UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

or

 

¨	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: 001-37807

 

HIP CUISINE, INC.

(Exact name of Registrant as specified in its charter)

 

Florida		5812		47-3170676
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

2250 NW 114^th Ave. Unit 1P, PTY 11020,

Miami, FL 33172-3652

Ph: 011-507-6501-8105

(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)

 

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 (Exchange Act) 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 x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rue 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨	Smaller Reporting Company	x
		Emerging growth company	¨

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

As of August 14, 2107, there were 8,142,583 outstanding shares of the issuer's common stock, par value $0.001 per share.

 

TABLE OF CONTENTS

 

			Page
PART I – FINANCIAL INFORMATION
Item 1	Consolidated Financial Statements (Unaudited)			3
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations			4
Item 3	Quantitative and Qualitative Disclosures About Market Risk			13
Item 4	Controls and Procedures			13
PART II – OTHER INFORMATION
Item 1	Legal Proceedings			14
Item 1A	Risk Factors			14
Item 2	Unregistered Sale of Equity Securities and Use of Proceeds			14
Item 3	Defaults Upon Senior Securities			14
Item 4	Mine Safety Disclosures			14
Item 5	Other Information			14
Item 6	Exhibits			15
Signatures				16

 

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PART I – FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Item Regulation S-X, Rule 10-01(c) Interim Financial Statements, and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the six months ended June 30, 2017, are not necessarily indicative of the results that can be expected for the year ended December 31, 2017.

 

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HIP CUISINE, INC.

 

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED JUNE 30, 2017
 

(UNAUDITED)

 

		Page
Consolidated Unaudited Condensed Balance Sheets		F-2
Consolidated Unaudited Condensed Statements of Operations		F-3
Consolidated Unaudited Condensed Statements of Cash Flows		F-4
Notes to the Unaudited Condensed Consolidated Interim Financial Statements		F-5

 

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HIP CUISINE, INC.

Consolidated Condensed Balance Sheets

(Unaudited)

 

		June 30, 2017				December 31, 2016
ASSETS
Current Assets
Cash and cash equivalents		$	104,283			$	191,660
Refundable sales taxes			-				731
Prepaids and deposits			73,782				74,685
Total Current Assets			178,065				267,076
Property, plant and equipment, net			679,865				254,686
Construction in Progress			-				153,930
Intangible Assets - Trademark			18,835				-
Goodwill			37,894				37,894
TOTAL ASSETS		$	914,659			$	713,586
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Checks drawn in excess of bank balance		$	-			$	407
Bank Loan, current portion			8,327				8,465
Accounts payable and accrued liabilities			89,398				34,145
Sales tax payable			971				-
Accrued Interest			6,000				40,500
Notes payable			40,000				300,000
Due to shareholder			95,756				192,253
Total Current Liabilities			240,452				575,770
Bank Loan, less current portion			66,846				71,016
TOTAL LIABILITIES			307,298				646,786
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, 1,000,000 shares authorized;
0 shares issued and outstanding			-				-
Common stock, $0.001 par value, 100,000,000 shares authorized;
8,142,583 and 6,585,333 shares issued and outstanding, respectively			8,142				6,585
Additional paid-in capital			1,898,230				480,737
Accumulated Deficit			(1,299,011	)			(420,522	)
TOTAL STOCKHOLDERS' EQUITY			607,361				66,800
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	914,659			$	713,586

 

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

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HIP CUISINE, INC.

Consolidated Condensed Statements of Operations

(Unaudited)

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2017				2016				2017				2016
REVENUES		$	161,307			$	35,752			$	289,044			$	70,960
COST OF GOODS SOLD			64,625				9,606				128,718				21,458
GROSS PROFIT			96,682				26,146				160,326				49,502
OPERATING EXPENSES
Depreciation and amortization			38,788				8,607				60,468				13,859
General and administrative			126,710				20,744				241,437				49,788
Professional fees			57,196				11,231				97,676				30,774
Salaries and wages			81,248				10,703				122,399				18,442
Stock based compensation			9,360				-				251,360				-
Total Operating Expenses			313,302				51,285				773,340				112,863
LOSS FROM OPERATIONS			(216,620	)			(25,139	)			(613,014	)			(63,361	)
OTHER INCOME (EXPENSES)
Interest Income			50				-				99				-
Interest Expense			(404	)			-				(667	)			-
Loss on debt settlement			-				-				(266,250	)			-
Other Income			(0	)			-				1,343				-
Total Other Expenses			(354	)			-				(265,475	)			-
LOSS BEFORE INCOME TAXES			(216,974	)			(25,139	)			(878,489	)			(63,361	)
Provision for income taxes			-				-				-				-
NET LOSS		$	(216,974	)		$	(25,139	)		$	(878,489	)		$	(63,361	)
Basic and Diluted Income per Common Share		$	(0.03	)		$	(0.00	)		$	(0.12	)		$	(0.01	)
Basic and Diluted Weighted Average Common Shares Outstanding			8,126,583				5,521,039				7,636,521				5,520,000

