UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-Q

 

(Mark one)

xQuarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended September 30, 2016

 

¨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: 0-53248

 

HPC Acquisitions, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   68-0635204
(State of incorporation)   (IRS Employer ID Number)

 

636 U.S. Highway 1, Ste. 110, North Palm Beach, FL 33408

(Address of principal executive offices)

 

(800) 208-1680

(Issuer's telephone number)

 

Not Applicable

(Former Name, Address and Fiscal Year if Changed Since Last Report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ Smaller reporting company x

 

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

 

State the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: November 16, 2016: 20,000,000 shares of common stock, par value $0.001

 

 

 

 

HPC Acquisitions, Inc.

 

Form 10-Q for the Quarter ended September 30, 2016

 

Table of Contents

 

  Page
Part I - Financial Information  
   
Item 1 - Financial Statements 3
   
Item 2 - Management's Discussion and Analysis of Financial Condition and Plan of Operations 12
   
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 14
   
Item 4 - Controls and Procedures 14
   
Part II - Other Information  
   
Item 6 - Exhibits 15
   
Signatures 16

 

 2 

 

 

Part I - Financial Information

Item 1 - Financial Statements

 

HPC Acquisitions, Inc.

Balance Sheets

(Unaudited)

 

   September 30,   December 31, 
   2016   2015 
ASSETS          
Current Assets          
Cash and cash equivalents  $224,728   $78,278 
Accounts receivable   169,511    - 
Inventory   2,331,898    - 
Prepaid expenses   3,125    1,250 
Total Current Assets   2,729,262      
Other assets   14,500    - 
Total Assets  $2,743,762   $79,528 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
Current Liabilities          
Accounts payable – trade  $6,434   $2,653 
Accounts payable – related party   1,851,368    - 
Accrued income taxes   64,800    - 
Accrued interest – related parties   710    32,169 
Notes payable – related parties   175,000    209,652 
           
Total Liabilities   2,098,312    244,474 
           
Commitments and Contingencies          
           
Stockholders’ Equity (Deficit)          
Preferred stock – $0.001 par value, 10,000,000 shares authorized, none issued and outstanding   -    - 
Common stock – $0.001 par value, 50,000,000 shares authorized, 20,000,000 and 6,989,000 shares issued and outstanding, respectively   20,000    6,989 
Stock subscriptions receivable   -    100,000 
Additional paid-in capital   1,193,469    403,380 
Accumulated deficit   (568,019)   (675,315)
           
Total Stockholders’ Equity (Deficit)   645,450    (164,946)
           
Total Liabilities and Stockholders’ Equity (Deficit)  $2,743,762   $79,528 

 

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

 

 3 

 

 

HPC Acquisitions, Inc.

Statements of Operations

For the Three and Nine Months Ended September 30, 2016 and 2015

(Unaudited)

 

   Nine Months   Nine Months   Three Months   Three Months 
   Ended   Ended   Ended   Ended 
   September 30,   September 30,   September 30,   September 30, 
   2016   2015   2016   2015 
                 
Revenues  $1,587,649   $-   $154,574   $- 
                     
Cost of Goods Sold   1,156,534    -    104,355    - 
                     
Gross Profit   431,115    -    50,219    - 
                     
Operating expenses                    
Selling expenses   31,526    -    13,026    - 
Professional fees   124,140    21,366    11,580    2,162 
General and administrative expenses   101,442    8,510    61,983    3,451 
                     
Total operating expenses   257,108    29,876    86,589    5,613 
                     
Income (loss) from operations   174,007    (29,876)   (36,370)   (5,613)
                     
Other income (expense)                    
Interest expense to investors   (904)   (6,486)   (710)   (2,288)
Interest expense to controlling stockholder   (1,007)   (3,819)   -    (1,302)
                     
Income (loss) before provision for income taxes   172,096    (40,181)   (37,080)   (9,203)
                     
Provision for income taxes   64,800    -    -    - 
                     
Net income (loss)  $107,296   $(40,181)  $(37,080)  $(9,203)
                     
Income (loss) per common share - basic and fully diluted  $0.01   $(0.01)  $(0.00)  $(0.00)
                     
Weighted-average number of common shares outstanding - basic and fully diluted   16,863,077    6,989,000    20,000,000    6,989,000 

 

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

 

 4 

 

 

HPC Acquisitions, Inc.

