $0.001 par value, 22,263,829 and 1,952,470 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		22,264			1,953
Additional paid in capital		7,962,062			4,868,548
Accumulated deficit		(7,919,102	)		(6,927,936	)
Total stockholders' deficit		65,474			(2,057,435	)
Total liabilities and stockholders' deficit	$	3,123,982		$	331,550

The accompanying notes are an integral part of these unaudited condensed financial statements.

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GOOD HEMP, INC.

(FORMERLY LONE STAR GOLD, INC.)

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended						For the Six Months Ended
	September 30						September 30
	2020			2019			2020			2019
Net sales	$	102,010		$	70,540		$	383,356		$	177,477
Cost of sales		77,688			71,656			290,157			179,153
Gross profit		24,322			(1,116	)		93,199			(1,676	)

Operating expenses		290,922			86,208			456,511			125,821
Operating loss		(266,600	)		(87,324	)		(363,312	)		(127,497	)

Other income (expense)
Loss on derivative liabilities		119,848			-			(607,496	)		-
Interest expense		(3,192	)		-			(20,360	)		-
Other expense		-			918			-			(842	)
Total other income (expense)		116,657			918			(627,855	)		(842	)

Net loss	$	(149,944	)	$	(86,406	)	$	(991,166	)	$	(128,339	)

Net loss per share - basic and diluted	$	(0.01	)	$	(0.05	)	$	(0.06	)	$	(0.08	)

Weighted average number of common shares - basic and diluted		21,952,470			1,843,679			17,776,646			1,598,441

The accompanying notes are an integral part of these unaudited condensed financial statements.

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GOOD HEMP, INC.

(FORMERLY LONE STAR GOLD, INC.)

CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT

(unaudited)

	Preferred						Common				Additional			Accumu-
	Stock						Stock				Paid-in			lated
	Shares			Amount			Shares		Amount		Capital			Deficit			Total

Balance, December 31, 2018		30,000,000		$	30,000			1,434,720	$	1,435	$	5,089,066		$	(5,230,429	)	$	(109,928	)
Return of preferred stock to treasury		(12,000,000	)		(12,000	)		-		-		-			-			(12,000	)
Purchase of intellectual property		12,000,000			12,000			-		-		-			-			12,000
Conversion of note payable into common stock		-			-			67,750		68		49,932			-			50,000
Net loss for the three months ended March 31, 2019		-			-			-		-		-			(7,849	)		(7,849	)
Balance, March 31, 2019		30,000,000		$	30,000			1,502,470	$	1,503	$	5,138,998		$	(5,238,278	)	$	(67,777	)
Net loss for the three months ended June 30, 2019															(34,084	)		(34,084	)
Balance, June 30, 2019		30,000,000		$	30,000			1,502,470	$	1,503	$	5,138,998		$	(5,272,362	)	$	(101,861	)
Preferred stock purchase		(18,000,000	)		(18,000	)		-		-		(282,000	)		-			(300,000	)
Conversion of preferred stock to common stock		(12,000,000	)		(12,000	)		450,000		450		11,550			-			-
Net loss for the three months ended September 30, 2019		-			-			-		-		-			(86,406	)		(86,406	)
Balance, September 30, 2019		-		$	-			1,952,470	$	1,953	$	4,868,548		$	(5,358,768	)	$	(488,267	)

Balance, December 31, 2019		-		$	-			1,952,470	$	1,953	$	4,868,548		$	(6,927,936	)	$	(2,057,435	)
Issuance of common stock for branding agreement		-			-			6,000,000		6,000		2,694,000			-			2,700,000
Issuance of common stock to William Alessi		-			-			7,000,000		7,000		-			-			7,000
Issuance of common stock to Chris Chumas		-			-			7,000,000		7,000		-			-			7,000
Net loss for the three months ended March 31, 2020		-			-			-		-		-			(188,551	)		(188,551	)
Balance, March 31, 2020		-		$	-			21,952,470	$	21,953	$	7,562,548		$	(7,116,487	)	$	468,014
Net loss for the three months ended June 30, 2020		-			-			-		-		-			(652,671	)		(652,671	)
Balance, June 30, 2020		-		$	-			21,952,470	$	21,953	$	7,562,548		$	(7,769,158	)	$	(184,657	)
Issuance of Series B-1 preferred stock		250,000			250			-		-		249,750			-			250,000
Issuance of common stock for conversion of convertible note		-			-			111,359		111		59,889			-			60,000
Issuance of common stock for services		-			-			160,000		160		119,840			-			120,000
Issuance of common stock for joint venture		-			-			40,000		40		19,960						20,000
Amortization of derivative liabilities		-			-			-		-		(49,925	)					(49,925	)
Net loss for the three months ended September 30, 2020		-			-			-		-		-			(149,944	)		(149,944	)
Balance, September 30, 2020		250,000		$	250			22,263,829	$	22,264	$	7,962,062		$	(7,919,102	)	$	65,474

The accompanying notes are an integral part of these unaudited condensed financial statements.

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GOOD HEMP, INC.

(FORMERLY LONE STAR GOLD, INC.)

CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30,

(unaudited)

	2020			2019
Cash flows from operating activities:
Net loss	$	(991,166	)	$	(128,339	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense		-			-
Stock-based compensation		52,500			-
Loss on derivative liabilities		(607,496	)		-
Changes in operating assets and liabilities:
Accounts receivable		(7,210	)		(15,443	)
Prepaid expenses		(130,616	)		-
Inventory		98,491			(239,196	)
Accounts payable		126,059			61,234
Interest payable		4,338			-
Net cash used in operating activities		(1,455,099	)		(321,744	)

Cash flows from investing activities:
Acquisition of intellectual property		-			(12,000	)
Net cash flows from investing activities		-			(12,000	)

Cash flows from financing activities:
Convertible notes payable to related parties, net of discounts		147,967			-
Convertible notes payable, net of discounts		966,084			-
Issuance of notes payable		19,100
Conversion of note payables to common stock, net		60,000			50,000
Issuance of preferred stock		250,000			12,000
Issuance of note to unrelated party		-			62,000
Issuance of notes to owner, net of owner advances		-			214,030
Net cash provided by financing activities		1,443,151			338,030

Net change in cash		(11,948	)		4,286

Cash and cash equivalents - beginning of period		48,088			-

Cash and cash equivalents - end of period	$	36,140		$	4,286

Supplemental non-cash information
Preferred stock purchases and returns to treasury, net	$	-		$	300,000
Conversion of preferred stock into common stock	$	-		$	12,000
Non-cash interest expense	$	-		$	9,655
Spire Branding Agreement for common stock	$	2,700,000		$	-
Conversion of notes payable into common stock	$	14,000		$	-

The accompanying notes are an integral part of these unaudited condensed financial statements.

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GOOD HEMP, INC.

(FORMERLY LONE STAR GOLD, INC.)

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020

(UNAUDITED)

NOTE 1 – NATURE OF OPERATIONS

Good Hemp, Inc. (the “Company” or “Good Hemp”), formerly known as Keyser Resources, Inc., and Lone Star Gold, Inc., was incorporated in the State of Nevada on November 26, 2007.

The Company was involved in the exploration and development of mining properties until September 30, 2013, when it discontinued operations. In 2017, the Company was put into receivership and in 2018, it emerged from receivership. On September 11, 2019, the Company's Board of Directors, pursuant to Nevada Revised Statute 92A.280, amended the Company's Articles of Incorporation to change the name of the Company from Lone Star Gold, Inc. to Good Hemp, Inc. The amendment was filed with the Nevada Secretary of State on September 12, 2019.

The Company is now a North Carolina based company that is made up of industry veterans focused on exploiting niche markets in the hemp industry. Good Hemp® includes two lines of hemp-based beverages. Good Hemp® 2oh! is a hemp-derived, CBD-infused line of flavored waters, and Good Hemp® fizz! is a line of carbonated hemp oil infused sodas. Good Hemp® products have been sold throughout the United States since 2016 via Amazon.com, as well as local retailers.

By establishing a comprehensive distribution system, Good Hemp® has secured listings for its products with regional and national grocery and convenience chain stores.

Effective July 1, 2020, the Board of Directors (the “Board”) of the Company appointed Scott Shellady to serve as the Chief Strategic Officer of the Company. In connection with Mr. Shellady’s appointment, on or about June 24, 2020 (with an effective date of July 1, 2020), the Company entered into a consulting services agreement with Mr. Shellady, pursuant to which Mr. Shellady would (i) render marketing, sales, distribution, and branding services to the Company; and (ii) would be paid $5,000 per month and 100,000 shares of Company common stock for services rendered during the initial term from July 1, 2020, through December 31, 2020.

On July 21, 2020, the Company filed with the State of Nevada a Certificate of Designation designating 250,000 shares of the Company’s authorized preferred stock as Series B-1 Convertible Preferred Stock (the “Series B-1 Preferred Stock”). Each share of Series B-1 Preferred Stock is convertible into 1.667 shares of Company common stock (subject to a 4.99% beneficial ownership limitation). The Series B-1 Preferred Stock entitles the holder to piggy-back registration rights and one vote per share.

Also, on July 21, 2020, the Company filed with the State of Nevada a Certificate of Designation designating 750,000 shares of the Company’s authorized preferred stock as Series B-2 Convertible Preferred Stock (the “Series B-2 Preferred Stock”). Each share of Series B-2 Preferred Stock is convertible into a number of shares of Company common stock equal to $1.00 divided by (i) the lesser of $0.60 or 60% of the 14-day average closing price of the Company’s common stock at the time of conversion (the “Market Price”) if the conversion occurs within 6 months of July 21, 2020, or (ii) 60% of the Market Price if the conversion occurs at least 6 months after July 21, 2020 (subject to a 4.99% beneficial ownership limitation). The Series B-2 Preferred Stock entitles the holder to one vote per share.

The outbreak of the coronavirus (COVID-19) resulted in increased travel restrictions, and shutdown of businesses, which may cause slower recovery of the economy. We may experience impact from quarantines, market downturns and changes in customer behavior related to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and could cause decreases in or delays in advertising spending and reduce and/or negatively impact our short-term ability to grow our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America and has a year-end of December 31.

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

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The unaudited condensed financial statements of the Company for the three and six month periods ended September 30, 2020 and 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2019 was derived from the audited financial statements included in the Company's financial statements as of and for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2020. These unaudited condensed financial statements should be read in conjunction with that report.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability of long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Impairment of Long-Lived Assets

Long-lived assets and certain identifiable intangible assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Fair Value of Financial Instruments

The FASB issued ASC 820-10, Fair Value Measurements and Disclosures, for financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required by the standard that the Company uses to measure fair value:

-	Level 1: Quoted prices in active markets for identical assets or liabilities
-	Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
-	Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.

Cash and Cash Equivalents

For purposes of the statement of cash flows, cash equivalents include demand deposits, money market funds, and all highly liquid debt instructions with original maturities of three months or less.

The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

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Inventory

Inventory consisting of raw materials and finished product is stated at the lower of cost (first in, first out method) or net realizable value.

Concentration and Credit Risk

The Company does not have any financial asset and therefore is not exposed to any credit risks.