 

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

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HIP CUISINE, INC.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

 

		Six Months Ended
		June 30,
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS		$	(878,489	)		$	(63,361	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization			60,468				13,859
Loss on debt settlement			266,250				-
Stock based compensation			251,360				9,500
Changes in operating assets and liabilities:
Refundable sales taxes			731				118
Prepaid expenses			903				(40,374	)
Checks drawn in excess of bank balance			(407	)			6,646
Accounts payable and accrued liabilities			55,253				3,882
Sales tax payable			971				-
Accrued interest			(34,500	)			-
Net cash used in operating activities			(277,460	)			(69,730	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment			(331,612	)			(11,007	)
Net cash used in investing activities			(331,612	)			(11,007	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock			750,000				3,637
Repayment of notes payable			(127,500	)			-
Repayment of bank loan			(4,308	)			-
Repayment of shareholder loans			(96,497	)			76,187
Net cash provided by financing activities			521,695				79,824
Net decrease in cash and cash equivalents			(87,377	)			(913	)
Cash and cash equivalents - beginning of period			191,660				2,354
Cash and cash equivalents - end of period		$	104,283			$	1,441
Supplemental Cash Flow Disclosures
Cash paid for interest		$	35,167			$	-
Cash paid for income taxes		$	-			$	-
Non-cash Financing and Investing Activities
Shares issued for acquisition of Trademark		$	18,940			$	-
Shares issued for payment of Notes Payable		$	132,500			$	-
Construction in Progress transferred to Property, Plant and Equipment		$	153,930			$	-

 

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

 

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HIP CUISINE, INC.

Notes to the Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2017 and 2016

(Unaudited)

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Hip Cuisine, Inc. (the “Company” or “HIP”) was incorporated in the State of Florida on March 19, 2014. The Company’s sole subsidiary Hip Cuisine, Inc. (“HCP”) was incorporated in Panama on February 24, 2014. The Company’s fiscal year end is December 31.

 

The Company is an international nutritional value concepts company and global fresh-served food purveyor for the health-conscious consumer with locations in Panama and the State of California, USA operated through its wholly owned subsidiary Rawkin Juice, Inc.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.

 

Basis of Consolidation

 

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Hip Cuisine, Inc. (Panama) and Rawkin Juice Inc.. All material intercompany balances and transactions have been eliminated.

 

Goodwill and Other Intangible Assets

 

We account for goodwill and intangible assets in accordance with ASC 350 "Intangibles-Goodwill and Other" ("ASC 350"). ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. In addition, ASC 350 requires that goodwill be tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests when circumstances indicate that the recoverability of the carrying amount of goodwill may be in doubt. Application of the goodwill impairment test requires judgment, including the identification of reporting units; assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. Changes in these estimates and assumptions or the occurrence of one or more confirming events in future periods could cause the actual results or outcomes to materially differ from such estimates and could also affect the determination of fair value and/or goodwill impairment at future reporting dates.

 

No impairment loss was recognized for the six months ended June 30, 2017.

 

The cost of intangible assets with determinable useful lives is amortized to reflect the pattern of economic benefits consumed, either on a straight-line or accelerated basis over the estimated periods benefited. Patents, technology and other intangibles with contractual terms are generally amortized over their respective legal or contractual lives. When certain events or changes in operating conditions occur, an impairment assessment is performed and lives of intangible assets with determinable lives may be adjusted.

 

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Recently Issued Accounting Pronouncements

 

The Company has reviewed all other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.

 

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

 

		June 30, 2017				December 31, 2016
Equipment		$	184,073			$	100,184
Furniture			62,660				10,113
Leasehold improvement			538,861				189,754
Less: accumulated depreciation			(105,728	)			(45,365	)
		$	679,865			$	254,686

 

Property and equipment are stated at cost. Depreciation is computed on the straight-line method. The depreciation methods are designed to amortize the cost of the assets over their estimated useful lives, in years, of the respective assets as follows:

 

Equipment	5 Years
Furniture and Fixtures	5 Years
Leasehold Improvement	3 Years

 

During the six months ended June 30, 2017 and 2016, the depreciation cost was $60,363 and $13,859, respectively.