Statements of Cash Flows

For the Nine Months Ended September 30, 2016 and 2015

(Unaudited)

 

   Nine Months   Nine Months 
   Ended   Ended 
   September 30,   September 30, 
   2016   2015 
Cash flows from operating activities          
Net income (loss)  $107,296   $(40,181)
Adjustments to reconcile net loss to net cash provided by operating activities          
(Increase) Decrease in          
Accounts receivable   (169,511)   - 
Inventory   (2,331,898)   - 
Prepaid expenses   (16,375)   (3,125)
Increase (Decrease) in          
Accounts payable – trade   17,445    (2,804)
Accounts payable – related party   1,838,414    1,500 
Accrued income taxes   64,800    - 
Accrued interest – related parties   (32,169)   7,626 
           
Net cash used in operating activities   (521,998)   (36,984)
           
Cash flows from financing activities          
Proceeds from notes payable – related parties   175,000    2,679 
Repayment of notes payable – related parties   (209,652)   - 
Proceeds from sale of common stock   703,100    - 
           
Net cash provided by financing activities   668,448    2,679 
    .      
Increase (decrease) in cash   146,450    (34,305)
           
Cash at beginning of period   78,278    34,330 
           
Cash at end of period  $224,728   $25 
           
Supplemental disclosure of interest and income taxes paid          
Interest paid for the period  $34,288   $- 
Income taxes paid for the period  $-   $- 

 

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

 

 5 

 

 

HPC Acquisitions, Inc.

Notes to Financial Statements

SEPTEMBER 30, 2016 and December 31, 2015

(Unaudited)

 

Note A - Organization and Description of Business

 

HPC Acquisitions, Inc. (the “Company”) was initially formed under the laws of the State of Minnesota as Herky Packing Co. on July 17, 1968. The Company initially produced and marketed meat snack foods, through food brokers, distributors and wagon jobbers. Despite a 1970 restructuring, including the relocation to an approximate 12,500 square foot production facility, the Company’s efforts were unsuccessful and all operations were terminated by the end of 1970. On April 10, 1972, the Company changed its corporate name to H. P. C. Incorporated. In connection with this name change, the Company acquired Ed Stein’s Tire Center, Inc., a Minneapolis, Minnesota-based distributor of Gates tires. This acquisition was unsuccessful and reversed in 1973.

 

On August 7, 2006, the Company changed its state of incorporation from Minnesota to Nevada by means of a merger with and into HPC Acquisitions, Inc., a Nevada corporation formed on June 12, 2006 solely for the purpose of effecting the reincorporation. The Articles of Incorporation and Bylaws of the Nevada corporation are the Articles of Incorporation and Bylaws of the surviving corporation. Such Articles of Incorporation modified the Company’s capital structure to allow for the issuance of up to 50,000,000 shares of $0.001 par value common stock and up to 10,000,000 shares of $0.001 par value preferred stock.

 

On March 8, 2016, the Company sold 12,011,000 shares of its common stock to David Selakovic at a total cash purchase price of $303,100. This transaction effected a change in management and control of the Company. Mr. Selakovic assigned to the Company certain assets consisting of the exclusive right to distribute in the Western Hemisphere natural agrochemicals developed by ECOWIN Co., Ltd., a Korean company, certain state permits for the sale of ECOWIN agrochemicals, and the trademark “Vegalab” (the “DS Assets”). Our new plan of operation is to commence the business of selling ECOWIN products under the brand name “Vegalab”.

 

The Company is currently in the business of selling the ECOWIN products under the “Vegalab” name in the United States of America. The Company’s current sole source of supply of ECOWIN products is through Vegalab S. A., a Swiss company solely owned by David Selakovic, who is also the Company’s controlling shareholder, Chief Executive and Chief Financial Officer and a director.

 

Note B - Preparation of Financial Statements

 

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

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

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.