Cash - The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable consists of product sales to customers. Trade accounts receivable are generally due 30 days after issuance of the invoice. Receivables past due more than 120 days are considered delinquent. Delinquent receivables are written off based on specific circumstances of the customer. At September 30, 2020, an allowance was not deemed necessary.

Derivative Financial Instruments

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company used a Black Scholes valuation model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Commitment and Contingencies

The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

The Company follows ASC 440-10, Commitments, to report accounting for certain commitments.

Net Loss Per Common Share

The Company computes net income or loss per share in accordance with ASC 260 Earnings per Share. Under the provisions of the Earnings per Share Topic ASC, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents; however, potential common shares are excluded if their effect is anti-dilutive.

Income Taxes

The Company accounts for its income taxes in accordance with ASC 740 Income Taxes, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. 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 operations in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that would otherwise be recorded for income tax benefits primarily relating to operating loss carryforwards as realization cannot be determined to be more likely than not.

The statement establishes a more-likely-than-not threshold for recognizing the benefits of tax return positions in the financial statements. Also, the statement implements a process for measuring those tax positions which meet the recognition threshold of being ultimately sustained upon examination by the taxing authorities. There are no uncertain tax positions taken by the Company on its tax returns and the adoption of the statement had no material impact to the Company’s financial statements. The Company files tax returns in the US and states in which it has operations and is subject to taxation. Tax years subsequent to 2013 remain open to examination by U.S. federal and state tax jurisdictions.

Revenue Recognition

Revenue is recognized in accordance with ASC 606. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

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The Company recognizes revenue upon completion of our performance obligations or expiration of the contractual time to use services such as professional service hours purchased in bulk for a given time period.

Recently Issued Accounting Pronouncements

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees except for certain circumstances. Any transition impact will be a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. This ASU is effective for the annual period beginning after December 15, 2018, including interim periods within that annual period and early adoption is permitted. We adopted this guidance on January 1, 2019 and the adoption of ASU No. 2018-07 did not have a material impact on our financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Qualitative and quantitative disclosures are required, and optional practical expedients may be elected. This ASU is effective for the annual period beginning after December 15, 2018, including interim periods within that annual period. Subsequent amendments to the initial guidance have been issued in January 2017, January 2018, and July 2018 within ASU No. 2017-03, ASU No. 2018-01, ASU No. 2018-10, and ASU No. 2018-11 regarding qualitative disclosures, optional practical expedients, codification improvements and an optional transition method to adopt with a cumulative-effect adjustment versus a modified retrospective approach. These updates do not change the core principle of the guidance under ASU No. 2016-02, but rather provide implementation guidance. We adopted this guidance on January 1, 2019 and the adoption of ASU No. 2016.02 did not have a material impact on our financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded. ASU No. 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. This pronouncement did not have a material impact on our financial statements.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted. This pronouncement did not have a material impact on our financial statements.

In February 2018, the FASB issued ASU No. 2018-02 (ASU No. 2018-02), “Income Statement - Reporting Comprehensive Income (Topic 220)”, which amended the previous guidance to allow for certain tax effects “stranded” in accumulated other comprehensive income, which are impacted by the Tax Reform Act signed into law on December 22, 2017, to be reclassified from accumulated other comprehensive income into retained earnings. This amendment pertains only to those items impacted by the new tax law and does not apply to any future tax effects stranded in accumulated other comprehensive income. This standard was effective for fiscal years beginning after December 15, 2018 and allowed for early adoption. The adoption of ASU No. 2018-02 did not have an impact on the Company’s financial position, results of operations and liquidity.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements on fair value measurement by removing, modifying, and adding certain disclosures. This ASU is effective for the annual period beginning after December 15, 2019, including interim periods within that annual period. We do not expect this pronouncement will have a material impact on our financial statements.

In August 2018, the SEC adopted amendments to simplify certain disclosure requirements, as set forth in Securities Act Release No. 33-10532, Disclosure Update and Simplification, which includes a requirement for entities to present the changes in shareholders’ equity in the interim financial statements in quarterly reports on Form 10-Q. This amendment is effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendment and proximity to the filing date for most filers’ quarterly reports, the SEC has allowed for a filer’s first presentation of the changes in shareholders’ equity to be included in its Form 10-Q for the quarter that begins after the effective date. This pronouncement did not have a material impact on our financial statements.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, “Intangibles–Goodwill and Other–Internal–Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU No. 2018-15 is effective for the Company on a prospective or retrospective basis beginning on January 1, 2020, with early adoption permitted. This pronouncement did not have a material impact on our financial statements.

The Company has evaluated all recent accounting pronouncements and determined that the adoption of pronouncements applicable to the Company has not had or is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

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NOTE 3 – GOING CONCERN

The Company's unaudited condensed financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has recurring operating losses, an accumulated deficit and a working capital deficiency. Management’s plans include raising capital in the debt and equity markets. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until its operations become established enough to be considered reliably profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the financial statements, the Company had a working capital deficit of $2,709,959 at September 30, 2020 and had a loss of $991,166 for the nine months ended September 30, 2020, which raises substantial doubt as to the Company’s ability to continue as a going concern in the future.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company is unable to continue as a going concern.

NOTE 4 – INTANGIBLE ASSETS

On February 6, 2019, the Company, entered into an Intellectual Property Purchase Agreement (the “Agreement”) with S. Mark Spoone, a Colorado corporation (the “Seller”), to acquire all of Mr. Spoone’s intellectual property associated with Mr. Spoone’s “Good Hemp” hemp-derived CBD-infused line of consumer beverages, for a purchase price consisting of 12,000,000 shares of the Company’s Class A preferred shares for a total value of $12,000. The transaction was completed on February 12, 2019.

On April 30, 2019, the Company acquired from S. Mark Spoone the CANNA HEMP and CANNA trademarks including all rights and trade secrets and related inventory for consideration totaling $32,462.39. At September 30, 2020, the Company had not attributed any value to the acquired trademarks.