 

NOTE 4- INTANGIBLE ASSET – TRADEMARK

 

		June 30, 2017
Trademark -acquired in February 2017		$	6,195
Trademark – acquired in June 2017			12,640
		$	18,835

 

Trademark acquired in February 2017

 

		June 30, 2017				December 31, 2016
Trademark		$	6,300			$	-
Less: accumulated amortization			(105	)			-
		$	6,195			$	-

 

In February 2017, the Company issued 10,000 restricted common shares valued at $0.63 for the acquisition of Trademark from an unaffiliated party. Amortization is computed over 15 years of estimated useful lives of the Trademark on the straight-line basis. For the six months ended June 30, 2017, amortization expense on trademark was $105. The Company will pay royalty of 20% of the net profits generated from the use of the Trademark in the future.

 

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Trademark acquired in June 2017

 

		June 30, 2017				December 31, 2016
Trademark		$	12,640			$	-

 

In June 2017, the Company issued 8,000 restricted common shares valued at $1.58 for the acquisition of Trademark from an unaffiliated party. Amortization is computed over 15 years of estimated useful lives of the Trademark on the straight-line basis. No amortization has been taken for the six months ended June 30, 2017. The Company will pay royalty of 20% of the net profits generated from the use of the Trademark in the future. The trademark is expected to be put into use during second half of year 2017.

 

NOTE 5 – GOODWILL

 

		June 30, 2017				December 31, 2016
Goodwill		$	37,894			$	37,894

 

Goodwill is generated from the acquisition of net assets from Rawkin Bliss LLC by the Company’s wholly owned subsidiary Rawkin Juice Inc. No impairment loss on Goodwill was recognized for the six months ended June 30, 2017, nor the year ended December 31, 2016.

 

NOTE 6 – NOTES PAYABLE

 

The Company had the following notes payable outstanding as of June 30, 2017 and December 31, 2016:

 

		June 30, 2017				December 31, 2016
Notes Payable		$	40,000			$	300,000
Less: current portion			(40,000	)			(300,000	)
Long-term Notes payable		$	-			$	-

 

The notes payable were assumed through the net assets acquisition as part of the consideration. During the six months ended June 30, 2017, $260,000 notes payable and $37,500 accrued interest were repaid with cash of $162,000 and share issuance of 306,250 restricted common shares valued at $398,750 with loss on debt settlement at $266,250.

 

NOTE 7 – BANK LOAN

 

The Company had the following bank loan outstanding as of June 30, 2017 and December 31, 2016:

 

		June 30, 2017				December 31, 2016
Bank loan, at $80,000 principal, repayable in monthly instalments of $829 with an annual interest rate of 2%, maturing Nov 29, 2026.		$	75,173			$	79,481
Less: current portion			(8,327	)			(8,465	)
Long-term note payable		$	66,846			$	71,016

 

During the six months ended June 30, 2017, the interest expense on bank loan was $667.

 

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NOTE 8 – RELATED PARTY TRANSACTIONS

 

During the six months ended June 30, 2016, the Company’s sole officer advanced $76,187 by the way of loans to the Company to finance the general operation of the Company. During the six months ended June 30, 2017, net repayment to the officer was $96,497.

 

As of June 30, 2017 and December 31, 2016, the Company owed $95,756 and $192,253 to this officer, respectively. These loans are non-interest bearing and due on demand.

 

NOTE 9 – SHARE CAPITAL

 

Preferred Stock

 

The Company has 1,000,000 authorized preferred shares at $0.001 par value.

 

There were no shares of preferred stock issued and outstanding as of June 30, 2017.

 

Common Stock

 

In March 2017, the Company completed and closed its second registered public offering of 1,000,000 common shares issued at $0.75 for cash proceeds of $750,000.

 

On February 7, 2017, the Company issued 10,000 restricted common shares valued at $0.63 per share for the acquisition of a trademark from an unaffiliated party.

 

During the six months ended June 30, 2017, the Company issued 233,000 restricted common shares valued at $251,360 to consultants to assist in managing its locations, locating expansion of restaurants and promoting the new restaurant locations.

 

During the six months ended June 30, 2017, the Company issued 8,000 restricted common shares valued at $12,640 to a coffee company for exclusive distribution and royalty rights to expand new coffee product line in its restaurant locations.

 

During the six months June 30, 2017, the Company issued 306,250 restricted common shares valued at $398,750 to repay certain notes payable assumed from the net assets acquisition. A loss on debt settlement of $266,250 was incurred related to the repayment of the notes payable.

 

There were 8,142,583 shares of common stock issued and outstanding as of June 30, 2017.