 

For segment reporting purposes, the Company operated in only one industry segment during the periods represented in the accompanying financial statements and makes all operating decisions and allocates resources based on the best benefit to the Company as a whole.

 

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Annual Report on Form 10-K for the year ended December 31, 2015.

 

 6 

 

 

In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-Q, should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report filed with the SEC on Form10-K for the year ended December 31, 206, and are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending December 31, 2016.

 

Note C - Going Concern Uncertainty

 

The Company’s business plan is to distribute, in the Western Hemisphere, certain natural agrochemicals developed by ECOWIN Co., Ltd., a Korean company, under the brand name “Vegalab”. However, there is no assurance that the Company will be able to successfully penetrate its targeted market or that the implementation of said business plan will result in the appreciation of our stockholders’ investment in the then outstanding common stock.

 

The Company's continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis. The Company faces considerable risk in its business plan. If insufficient operating capital is available during the next twelve months, the Company will be forced to rely on existing cash in the bank and additional funds loaned by management and/or significant stockholders.

 

The Company’s former majority stockholder previously provided the necessary working capital to maintain the corporate status of the Company. It is the current intent of management and significant stockholders to provide sufficient working capital, if necessary, to support and preserve the integrity of the corporate entity. However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding.

 

The Company anticipates offering future sales of equity securities. However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.

 

The Company’s certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock and 50,000,000 shares of common stock. The Company’s ability to issue preferred stock may limit the Company’s ability to obtain debt or equity financing as well as impede potential takeover of the Company, which takeover may be in the best interest of stockholders. The Company’s ability to issue these authorized but unissued securities may also negatively impact our ability to raise additional capital through the sale of our debt or equity securities.

 

In such a restricted cash flow scenario, the Company would be unable to complete its business plan steps, and would, instead, delay all cash intensive activities. Without necessary cash flow, the Company may become dormant during the next twelve months, or until such time as necessary funds could be raised in the equity securities market.

 

While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach its goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.

 

These conditions raise substantial doubt about our ability to continue as a going concern for the next twelve months. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 

 

Note D - Summary of Significant Accounting Policies

 

1.Cash and cash equivalents

 

The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

 

 7 

 

 

2.Concentrations of credit risk

 

Sales to one customer comprised 89% of the Company’s total revenues and 0% of accounts receivable for the nine months ended September 30, 2016. The Company believes that, in the event that its primary customer is unable or unwilling to continue to purchase the Company’s goods, there are a number of alternative customers at comparable prices. 

 

At the present time, our sole source of supply is Vegalab S.A. At September 30, 2016, we held inventory at a cost of $2,331,898, and outstanding accounts payable to Vegalab S.A., in the amount of $1,851,368. Our payment terms on the account payable are “payable upon sale to consumer”.

 

3.Accounts receivable

 

In the normal course of business, the Company extends unsecured credit to virtually all of its customers which are located throughout the United States. Because of the credit risk involved, management has provided an allowance for doubtful accounts which reflects its opinion of amounts which will eventually become uncollectible. In the event of complete non-performance, the maximum exposure to the Company is the recorded amount of trade accounts receivable shown on the balance sheet at the date of non-performance.

 

4.Inventory

 

Inventory consists of finished goods related to the sale of certain natural agrochemicals developed by ECOWIN Co., Ltd., a Korean company, under the brand name “Vegalab”. Inventory is valued at the lower of cost or market using the first-in, first-out method. A charge to income is taken when factors that would result in a need for a reduction in the valuation, such as excess or obsolete inventory, are noted.

 

5.Revenue recognition

 

Revenue is recognized when the earnings process is completed, the risks and rewards of ownership have transferred to the customer, which is generally the same day as delivery or shipment of the product, the price to the buyer is fixed or determinable, and collection is reasonably assured. All sales are recorded when the goods are shipped. 

 

The Company ships all product on an FOB-Plant, “as-is” basis. Accordingly, revenue is recognized by the Company at the point at which an order is shipped at a fixed price, collection is reasonably assured and the Company has no remaining performance obligations related to the sale. The Company sells all products with “no right of return” by the purchaser for any factor other than defects in the products.