Effective February 28, 2020, the Company entered into a Branding Agreement (the “Branding Agreement”) with Spire Holdings, LLC (“Spire”), pursuant to which the Company would immediately issue Spire 6,000,000 shares of the Company’s common stock (the “Spire Shares”), and Spire would provide the Company (i) 7 primary NASCAR Cup Series No. 77 entry automobile, team and drivers (“Car”) sponsorships, and (ii) 25 associate or secondary sponsorships in connection with the Car, subject to NASCAR and network television approval. Pursuant to the Branding Agreement, Spire has some antidilution protection and piggyback registration rights with respect to the Spire Shares.

The Company recorded an intangible asset in the amount of $2,700,000 based on the closing price of GHMP common shares of $0.45 on February 28,2020.

NOTE 5 – NOTES PAYABLE

On March 14, 2019, the Company borrowed $50,000 from an unrelated third party. The loan was unsecured, bore interest at 8% per year, and was due and payable on September 14, 2019. At the option of the note holder, the note may at any time be converted into shares of the Company’s common stock. The number of shares to be issued upon conversion would be determined by dividing the amount to be converted by 60% of the average of the three lowest closing prices of the Company’s common stock during the ten trading days immediately preceding the conversion date. If at any time prior to July 14, 2020, the Company sold or issued any shares of its common stock at a price below $1.20 per share, the Company would issue such number of additional shares of its common stock to the note holder as determined by the following:

B = C

$1.20 = D

C – D = Number of additional shares to be issued to the note holder

Where:

A = The principal amount of the note previously converted by the note holder.

B = The price per share at which the Company’s common stock was sold or issued.

On March 15, 2019, the note holder exercised its option to convert the note into 67,750 restricted shares of the Company’s common stock. The common stock was issued to the note holder in April 2019.

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On March 30, 2020, the Company entered into a securities purchase agreement (the “SPA”) with Power Up Lending Group Ltd., a Virginia corporation (the “Investor”), pursuant to which the Company agreed to issue to the Investor a 10% Convertible Promissory Note (the “Note”), dated March 23, 2020, in the principal amount of $67,500. The Note was funded by the Investor on March 30, 2020, and on such date pursuant to the SPA, the Company reimbursed the Investor for expenses for legal fees and due diligence of $2,500. The SPA includes customary representations, warranties and covenants by the Company and customary closing conditions.

The Note matures 12 months after the date of the Note on March 23, 2021. The Note is convertible into shares of the Company’s common stock beginning on the date which is 180 days from the date of the Note, at a conversion price equal to 65% multiplied by the lowest closing bid price during the 20 trading day period ending on the last complete trading day prior to the date of conversion; provided, however, that the Investor may not convert the Note to the extent that such conversion would result in the Investor’s beneficial ownership of the Company’s common stock being in excess of 4.99% of the Company’s issued and outstanding common stock. The beneficial ownership limitation may not be waived by the Investor.

The Note carries a prepayment penalty if the Note is paid off in 60, 90, 120,150, or 180 days following the Note date. The prepayment penalty is based on the then-outstanding principal at the time of payoff, plus accrued and unpaid interest, multiplied by 115%, 120%, 125%, 130%, and 135% respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment.

Effective April 8, 2020, the Company and its lender, GS Capital Partners, LLC, entered into a forbearance agreement relating to the Lender’s promissory note dated October 8, 2019, in the original principal amount of $103,000, pursuant to which the Company would pay the Lender $40,000 by April 10, 2020, and $80,000 by May 10, 2020. The Company made both payments, with the final payment made on May 11, 2020, since May 10, 2020, was a Sunday, and the lender’s note is now considered paid in full.

Effective May 8, 2020, the Company entered into a securities purchase agreement with Power Up Lending Group Ltd., a Virginia corporation (“Power Up”), pursuant to which the Company agreed to issue to the Power Up an 8% Convertible Promissory Note, dated May 7, 2020, in the principal amount of $42,000. The note was funded by the Power Up on May 8, 2020, and on such date pursuant to the securities purchase agreement, the Company reimbursed the Power Up for expenses for legal fees and due diligence of $2,000. The securities purchase agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The note matures 12 months after the date of the note on May 7, 2021. The note is convertible into shares of the Company’s common stock beginning on the date which is 180 days from the date of the note, at a conversion price equal to 65% multiplied by the lowest closing bid price during the 20 trading day period ending on the last complete trading day prior to the date of conversion; provided, however, that Power Up may not convert the note to the extent that such conversion would result in Power Up’s beneficial ownership of the Company’s common stock being in excess of 4.99% of the Company’s issued and outstanding common stock. The beneficial ownership limitation may not be waived by Power Up. The note carries a prepayment penalty if the note is paid off in 30, 60, 90, 120, 150, or 180 days following the note date. The prepayment penalty is based on the then-outstanding principal at the time of payoff, plus accrued and unpaid interest, multiplied by 112%, 115%, 118%, 125%, 130%, and 135% respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment.

On July 31, 2020, the Company issued a Convertible Promissory Note (the “JRF Note”) to JRF AZ Investments II, LP (the “JRF Investor”), in the principal amount of $60,000, which was funded on July 31, 2020. The JRF Note matured nine months after the date of the note and was convertible into shares of the Company’s common stock at a conversion price equal to 60% of the average closing price during the 10 trading day period ending on the trading day prior to conversion. On August 1, 2020, the JRF Investor elected to convert the entire JRF Note into Company common stock and was subsequently issued 111,359 shares of Company common stock in conversion thereof.