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

The Company currently leases 152.18 square meters of space at Balboa Boutiques located in Panama City, Panama. The current lease term began on July 1, 2015 and expires on February 27, 2017, but is automatically renewable for an additional thirty-six months under the original lease terms. The Company intends to renew the lease when the term expires. The monthly lease payment is $4,900 per month. This location serves as the Company’s only facility for day to day operations. During the six months ended June 30, 2017 and 2016, the Company has made approximately $29,000 and $26,000 in rental payments.

 

The Company currently leases 282.35 square meters of their second restaurant location in Costa del Este Panama. The current lease term began in January 2017 and expires in December 2021, but is automatically goes to a month to month rental after 5 years until a new contract is entered into. The current monthly lease is approximately $12,000. During the six months ended June 30, 2017, the Company has made approximately $71,000 in rental payments.

 

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The Company currently leases a location in Burbank, CA. The current lease term began on May 1, 2013 and expires on April 30, 2018. The current monthly lease is $5,600 until April 2017 and will be $5,800 from May 2017 to April 2018. During the six months ended June 30, 2017, the Company has made $34,000 in rental payments.

 

On February 21, 2017, the Company entered into a 3 year lease agreement which will start from June 1, 2017 for a restaurant location in Santa Monica, California. The total square meters is 492 and the rent for the location is $4,300 per month, with a 3% annual escalation. The lease can be extended for a further three years after the end of the current lease term. During the six months ended June 30, 2017, the Company has made $4,300 in rental payments.

 

The Company has no other commitments or contingencies as of June 30, 2017.

 

The following is a schedule by years of minimum future rentals on leases as of June 30, 2017:

 

Six Months Ending December 31:
2017		$	160,632
Year Ending December 31:
2018			275,767
2019			254,143
2020			173,874
Later Years			141,264
Total minimum future rentals		$	1,005,680

 

From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that it is adequately insured for its operations and there are no current matters that would have a material effect on the Company's financial position or results of operations.

 

NOTE 11 – SUBSEQUENT EVENTS

 

Management has evaluated subsequent events through the date these consolidated financial statements were available to be issued. Based on our evaluation no other material events have occurred that require disclosure.

 

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

 

The following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of such financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates, including those related to useful lives of real estate assets, bad debts, impairment, contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. There can be no assurance that actual results will not differ from those estimates. The analysis set forth below is provided pursuant to applicable SEC regulations and is not intended to serve as a basis for projections of future events. See "Cautionary Statement Regarding Forward Looking Statements" above.

 

 Plan of Operation

 

Our Business

 

Hip Cuisine, Inc. was incorporated in the state of Florida on March 24, 2014. Our United States offices are currently located at 2250 NW 114^th Ave. Unit 1P, PTY 11020, Miami, FL 33172-3652. Our Panama offices are located at Balboa Boutiques, Ave. Balboa, Local B104, Panama City, Panama. Our telephone number is 011-507-6501-8105.

 

On September 30, 2014, we entered into a Share Exchange Agreement (the "Share Exchange Agreement") with Hip Cuisine, Inc., a Panamanian corporation incorporated pursuant to the laws of the Republic of Panama on February 24, 2014 ("Hip Panama"), and its sole shareholder, and our Chief Executive Officer, President and Director, Natalia Lopera, whereby we acquired one hundred percent (100%) of the issued and outstanding common stock of Hip Panama in exchange for 5,000,000 shares of our Common Stock. Upon the consummation of the Share Exchange Agreement, Hip Panama became a wholly-owned subsidiary of our Company.

 

Hip Cuisine, Inc. has created a restaurant concept that combines the Health Food restaurant which uses the brand Healthy, Vegan & Raw to identify to the public what it has to offer which is low sodium, low calorie, high in protein dishes and the ingredients are Vegan Friendly, Vegetarian and a full menu with fresh fish, chicken and steak. The vegetables are purchased fresh daily from the local farmers market. We also added, with the restaurant, a full array of "Cold Press Juices & Smoothies". The United States is exploding with Cold Press juice stores to meet the demand of the general public who has moved to a Healthier Diet and who is becoming more conscience of what foods it is consuming.

 

We made the decision to open the first location in Panama City Panama for several reasons. The main reason was the fact that the Health & Fitness market in Central and South America was growing at a very rapid pace and compared to the United States the Cold Press and Healthy Food restaurants were virtually nonexistent. In fact we know of only four Vegan restaurants in all of Panama City. In addition, Panama City is one of the fastest growing cities in Latin America and with the expansion of the Panama Canal there is a very large international population and they are looking for Healthy alternative than what is currently being offered in Panama. The labor is substantially less yet the prices of the dishes are equal to that of the United States.