 

5.Income taxes

 

The Company files income tax returns in the United States of America and may file, as applicable and appropriate, various state(s). With few exceptions, the Company is no longer subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for years ending before December 31, 2013. The Company does not anticipate any examinations of returns filed since January 1, 2014.

 

The Company uses the asset and liability method of accounting for income taxes. At September 30, 2016 and December 31, 2015, respectively, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences. Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization, allowance for doubtful accounts and vacation accruals.

 

The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification. The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority. As a result of the implementation of Codification’s Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.

 

 8 

 

 

6.Income (Loss) per share

 

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

 

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).

 

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.

 

As of September 30, 2016 and 2015, the Company had no outstanding stock warrants, options or convertible securities which could be considered as dilutive for purposes of the loss per share calculation.

 

7.Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2017.

 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flows.

 

Note E - Fair Value of Financial Instruments

 

The carrying amount of cash, accounts receivable, accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

 

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

 

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to financial risk, if any.

 

Note F - Related Party Transactions

 

The Company’s current sole source of supply of ECOWIN products is through Vegalab S. A., a Swiss company solely owned by David Selakovic, who is also the Company’s controlling shareholder. During the nine months ended September 30, 2016, the Company incurred $2,431,936 for product purchases at market rates for resale from Vegalab S. A. and payable upon sale to consumer.

 

As of September 30, 2016 and December 31, 2015 the Company had outstanding accounts payable – related party of $1,851,368 and $0, respectively.

 

 9 

 

 

Note G - Notes Payable to Investors

 

During 2014, the Company borrowed an aggregate $122,300 on eight (8) separate promissory notes payable to six (6) separate unrelated third parties. These notes bear interest at either 5.0% or 6.0% per annum and were due on the earlier of October 1, 2015 or upon closing by the Company of a financing in the amount of $1,000,000 or more. These notes were paid in full by March 31, 2016.

 

   September 30,   December 31, 
   2016   2015 
         
Outstanding principal  $-   $122,300 
Accrued interest payable   -    2,215 
           
Total obligation outstanding  $-   $124,515 

 

Note H - Note Payable to Controlling Stockholder

 

The Company and its former controlling stockholder, Craig Laughlin, agreed, in previous periods, that additional funds would be necessary to support the corporate entity and comply with the periodic reporting requirements of the Securities Exchange Act of 1934, as amended. To this end, Mr. Laughlin agreed to lend the Company up to $50,000 with an original maturity period not to exceed three (3) years from the initial funding date at an interest rate of 6.0% per annum. The maturity date was subsequently extended to September 2010 and, post-maturity, became due upon demand. During the quarter ended March 31, 2016, the Company paid this note and all accrued interest in full.

 

On August 24, 2016 the Company’s new controlling stockholder, David Selakovic, agreed to lend the Company up to $300,000 at a rate of 4% per annum, with principal due on sixty days demand. As of September 30, 2016, Mr. Selakovic had loaned the Company a total $175,000. The Company accrued interest expense related to this loan of $710 as of September 30, 2016. No repayments on this note payable were made as of September 30, 2016.

 

Note I - Common Stock Transactions

 

On March 8, 2016, the Company completed the sale of 12,011,000 shares of its common stock to David Selakovic for approximately $303,100 in cash. The Company received $100,000 in the fourth quarter of 2015 under a stock subscription and the remaining balance during the nine months ended September 30, 2016.

 

In May 2016, the Company completed a private offering of 1,000,000 shares of common stock for $500,000 in cash.

 

 10 

 

 

Note J – Commitment and Contingencies

 

On July 20, 2016, the Company entered into a lease agreement for warehouses located at 2542 Business Parkway Suite 1 and 2, Minden, Nevada. The facility is 24,276 square feet with a lease term of 36 months at a current cost of approximately $13,959 per month. The Company was also required to make a security deposit of $14,500 included in other assets on the balance sheet as of September 30, 2016.

 

Note K- Subsequent Events

 

Management has evaluated all other activity of the Company through the release date of these financial statements and have concluded that no other subsequent events have occurred that would require recognition in the accompanying financial statements or disclosure in the notes to financial statements.