On August 4, 2020, the Company entered into a securities purchase agreement with DGF Services, Inc. The note is for $10,000 bearing interest at 7% per annum and has a conversion price of $0.60 per share. The note matures on February 3, 2021.

On August 18, 2020, the Company entered into a securities purchase agreement with Power Up pursuant to which the Company agreed to issue to the Investor an 8% Convertible Promissory Note, dated August 18, 2020, in the principal amount of $128,000. The note was funded by the Investor on August 18, 2020, and on such date pursuant to the securities purchase agreement, the Company reimbursed the Investor for expenses for legal fees and due diligence of $2,000. The securities purchase agreement includes customary representations, warranties and covenants by the Company and customary closing conditions. The note matures 12 months after the date of the note on August 17, 2021. The note is convertible into shares of the Company’s common stock beginning on the date which is 180 days from the date of the note, at a conversion price equal to 65% multiplied by the lowest closing bid price during the 20 trading day period ending on the last complete trading day prior to the date of conversion; provided, however, that the Investor may not convert the note to the extent that such conversion would result in the Investor’s beneficial ownership of the Company’s common stock being in excess of 4.99% of the Company’s issued and outstanding common stock. The beneficial ownership limitation may not be waived by the Investor. The note carries a prepayment penalty if the note is paid off in 30, 60, 90, 120, 150, or 180 days following the note date. The prepayment penalty is based on the then-outstanding principal at the time of payoff, plus accrued and unpaid interest, multiplied by 112%, 115%, 118%, 125%, 130%, and 135% respectively. After the expiration of 180 days following the issue date, the Company shall have no right of prepayment.

NOTE 6 – RELATED PARTY TRANSACTIONS

All related party transactions are recorded at the exchange amount which is the value established and agreed to by the related party. Mr. William Alessi, CEO, is the Principal Executive Officer and director of the Company. The JanBella Group is an entity controlled by Mr. Alessi. Chris Chumas is a director and a minority shareholder of the Company.

A payable to a related party of $17,574 to Maurice Bideaux, the Company’s former chief executive officer and director, was forgiven by Mr. Bideaux in 2010. An additional advance from Mr. Bideaux of $38,910 remains unpaid.

On February 6, 2019, Mr. William Alessi, the Company’s CEO and one of its directors, personally sold 6,000,000 shares of the Company’s Class A Preferred Shares to Chris Chumas for $100,000 in cash.

During the quarter ended March 31, 2019, Mr. Alessi returned to treasury 12,000,000 shares of Class “A” preferred shares to facilitate the acquisition of certain intellectual property as disclosed below and in Note 4 above. As a result, $12,000 has been added to his loan account in lieu of payment.

On July 18, 2019, the Company issued promissory notes to Mr. Alessi, JanBella Group and Mr. Chumas to evidence the amounts they advanced to the Company. The notes are due on demand, bear interest at 10% per year, and are secured by all of the Company's assets. At the option of the noteholders, the notes may be converted into shares of the Company's common stock. The number of shares which will be issued upon any conversion of the notes will be determined by dividing the principal amount to be converted (plus, at the option of the noteholder, accrued and unpaid interest) by the lower of (i) $0.001 or, (ii) 50% of the lowest bid price during the forty-five consecutive trading day period ending on the trading day immediately prior to the conversion date.

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On or about July 22, 2019, the Company purchased shares of its Class A Preferred Shares from the following persons:

	Class A
Name	Preferred Shares		Consideration
William Alessi		12,000,000	$	200,000	(1)

Chris Chumas		6,000,000	$	100,000	(1)

____________

(1) Payment for the preferred shares was in the form of notes. The notes bear interest at 8% per year, are due and payable on December 31, 2019, and are unsecured.

On or about July 22, 2019, S. Mark Spoone converted his 12,000,000 Class A Preferred Shares into 450,000 shares of the Company's common stock.

On January 29, 2020, the Company issued 7,000,000 shares of its common stock to each of William Alessi and Chris Chumas, respectively, for partial conversion of their promissory notes in the principal amount of $7,000 each, respectively.

The following table presents principal amounts due, and common and preferred shares held by William Alessi, Chris Chumas and S. Mark Spoone as of September 30, 2020:

			Interest			Common Shares			Preferred Shares
Name	Principal		rate			#			#
Chris Chumas	$	143,287	8%-10		%		7,000,000		nil

William Alessi		349,317	0%-10		%		6,971,050	(1)	nil

JanBella Group ⁽²⁾		110,000		10	%	nil			nil

S. Mark Spoone	nil						450,000		nil

Total	$	602,605

⁽¹⁾Includes 6,971,000 shares held in the name of Mr. Alessi’s trust, and 50 shares held in the name of Mr. Alessi’s IRA.

⁽²⁾Mr. Alessi’s entity.

See Part II – Unregistered Sales of Equity Securities and Use of Proceeds regarding the sale of unregistered securities and use of proceeds.

NOTE 7 – DERIVATIVE LIABILITIES

The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2020. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.

For the nine months ended September 30, 2020, the assumptions utilized in estimating fair values of the liabilities measured on a recurring basis are as follows:

	Nine months ended
	September 30, 2020
Expected term	1.00 years
Expected average volatility		425	%
Expected dividend yield		-
Risk-free interest rate		1.59	%

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The fair value measurements of the derivative liabilities at September 30, 2020 is summarized:

Total				Level 1				Level 2				Level 3
$	2,123,877			$	-			$	-			$	2,123,877

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Legal Matters

The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows. As of November 24, 2020, the Company did not have any legal actions pending against it.

Commitments

The Company entered into various Seed Resale Agreements to sell Hemp seeds to growers. The Company is obligated to purchase from the growers’ minimum future quantities of hemp biomass.