 

We opened for business in July of 2015 after 15 months of construction at the Balboa Boutiques shopping mall located on Ave. Balboa, which is a prime location in Panama City near the financial district and on the water. A major renovation to the "Cinta Costera" along Balboa now offers a biking and jogging trail along with exercise equipment, basketball and tennis courts and this extends for 5 kilometers along Balboa Ave. and continues over the water all the way to the Amador which is Panama City's main marina. Every Sunday they close Ave. Balboa and set up biking events and other events like Yoga classes and more.

 

In March 2017, we completed the construction and design project of our 2^nd restaurant in Costa del Este Panama. We expect to open this location in May 2017. This location is 288 square meters, which is much larger than our first location in the Balboa Boutiques shopping center in Panama City. The Costa del Este locationwill be used for our production kitchen where we will prepare the meal packages and juices for the other spoke locations and deliveries.

 

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We entered into an Asset Purchase Agreement with Rawkin Bliss LLC dba Rawkin Juice of Burbank California www.rawkinjuice.com which closed on April 14, 2017. This will allow us to not only expand our offerings into the US market with an established brand like Rawkin Juice, but we now can offer a Hip Cuisine in areas that a Hip Cuisine “Vegan Friendly” offering would work better than a 100% Vegan offering like that of Rawkin Juice in Burbank California.

 

We entered into a second “spoke” location for Rawkin Juice located in Santa Monica, CA, and this location is scheduled to open on May 1^st of 2017. We will produce the products in the production kitchen in Burbank and deliver to the Santa Monica location daily to maintain a 100% Organic, Vegan fresh line of products including Cold Pressed Juices, Smoothies, Desserts, Salads and the Living Gourmet line of Raw Vegan foods.

 

We have already designed and can order the packaging, labels and bottles for delivery. We currently use a POS system called LAVU and this can handle everything from inventory control, orders, menu and employee payroll. It is a complete system designed for restaurants and is scalable. The only additional cost is for the equipment for the additional restaurants, such as I-Pads, kitchen printer, fiscal printer and cashier I-pad and register, which is approximately $4,500 per location. Then we pay a monthly service fee that is approximately $105 per month.

 

We currently offer to our customers at both the Balboa Boutiques location and Rawkin Juice in Burbank the ability to purchase one day detox (6 juices) or 3 day detox (18 juices), as well as weekly meal plans. These plans range from $37.50 to $55.00 for the 1 day, $112.50 to $155.00 for the 3 day detox and $150 for the weekly meal plan.

 

We have budgeted a total cost of $12,000 to complete the website which will allow us to accept online orders for our customers who want deliveries. Currently we use a delivery service to deliver orders, and they charge a delivery fee and pay for the order when they pick up. The Rawkin Juice location in Burbank utilizes several 3^rdparty delivery companies that offer our menu for a fee such as Grub Hub, Uber Eats, Eat 24 and Door Dash. We plan to launch our own application for deliveries in May of 2017, through our online ordering site called www.rawkintogo.com.

 

Our goals over the next twelve (12) months are to:

 

	·	Open the second location in Plaza 770 in Costa del Este Panama.
	·	Open a second "spoke" location for Rawkin Juice located in Santa Monica, CA.
	·	Locate and start construction of the "Hub & Spoke" locations. The production kitchens in Burbank and Costa del Este will produce and bottle the juices and smoothies, then deliver to the Spokes and other outlets throughout Panama and California such as local gyms and Health Food stores.
	·	Develop the online ordering system for deliveries through the website www.rawkintogo.com.

 

Expenditures

 

The following chart provides an overview of our budgeted expenditures by significant area of activity over the next twelve (12) months, assuming we are able to attract sufficient debt or equity financing. There can be no assurance that we will be able to attract financing and we may be required to scale back operations accordingly.

 

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		Months 1-3				Months 4 - 6				Months 7-9				Months 10-12				Total 12 months
Rent		$	26,625			$	36,625			$	41,625			$	71,625			$	176,500
Payroll		$	37,000			$	54,000			$	66,000			$	96,000			$	253,000
Loans		$	10,000			$	10,000			$	15000			$	25,000			$	60,000
Supplies		$	57,750			$	84,000			$	98,000			$	131,600			$	371,350
Utilities		$	16,500			$	20,500			$	22,000			$	28,000			$	87,000
Accounting		$	4,500			$	4,500			$	4,500			$	4,500			$	18,000
Legal		$	6,000			$	6,000			$	6,000			$	6,000			$	24,000
Auditing		$	5,000			$	5,000			$	20,000			$	5,000			$	35,000
CFO		$	4,500			$	4,500			$	4,500			$	4,500			$	18,000
Advertising		$	3,500			$	4,500			$	4,500			$	4,500			$	17,000
Investor Relations		$	15,000			$	15,000			$	15,000			$	15,000			$	60,000
Total Expenditures		$	186,375			$	244,625			$	297,125			$	391,725			$	1,119,850

 

Milestones

 

Months 1 through 9

 

During the first nine (9) months we plan to:

 

	o	Open Costa del Este Panama and the production kitchen.
	o	Enter into deliveries and monthly diet programs.
	o	Open a second "spoke" location for Rawkin Juice located in Santa Monica, CA.
	o	Enter contract with four (4) Spoke locations for processing facilities.
	o	Launch new website to handle online deliveries and POS processing.