 

 

(Remainder of this page left blank intentionally)

 

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Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Caution Regarding Forward-Looking Information

 

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the audited December 31, 2015 Consolidated Financial Statements and notes thereto, along with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2015 Annual Report on Form 10-K, filed separately with the Securities and Exchange Commission.

 

This document contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, which address activities, actions, goals, prospects, or new developments that we expect or anticipate will or may occur in the future, including such things as expansion and growth of our operations and other such matters are forward-looking statements. Any one or a combination of factors could materially affect our operations and financial condition. These factors include competitive pressures, success or failure of marketing programs, changes in pricing and availability of products offered to customers, legal and regulatory initiatives affecting our products, and conditions in the capital markets. Forward-looking statements made by us are based on knowledge of our business and the environment in which we operate as of the date of this report. Because of the factors discussed in our 2015 Annual Report on Form 10-K and factors disclosed in subsequent reports filed with the Securities and Exchange Commission, actual results may differ from those in the forward-looking statements.

 

Plan of Operation

 

In March 2016, HPC acquired distribution rights to natural agrochemicals developed by ECOWIN, state permits related to those products, a trademark, and cash to commence the business of selling Vegalab products, as described under “Item 1. Business,” of its Annual Report on Form 10-K for the year ended December 31, 2015. HPC had no customers and no employees at the time of the asset purchase, so this endeavor represents the start of a new venture with the assets acquired.

 

We believe the most effective way to establish a foothold in the agriculture industry for our products is to pursue acceptance by one or more of the major United States agricultural businesses. This approach is based, in part, on the resources these businesses have available to test, or try-out, new product offerings and the resulting “cachet” that can attach to products once they have been accepted by these businesses.

 

To that end our executive officers will pursue discussions with large distributors of fertilizers and pesticides, and large farming operations to invite them to perform field tests with sample product. Preliminary discussions and information provided on the Vegalab technology have been well-received, so HPC expects to focus its efforts initially on pursuing testing programs with the major distributors and producers to advance the opportunity for acceptance and then purchase of the products. The last nine months of 2016 will be a period of high activity for testing and promoting the products with the major distributors and producers. The large distributors and farming operations is not a large group and we are focused on approximately 15 of these businesses. This targeted approach will enable us to limit the cost of promoting our products during this initial phase of the marketing effort, so we believe we have the financial resources to do so without additional capital.

 

To the extent we are successful in converting a major distributor or farming operation to a customer, we will need to be able to obtain and deliver product, which means we will need to finance inventory. We purchased inventory in April 2016, which has been used for testing by prospective customers and sales of “starter” purchases to try the products out in a typical crop setting. Additional purchases were made in the following months. All inventory is purchased from Vegalab S.A., a related party that is owned and controlled by David Selakovic, an officer, director, and principal shareholder of the Company. There is no firm commitment or purchase agreement with Vegalab S.A. At September 30, 2016, we held inventory at a cost of $2,331,898, and outstanding accounts payable to Vegalab S.A., in the amount of $1,851,368. Future inventory purchases will depend on how successful we are with our marketing efforts and our ability to finance such purchases.

 

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During the fourth quarter of calendar year 2016, we expect to establish an e-commerce presence. One of the items we acquired is the US trademark “Vegalab™.” Our marketing efforts will incorporate this brand name. Our intention is to establish a website around this trademark and build a brand by promoting the efficacy and environmental safety of the Vegalab products. Assuming we have some success with our targeted initial marketing strategy described above, we intend to use that to attract other potential users to the products we offer through our website and by employing sales representatives with experience in agriculture to promote our products to other distributors and large scale users.

 

If we are successful in gaining acceptance and orders for our product, we expect we will develop two sales channels. The first is establishing sub-distributors made up of well-established distributors of fertilizers and pesticides. Second is direct sales to farm operations through farm coops and retailers. As this is a new venture we cannot predict whether or to what extent we will be successful in establishing and managing these sales channels. Once we become more established, we will actively pursue other marketing and promotional activities, such as participation in trade shows and developing plans for expanding marketing outside the Unites States.