NOTE 9 – CAPITAL STOCK

On February 28, 2019, the Company was advised that FINRA had received the necessary documentation to announce a 1:100 reverse split. This corporate action took effect on March 1, 2019, and on that date every 100 outstanding shares of the Company’s common stock share were automatically converted into one share of common stock (with fractional shares rounded up to the nearest whole share). The accompanying financials have been retroactively adjusted to reflect the 1:100 reverse split.

On February 6, 2019, the Company issued 12,000,000 shares of its Class “A” preferred shares to S. Mark Spoone in consideration for the acquisition of Spoone’s trademarks and intellectual property, which included all rights and trade secrets to the hemp-derived CBD-infused line of consumer beverages sold under the “Good Hemp” brand. Since then, the Company has been conducting operations under the “Good Hemp” trade name.

On February 12, 2019 Chris Chumas acquired 6,000,000 shares of preferred stock from William Alessi for $100,000 in cash.

During the quarter ended March 31, 2019, Mr. Alessi returned to treasury 12,000,000 shares of Class “A” preferred shares to facilitate the acquisition of certain intellectual property as disclosed in Note 4. As result $12,000 has been added to his loan account in lieu of payment.

On January 29, 2020, the Company issued 7,000,000 shares of its common stock to each of William Alessi and Chris Chumas, respectively, for partial conversion of promissory notes in the principal amount of $7,000 each, respectively.

On February 28, 2020, the Company entered into a Branding Agreement (the “Branding Agreement”) with Spire Holdings, LLC (“Spire”), pursuant to which the Company would immediately issue Spire 6,000,000 shares of the Company’s common stock (the “Spire Shares”), and Spire would provide the Company (i) 7 primary NASCAR Cup Series No. 77 entry automobile, team and drivers (“Car”) sponsorships, and (ii) 25 associate or secondary sponsorships in connection with the Car, subject to NASCAR and network television approval. Pursuant to the Branding Agreement, Spire has some anti-dilution protection and piggyback registration rights with respect to the Spire Shares.

On August 24, 2020, with an effective date of July 1, 2020, the Company entered into a joint venture agreement with Paul Hervey (“Hervey”), an individual, for the purpose of cultivating hemp. Hervey is a licensed hemp cultivator in good standing under the laws of North Carolina with approximately 3,700 square feet of greenhouse cultivation space and approximately 9 acres of farmable land (the “Facility”). Under the joint venture agreement, Good Hemp will contribute up to $160,000 for the preparation of the Facility, as well as up to $174,000 as ongoing operational expenses for the joint venture, and Hervey will contribute exclusive use of the Facility, as well as purchase services and/or purchase or lease necessary equipment for the planting, cultivation and irrigation for growing hemp, and profits shall be split equally by the parties after reimbursement of expenses paid by the parties. The joint venture shall conduct business under the name “Olin Farms, LLC”. On or about August 20, 2020, the Company compensated Hervey $53,433.33 for the initial expenses of the joint venture. The payment was made as follows: (i) a check payable to Hervey in the amount of $33,433.33, and (ii) the issuance of 40,000 shares of Company common stock in lieu of a $20,000 cash payment.

See Part II – Unregistered Sales of Equity Securities and Use of Proceeds regarding the sale of unregistered securities and use of proceeds.

NOTE 10 – TERMINATION OF MATERIAL CONTRACT

In 2018, the Company had entered into an agreement with Infinity, Inc. (“Infinity”). On February 6, 2019, the Company terminated its agreement with Infinity since the transaction had not closed by January 14, 2019, as required by the agreement.

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated all transactions from September 30, 2020, through the financial statement issuance date for subsequent event disclosure consideration and noted no significant subsequent event that needs to be disclosed other than as set forth below.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed on March 30, 2020, and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

Company Overview and Product Brands

The Company was formed as a Nevada corporation on November 26, 2007. The Company was involved in exploration and development of mining properties until September 30, 2013, when it discontinued operations. In June 2017, the Company’s creditors filed a petition in the District Court of Harris County, Texas for the appointment of a receiver. In August of 2017, the court appointed a receiver (who was subsequently appointed as an officer and director of the Company), and in February 2018, the receiver appointed William Alessi as a director of the Company and then resigned as a director and officer of the Company.

On February 6, 2019, the Company acquired trademarks and intellectual property, which includes all rights and trade secrets to the hemp-derived CBD-infused line of consumer beverages sold under the “Good Hemp” brand. Since then, the Company has been conducting operations under the “Good Hemp” trade name and through the http://www.goodhemplivin.com/ website. Information on this website is not a part of this report on Form 10-Q.

On April 30, 2019, the Company acquired from Mr. Spoone the “CANNA HEMP” and “CANNA” trademarks including all rights and trade secrets and related inventory. At September 30, 2020, the Company had not attributed any value to these acquired trademarks.

The Company is now a North Carolina based company that is made up of industry veterans focused on exploiting niche markets in the hemp industry. The Company’s Good Hemp® products include two lines of hemp-based beverages described below. Good Hemp® products have been sold throughout the United States since 2016 via Amazon.com, as well as local retailers.

Products

Good Hemp® includes two lines of hemp-based beverages, Good Hemp® 2oh! and Good Hemp® fizz! sodas.

Good Hemp® 2oh! is a line-up of refreshing, all-natural, “good-for-you”, ready-to-drink waters in six flavors: blueberry-blast, island coco-lime, kiwi-strawberry, lemon-twist, mango-fandango and Q-cumbermint. Each Good Hemp® 2oh! beverage is 16.9 fluid ounces infused with 10mg of hemp oil (CBD rich), 6g of prebiotic fiber, has no sugar, contains no artificial sweeteners or flavors, is gluten free, vegan, and contains no net carbs. Production of this beverage began in May 2019.