 

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Months 9 through 12

 

During the following three (3) months, we expect to achieve the following:

 

	o	Enter into 3rd round of financing to open six (6) more spokes which will include one restaurant with the production kitchen.
	o	Build an established board of directors with experience in the sector.
	o	Set up an audit committee and employee ESOP plan.

 

In March 2017, the Company completed and closed a private offering exempt from registration pursuant to Rule 506(b) of Regulation D of 1,000,000 shares of the Company's common stock, par value $0.001, issued at $0.75 per share for cash proceeds of $750,000. No brokers or underwriters were utilized in this offering and no commissions were paid.

 

We do not currently have any arrangements for financing and we can provide no assurance to investors we will be able to find such financing. There can be no assurance that additional financing will be available to us, or on terms that are acceptable. Consequently, we may not be able to proceed with our intended business plan.

 

Liquidity and Results of Operations

 

Results of Operations

 

For the six months ended June 30, 2017 Compared to the six months ended June 30, 2016

 

The following table summarizes our results of operations for the six months ended June 30, 2017 and 2016:

 

		Six Months Ended
		June 30,
Statement of Operations Data:		2017				2016				Changes
Revenue		$	289,044			$	70,960			$	218,084
Cost of Goods Sold			128,718				21,458				(107,260	)
Gross Profit			160,326				49,502				110,824
Operating Expenses			773,340				112,863				(660,477	)
Loss From Operations			(613,014	)			(63,361	)			(549,653	)
Other Expenses			(265,475	)			-				(265,475	)
Net Loss		$	(878,489	)		$	(63,361	)		$	(815,128	)

 

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For the six months ended June 30, 2017, we earned revenue of $289,044 compared to $70,960 for the six months ended June 30, 2016. Cost of goods sold for the six months ended June 30, 2017 were $128,718 resulting in a gross profit of $160,326, compared to cost of goods sold of $21,458 and gross profit $49,502 from the six months ended June 30, 2016 due to growth and expansion of the business to new restaurants locations.

 

Operating expenses were $773,340 for the six months ended June 30, 2017, compared to $112,863 for the six months ended June 30, 2016, due to additional costs related to the completion and opening of our restaurant and costs associated with ongoing regulatory expenses.

 

		Six Months Ended
		June 30,
Operating Expenses:		2017				2016				Changes
Depreciation and amortization		$	60,468			$	13,859			$	46,609
General and administrative			241,437				49,788				191,649
Professional fees			97,676				30,774				66,902
Salaries and wages			122,399				18,442				103,957
Stock based compensation			251,360				-				251,360
Total operating expenses		$	773,340			$	112,863			$	660,477

 

Operating expenses for the six months ended June 30, 2017 were comprised of $60,468 for depreciation and amortization, $241,437 for general and administrative, $97,676 for professional fees, $122,399 for salaries and wages and $251,360 for stock based compensation. Operating expenses for the six months ended June 30, 2016 were comprised of $13,859 for depreciation, $49,788 for general and administrative, $30,774 for professional fees and $18,442 for salaries and wages.

 

Depreciation was $60,363 for the six months ended June 30, 2017, which increased by $46,504 from $13,859 for the six months ended June 30, 2016, due to the acquisition of property, plant and equipment to support expansion of the business.

 

General and Administrative expenses were $241,437 for the six months ended June 30, 2017, which increased by $191,649 from $49,788 for the six months ended June 30, 2016, attributed to increase in rental expenses and other general administrative expenses for additional restaurant locations.

 

Professional fees were $97,676 for the six months ended June 30, 2017, increased by $66,902 from $30,774 for the six months ended June 30, 2016, related to the increases in accounting, auditing, legal and market listing expenses and public offerings.

 

Salaries and wages were $122,399 for the six months ended June 30, 2017, increased by $103,957 from $18,442 for the six months ended June 30, 2016, as the Company hired more restaurant staffs to support operational expansion.

 

Stock based compensation $251,360 was incurred for the six months ended June 30, 2017, relates to the issuance of common shares for consulting services to support the expansion of the new restaurant locations.