 

To summarize, by the end of the first calendar quarter of 2017, we hope to have:

 

·Several major agrichemical product distributors or farming operation established as customers;

 

·A well-developed Internet presence and brand for our products;

 

·Sales representatives promoting our products; and

 

·Growing revenue from sales of our products.

 

Our plan of operation notwithstanding, our business is a new venture with all of the risks and uncertainties associated with such ventures. We do not have an established customer base or a history of sales from which you can evaluate or predict out ability to gain customers and grow the business. We have a limited amount of capital for inventory purchases, but the establishment of customers for our products will require capital for inventory that we have not yet obtained, or purchases of inventory under credit arrangements we have not arranged. We do not have established market acceptance of our products, so we are a new entrant in a well-established market for agrochemicals in which our competitors have well-known products and much more substantial financial, managerial, and promotional resources than we do. As product sales increase, we will need to employ people to support that growth, and there is no assurance that we will be able to attract and engage employees with the skills needed to facilitate the development of our business.

 

Results of Operations

 

Since the Company was not engaged in active business operations in 2015, a comparison of results of operations between comparable accounting periods for 2016 and 2015 in the discussion below is not meaningful.

 

During the quarter ended September 30, 2016, the Company recognized revenues of $154,574 from the sale of Vegalab products, and recognized revenues of $1,587,649 for the nine-month period then ended. Cost of goods sold were $104,355 and $1,156,534 for the three and nine-month periods ended September 30, 2016, respectively.

 

Total operating expenses for the nine months ended September 30, 2016, were $257,108, and were $86,589 for the three months then ended. For the nine months ended September 30, 2016, income from operations was $174,007. For the three-month period then ended, the Company recognized a loss from operations in the amount of $36,370.

 

After the provision for income taxes, net income for the nine-month period ended September 30, 2016, was $107,296, or $0.01 per share on a fully diluted basis. The net loss for the three month period ended September 30, 2016, was $37,080.

 

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Liquidity and Capital Resources

 

At September 30, 2016 and December 31, 2015, the Company had a working capital surplus (deficit) of approximately $630,450 and $(165,000), respectively.

 

At the present time, our sole source of supply is Vegalab S.A. At September 30, 2016, we held inventory at a cost of $2,331,898, and outstanding accounts payable to Vegalab S.A., in the amount of $1,851,368. Our payment terms on the account payable are “payable upon sale to consumer”.

 

On March 8, 2016, we raised $303,100, from the sale of 12,011,000 shares of common stock to David D. Selakovic. These funds were applied to pay off substantially all of our liabilities at December 31, 2015, and costs related to the acquisition of assets in March 2016. In May 2016, the Company completed a private placement of 1,000,000 shares of common stock for $500,000 in cash, which we intend to use in operations and for general corporate purposes.

 

We believe our current funding is sufficient to meet our needs described above over the next 9 to 12 months. Nevertheless, our goal is to begin and then increase product sales as quickly as we can within the constraints of our managerial and financial resources. If sales opportunities exceed our expectations, we will need additional debt or equity financing to seize these opportunities and there is no assurance financing will be available or available at terms we would find acceptable. If we are unable to raise additional capital at a level adequate to support our sales opportunities, we would need to curtail marketing efforts, which would adversely affect growth and results of operations and could prevent us from succeeding in implementing our new operating business.

 

Critical Accounting Policies and Estimates

 

A summary of our significant accounting policies and estimates is discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2015, and in Note D to the unaudited financial statements included with this report. Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience 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 or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

 

Not required of a smaller reporting company.

 

Item 4 - Controls and Procedures

 

Our management, under the supervision and with the participation of our Chief Executive and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Certifying Officer concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a weakness in our internal control over financial reporting described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2015, which we view as an integral part of our disclosure controls and procedures.

 

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There have been no changes in our internal control over financial reporting during the quarterly period ended September 30, 2016, which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

Part II - Other Information

 

Item 6 - Exhibits

 

31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101 Interactive data files pursuant to Rule 405 of Regulation S-T.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  HPC Acquisitions, Inc.
   
Dated: November 21, 2016 /s/ David D. Selakovic
  David D. Selakovic
  Chief Executive Officer and
  Chief Financial Officer

 

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