Good Hemp® fizz is a line-up of carbonated refreshing, all-natural, “good-for-you”, “ready-to-drink carbonated beverages in three flavors: blueberry-bam, mango-tango and citrus-twist. Each Good Hemp® fizz beverage is 12 fluid ounces infused with 10mg of hemp oil (CBD rich), 6g of prebiotic fiber, contains no artificial sweeteners or flavors, and is gluten free and vegan. Production of this beverage began in July 2019.

As of September 30, 2020, these beverages were being sold in over 600 stores in the United States.

Overview and Mission

Our mission is to be one of the market leaders in the development and marketing of natural and functional hemp-derived beverage products to a significant segment of the population, with the products being convenient and appealing to consumers. We have an experienced management team of beverage industry, marketing and financial markets executives that have strong relationships in the industry.

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Emerging Growth Company Status

We are an “emerging growth company” as defined under the Jumpstart Our Business Startups Act, commonly referred to as the JOBS Act. We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

As an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to:

•	not being required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act (we also will not be subject to the auditor attestation requirements of Section 404(b) as long as we are a “smaller reporting company,” which includes issuers that had a public float of less than $75 million as of the last business day of their most recently completed second fiscal quarter);

•	reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

•	exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Under this provision, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In other words, an “emerging growth company” can delay the adoption of such accounting standards until those standards would otherwise apply to private companies until the first to occur of the date the subject company (i) is no longer an “emerging growth company” or (ii) affirmatively and irrevocably opts out of the extended transition period provided in Securities Act Section 7(a) (2) (B). The Company has elected to take advantage of this extended transition period and, as a result, our financial statements may not be comparable to the financial statements of other public companies. Accordingly, until the date that we are no longer an “emerging growth company” or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a) (2) (B), upon the issuance of a new or revised accounting standard that applies to your financial statements and has a different effective date for public and private companies, clarify that we will disclose the date on which adoption is required for nonemerging growth companies and the date on which we will adopt the recently issued accounting standard.

Our Growth Strategy

Expanding our US distribution reach to service national chain stores; increase awareness of our brand in the United States; securing additional chain, convenience and key account store listings for all our brands nationwide and internationally; -increasing our warehouse direct to retail channel; focusing on full service Class “A” distributors; and focusing on placing our products in produce, natural and cold sets as opposed to the grocery aisles.

Results of Operations

For the three months ended September 30, 2020 compared to the three months ended September 30, 2019

Revenue

During the three months ended September 30, 2020, the Company generated $102,010 in net sales compared to $70,540 for the same period in 2019. The increase is primarily due to increased sales of the Company’s products.

Operating Expenses

The Company had cost of sales of $77,688 for the three months ended September 30, 2020, compared to $71,656 for the same period in 2019. The increase was primarily due to increased sales of the Company’s products.

The Company incurred general and administrative expenses totaling $290,922 for the three months ended September 30, 2020, compared to $86,208 for the same period in 2019. The increase was primarily due to increasing professional fees associated with being a public company and increasing operations.

Net Loss

The Company had a net loss of $149,944 for the three months ended September 30, 2020, compared to a net loss of $86,406 for the same period in 2019. This increase was primarily due to an increase in the Company’s derivative liabilities associated with convertible promissory notes which recorded a gain on derivative liabilities of $119,848, as compared to $0 for the same period in 2019.

For the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019

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Revenue

During the nine months ended September 30, 2020, the Company generated $383,356 in net sales compared to $177,477 for the same period in 2019. The increase is primarily due to increased sales of the Company’s products.

Operating Expenses

The Company had cost of sales of $290,157 for the nine months ended September 30, 2020, compared to $179,153 for the same period in 2019. The increase was primarily due to increased sales of the Company’s products.

The Company incurred general and administrative expenses totaling $456,511 for the nine months ended September 30, 2020 compared to $125,821 for the same period in 2019. The increase was primarily due to increasing professional fees associated with being a public company and increasing operations.

Net Loss

The Company had a net loss of $991,166 for the nine months ended September 30, 2020, compared to a net loss of $128,339 for the same period in 2019. This increase was primarily due to an increase in the Company’s derivative liabilities associated with convertible promissory notes which recorded a loss on derivative liabilities of $607,496, as compared to $0 for the same period in 2019.

Liquidity and Capital Resources

We had cash used in operations of $1,455,099 for the nine months ended September 30, 2020, compared to $321,744 for the nine months ended September 30, 2019. The increase in cash used in operating activities for the nine months ended September 30, 2020 is attributable to the loss on derivative liabilities of $607,496 and the net loss of $991,166 compared to $0 and $128,339, respectively, for the same period ended September 30, 2019.

We had cash used in investing activities of $0 for the nine months ended September 30, 2020, and $12,000 for the nine months ended September 30, 2019.

We had cash provided by financing activities of $1,443,151 for the nine months ended September 30, 2020, compared to cash provided by $338,030 for the same period in 2019.

As of September 30, 2020, the Company had cash and cash equivalents of $37,752. We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $200,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, inventory purchases, legal and accounting fees.

As of September 30, 2020, and 2019, the Company has primarily been funded by Mr. Alessi and Mr. Chumas. In addition, the Company has issued convertible notes to unrelated third parties. As of September 30, 2020, and December 31, 2019, related party notes totaled $400,575 and $252,608, net of discounts, respectively, and third-party notes totaled $286,910 and $62,339, net of discounts, respectively.

The Company does not know of any trends, demands, commitments, events or uncertainties that will result in, or that are reasonable likely to result in, our liquidity increasing or decreasing in any material way.

The Company does not know of any significant changes in expected sources and uses of cash.

The Company does not have any commitments or arrangements from any person to provide it with any equity capital.