 

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For the three months ended June 30, 2017 Compared to the three months ended June 30, 2016

 

The following table summarizes our results of operations for the three months ended June 30, 2017 and 2016:

 

		Three Months Ended
		June 30,
Statement of Operations Data:		2017				2016				Changes
Revenue		$	161,307			$	35,752			$	125,555
Cost of Goods Sold			64,625				9,606				(55,019	)
Gross Profit			96,682				26,146				70,536
Operating Expenses			313,302				51,285				(262,017	)
Loss From Operations			(216,620	)			(25,139	)			(191,481	)
Other Expenses			(354	)			-				(354	)
Net Loss		$	(216,974	)		$	(25,139	)		$	(191,835	)

 

For the three months ended June 30, 2017, we earned revenue of $161,307 compared to $35,752 for the three months ended June 30, 2016. Cost of goods sold for the three months ended June 30, 2017 were $64,625 resulting in a gross profit of $96,682, compared to cost of goods sold of $9,606 and gross profit $26,146 from the three months ended June 30, 2016 due to growth and expansion of the business to new restaurants locations.

 

Operating expenses were $313,302 for the three months ended June 30, 2017, compared to $51,285 for the three months ended June 30, 2016, due to additional costs related to the completion and opening of our restaurant and costs associated with ongoing regulatory expenses.

 

		Three Months Ended
		June 30,
Operating Expenses:		2017				2016				Changes
Depreciation and amortization		$	38,788			$	8,607			$	30,181
General and administrative			126,710				20,744				105,966
Professional fees			57,196				11,231				45,965
Salaries and wages			81,248				10,703				70,545
Stock based compensation			9,360				-				9,360
Total operating expenses		$	313,302			$	51,285			$	262,017

 

Operating expenses for the three months ended June 30, 2017 were comprised of $38,788 for depreciation and amortization, $126,710 for general and administrative, $57,196 for professional fees, $81,248 for salaries and wages and $9,360 for stock based compensation. Operating expenses for the three months ended June 30, 2016 were comprised of $8,607 for depreciation, $20,744 for general and administrative, $11,231 for professional fees and $10,703 for salaries and wages.

 

Depreciation was $38,683 for the three months ended June 30, 2017, which increased by $30,076 from $8,607 for the three months ended June 30, 2016, due to the acquisition of property, plant and equipment to support expansion of the business.

 

General and Administrative expenses were $126,710 for the three months ended June 30, 2017, which increased by $105,966 from $20,744 for the three months ended June 30, 2016, attributed to increase in rental expenses and other general administrative expenses for additional restaurant locations.

 

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Professional fees were $57,196 for the three months ended June 30, 2017, increased by $45,965 from $11,231 for the three months ended June 30, 2016, related to the increases in accounting, auditing, legal and market listing expenses and public offerings.

 

Salaries and wages were $81,248 for the three months ended June 30, 2017, increased by $70,545 from $10,703 for the three months ended June 30, 2016, as the Company hired more restaurant staffs to support operational expansion.

 

Stock based compensation $9,360 was incurred for the three months ended June 30, 2017, relates to the issuance of common shares for consulting services to support the expansion of the new restaurant locations.

 

Liquidity and Capital Resources

 

The following tables present selected financial information on our capital as of June 30, 2017 and December 31, 2016 and our cash flows as of June 30, 2017 and June 30, 2016:

 

		June 30,				December 31,
Capital Data		2017				2016				Changes
Cash and Cash Equivalents		$	104,283			$	191,660			$	(87,377	)
Current Assets		$	178,065			$	267,076			$	(89,011	)
Current Liabilities		$	240,452			$	575,770			$	(335,318	)
Working Capital (Deficiency)		$	(62,387	)		$	(308,694	)		$	246,307

 

		Six Months Ended
		June 30,
Cash Flow Data:		2017				2016				Changes
Cash Flows used in Operating Activities		$	(277,460	)		$	(69,730	)		$	(207,730	)
Cash Flows used in Investing Activities			(331,612	)			(11,007	)			(320,605	)
Cash Flows provided by Financing Activities			521,695				79,824				441,871
Net decrease in Cash During Period		$	(87,377	)		$	(913	)		$	(86,464	)

 

As of June 30, 2017 and December 31, 2016 our cash was $104,283 and $191,660, respectively. The decrease in cash for the six months ended June 30, 2017 was mainly attributed from a $521,695 cash flows provided by financing activities achieved from $750,000 cash proceeds received from issuance of common stock from the Company second public offering.

 

As of June 30, 2017, we experienced an increase in our working capital of $246,307. The increase in working capital during the six months ended June 30, 2017 was primarily from decrease in current liabilities mainly through the repayment of $294,500 note payable and accrued interest through issuance of common shares.

 

Cash Flows

 

We fund our operations with cash generated from restaurant sales revenue, capital contributions, and issuances of common stock.

 

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Operating Activities

 

For the six months ended June 30, 2017, net cash used in operating activities was $277,460, related to our net loss of $878,489 reduced by depreciation and amortization of $60,468, loss on debt settlement of $266,250, stock based compensation of $251,360, a decrease in refundable sales taxes of $731, a decrease in prepaid expenses of $903, a decrease in checks drawn in excess of bank balance of $407, an increase of $55,253 in accounts payable, an increase in sales tax payable of $971 and a decrease of $34,500 in accrued interest. 

 

For the six months ended June 30, 2016, net cash used in operating activities was $69,730, related to our net loss of $63,361, depreciation of $13,859, stock based compensation of $9,500, a decrease in refundable sales taxes of $118, a decrease in prepaid expenses of $40,374, an increase in checks drawn in excess of bank balance of $6,646 and an increase of $3,882 in accounts payables.

 

The increase of net cash used in operating cash flow was primarily due to an increase in net loss for increase cash used for operating activities to support business expansion.

 

Investing Activities

 

For the six months ended June 30, 2017, net cash used in investing activities was $331,612 compared to net cash used of $11,007 during the six months ended June 30, 2016. The increase in net cash used was related primarily to $331,612 of costs for the acquisition of building and equipment for the Company’s restaurants.

 

Financing Activities

 

Net cash provided by financing activities was $521,695 for the six months ended June 30, 2017 mainly attributed to cash proceeds from issuance of common shares for $750,000 from the Company’s second public offering. The Company has also repaid notes payable at $127,500 and bank loans at $4,308. In additional, the Company has repaid $96,497 to its sole officer.

 

Net cash provided by financing activities for the six months ended June 30, 2016 was $79,824 through $76,187 of advances from related parties and $3,637 cash proceeds from issuance of common shares.

 

Material Commitments

 

Going Concern.

 

The accompanying financial statements have been prepared assuming that the company will continue as a going concern which contemplates, amongst other things, the realization of assets and satisfaction of liabilities in the course of business.

 

We anticipate that our future liquidity requirements will arise from the need to fund our growth, pay our current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from private sources and/or debt financing.

 

Our independent auditors included an explanatory paragraph in their report on the accompanying financial statements expressing concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

 

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Critical Accounting Policies

 

The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures about contingent assets and liabilities. We base these estimates and assumptions on historical experience and on various other information and assumptions that are believed to be reasonable under the circumstance. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as additional information is obtained, as more experience is acquired, as our operating environment changes and as new events occur. Our critical accounting policies are listed in the notes to our audited financial statements included in this registration Statement.

 

Future Financings.

 

We will continue to rely on equity sales of the Company's Common Stock in order to continue to fund business operations. Issuances of additional shares will result in dilution to existing shareholders. There is no assurance that the Company will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned operations

 

Recently Issued Accounting Pronouncements.

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued but not yet adopted that might have a material impact on its financial position or results of operations.

 

Off-Balance Sheet Arrangements.

 

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

 

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Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

 

During the period covered by this report, the Company has had no changes in or disagreements with its accountants.

 

Quantitative and Qualitative Disclosures about Market Risk

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a "smaller reporting company", we are not required to provide the information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluations of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management team, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of December 31, 2004. Based on this evaluation, we concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic reports.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this report, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

The Company has no knowledge of existing or pending legal proceedings against the Company, nor is the Company involved as a plaintiff in any proceeding or pending litigation. There are no proceedings in which any of the Company's directors, officers or any of their respective affiliates, or any beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

As a "smaller reporting company", we are not required to provide the information required by this Item.

 

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

 

On May 3, 2017, the Company issued 8,000 restricted common shares valued at $9,360 for promotional services of its Rawkin Juice locations.

 

On June 15, 2017, the Company issued 8,000 restricted common shares valued at $12,640 to a coffee company for exclusive distribution and royalty rights to expand new coffee product line in its restaurant locations.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

INDEX TO EXHIBITS

 

Exhibit		Description
31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer and Chief Financial 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 Chief Executive Officer and 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.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase.
101.DEF		XBRL Taxonomy Extension Definition Linkbase.
101.PRE		XBRL Taxonomy Extension Label Linkbase.
101.LAB		XBRL Taxonomy Extension Presentation Linkbase.

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

HIP CUISINE, INC.  (Registrant)
Signature		Title		Date
/s/ Natalia Lopera		Chief Executive Officer		August 14, 2017
Natalia Lopera
/s/ Douglas W. Samuelson		Chief Financial Officer		August 14, 2017
Douglas W. Samuelson

 

 

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