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the financial statements, the Company had a working capital deficit of $2,709,959 at September 30, 2020, and had a loss of $991,166 for the nine months ended September 30, 2020, which raises substantial doubt as to the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

Off Balance Sheet Arrangements

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

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Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

Reclassification of Certain Expenses

The results of operations as of September 30, 2020 were prepared on a consistent basis with prior periods.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

Item 4. – Control and Procedures

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

•	The Company does not have a majority of independent directors;
•	Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
•	Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting; and
•	Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.
•	To remediate our internal control weaknesses, management intends to implement the following measures: as funding permits, the Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements; the Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting; and upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management hopes to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

Changes in Internal Control over Financial Reporting

During the fiscal quarter covered by this Quarterly Report, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than disclosed herein, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

Item 1A. Risk Factors

Not required.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Effective July 1, 2020, Scott Shellady was appointed to serve as the Chief Strategic Officer of the Company. On June 24, 2020, the Company entered into a consulting services agreement with Mr. Shellady, pursuant to which Mr. Shellady would (i) render marketing, sales, distribution, and branding services to the Company; and (ii) would be paid $5,000 per month and 100,000 shares of Company common stock (the “Shellady Shares”) for services rendered during the initial term from July 1, 2020, through December 31, 2020. The Shellady Shares were issued to Mr. Shellady in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation, and the transaction did not involve a public offering.

On July 29, 2020, the Company sold a third party investor (the “Investor”) the following securities (the “Securities”) for an aggregate purchase price of $250,000: (i) 250,000 shares of the Company’s Series B-1 Convertible Preferred Stock, (ii) non-cashless warrants to purchase 250,000 shares of the Company’s Series B-2 Convertible Preferred Stock for $1.00 per share terminating on January 21, 2021, (iii) non-cashless warrants to purchase 250,000 shares of the Company’s Series B-2 Convertible Preferred Stock for $1.00 per share terminating on July 21, 2021, and (iv) non-cashless warrants to purchase 250,000 shares of the Company’s Series B-2 Convertible Preferred Stock for $1.00 per share terminating on January 21, 2022. The Securities were sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) promulgated thereunder, as there was no general solicitation, the Investor was accredited, and the transaction did not involve a public offering.

Effective July 31, 2020, the Company issued a Convertible Promissory Note to JRF AZ Investments II, LP in the principal amount of $60,000, which was funded on July 31, 2020. The Note matured six months after the date of the Note and was convertible into shares of the Company’s common stock at a conversion price equal to 60% of the average closing price during the 10 trading day period ending on the trading day prior to conversion. On August 1, 2020, JRF AZ Investments II, LP elected to convert the entire Note into Company common stock and was subsequently issued 111,359 shares of Company common stock in conversion thereof. The Company relied upon the exemptions provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act of 1933, as amended, in connection with issuance of these securities as the common stock was issued in exchange for debt of the Company held by the lender, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transaction did not involve a public offering.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit		Description
3.1		Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
3.2		Articles of Merger (changing Company name) (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
3.3		Bylaws (incorporated by reference to Exhibit 3.2 to Annual Report on Form 10-K filed on May 25, 2018, file no. 000-54509)
3.4		Certificate of Designation of Series B-1 Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on July 27, 2020, file no. 000-54509)
3.5		Certificate of Designation of Series B-2 Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed on July 27, 2020, file no. 000-54509)
5.1		Opinion Regarding Legality (incorporated by reference to Exhibit 5.1 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
10.1		Intellectual Property Purchase Agreement, between the Company and Good Hemp Living, LLC, dated February 6, 2019 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on February 12, 2019, file no. 000-54509)
10.2		Branding Agreement between the Company and Spire Holdings, LLC, effective as of February 28, 2020 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on March 2, 2020, file no. 000-54509)
10.3		Joint Venture Agreement of Olin Farms, LLC, between the Company and Paul Hervey, dated July 1, 2020 (incorporated by reference to Exhibit 10.3 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
10.4		Promissory Note dated July 17, 2019, issued by the Company to William Alessi (incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
10.5		Promissory Note dated July 17, 2019, issued by the Company to JanBella Group, LLC (incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
10.6		Promissory Note dated July 17, 2019, issued by the Company to Chris P. Chumas (incorporated by reference to Exhibit 10.6 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
10.7		Promissory Note dated July 22, 2019, issued by the Company to William Alessi (incorporated by reference to Exhibit 10.7 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
10.8		Promissory Note dated July 22, 2019, issued by the Company to Chris P. Chumas IRA (incorporated by reference to Exhibit 10.8 to Registration Statement on Form S-1 filed on September 23, 2020, file no. 333-248986)
10.9		Securities Purchase Agreement, between the Company and Power Up Lending Group Ltd., dated August 17, 2020 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on August 21, 2020, file no. 000-54509)
10.10		Convertible Promissory Note dated August 17, 2020, issued by the Company to Power Up Lending Group Ltd. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 21, 2020, file no. 000-54509)
10.11		Consulting Services Agreement between the Company and Scott Shellady, dated June 24, 2020 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on June 30, 2020, file no. 000-54509)
31.1		Certification by the Principal Executive Officer
31.2		Certification by the Principal Accounting Officer
32.1		Certifications by the Principal Executive and Accounting Officers
101		Interactive data files pursuant to Rule 405 of Regulation S-T.

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SIGNATURES

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

	GOOD HEMP, INC.

Date: November 24, 2020		/s/ William Alessi
		William Alessi
		Chief Executive Officer

Date: November 24, 2020		/s/ Emma Setzer
		Emma Setzer
		Chief Financial Officer

Good Hemp, Inc. - FORM 10-Q - November 25, 2020

Attached files

Good Hemp, Inc. Reports