NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN US$)
SEPTEMBER
30, 2022 AND 2021
NOTE
1: NATURE OF OPERATIONS
HUMBL,
Inc. (“Company” or “HUMBL”) was incorporated November 12, 2009. The Company was redomiciled on November 30, 2020
to the State of Delaware.
On
December 3, 2020, HUMBL, LLC (“HUMBL LLC”) merged into the Company in what is accounted for as a reverse merger. Under the
terms of the Merger Agreement, HUMBL LLC exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred
Stock. The Series B Preferred shares were issued to the respective members of HUMBL LLC following the approval by FINRA of a one-for-four
reverse stock split of the common shares and the increase in the authorized common shares to 7,450,000,000 shares, and 10,000,000 preferred
shares.
The
FINRA approval for both the increase in the authorized common shares and reverse stock split occurred on February 26, 2021. To assume
control of the Company, the former CEO, Henry Boucher assigned his 7,000,000 shares of Series A Preferred Stock as well as 550,000,000
shares of common stock to Brian Foote, the President and CEO of HUMBL LLC for a $ note payable. The Series A Preferred Stock is
not convertible into common stock; however, it has voting rights of 10,000 votes per 1 share of stock. After the reverse merger was completed,
HUMBL LLC ceased doing business, and all operations were conducted under Tesoro Enterprises, Inc. which later changed their name to HUMBL,
Inc. (“HUMBL” or the “Company”).
On
June 3, 2021 we acquired Tickeri, Inc. (“Tickeri”) in a debt and stock transaction totaling $20,000,000 following which Tickeri
became a subsidiary of HUMBL. Tickeri is a leading ticketing, live events and box office SaaS platform featuring Latin events and artists
throughout the United States, Latin America, and the Caribbean corridor. The purchase price for the stock purchase was $20,000,000 of
which we must pay $10,000,000 in our common stock and $10,000,000 was paid through two promissory notes. The shares had a deemed value
equal to the volume weighted average price per share of HUMBL common stock on the OTC Markets for the ten consecutive trading days ending
with the complete trading day ending two trading days prior to the closing. We issued the two shareholders of Tickeri, Juan Gonzalez
and Javier Gonzalez, 4,672,897 shares of our common stock each. We also issued to each of Juan and Javier Gonzalez a secured promissory
note in the face amount of $5,000,000. The promissory notes are due and payable on or before December 31, 2022, bear interest at the
rate of 5% per annum and are secured by the equity interests of Tickeri. In the event of an uncured default by HUMBL under the promissory
note, Juan and Javier Gonzalez have the right to recover the ownership of Tickeri and re-commence the business and operations of Tickeri
free and clear of any claims or encumbrances by HUMBL. We intend to limit the integration of Tickeri’s assets with our assets until
the promissory notes are paid in full. We agreed to register on Form S-1 within three months from the closing the shares issued to Juan
and Javier Gonzalez and have the registration statement declared effective within six months of the closing date. Following the closing,
Juan Gonzalez and Javier Gonzalez, entered into employment agreements having a term of 18 months, appointing them CEO of Tickeri and
CTO of HUMBL, respectively. The Company has been negotiating with both Juan Luis and Javier Gonzalez regarding the registration rights
effectiveness provision and have accrued $700,000 through June 30, 2022 as a result of the failure to have the registration statement
originally filed in July 2021 declared effective. We evaluated whether this penalty would constitute a derivative liability, and we determined
that there are sufficient funds to cover this fee and sufficient authorized common stock should we pay this fee in stock.
On
June 30, 2021, we acquired Monster Creative, LLC (“Monster”). Monster is a Hollywood production studio that specializes in
producing movie trailers and other related content. Monster was founded by Doug Brandt and Kevin Childress. Monster will collaborate
with HUMBL in the production of NFTs and other digital content. The purchase price for all of the membership interests in Monster was
paid through the issuance of one convertible note and one non-convertible note to each of Doug Brandt and Kevin Childress in the aggregate
principal amount of $8,000,000. The convertible notes were issued to Doug Brandt (through an entity owned by him) and Kevin Childress
in the aggregate principal amount of $7,500,000. The notes convert at the holder’s election at $1.20 per share, bear interest at
5% per annum and are due in 18 months from issuance. We also issued non-convertible notes to Doug Brandt and Kevin Childress in the aggregate
amount of $500,000. These notes bear interest at the rate of 5% per annum and are due on April 1, 2022. Doug Brandt and Kevin Childress
each entered into employment agreements with Monster having a term of three years. Doug Brandt was appointed as the CEO of Monster and
Kevin Childress was appointed as its President and Creative Director. The Company and Doug Brandt and Kevin Childress agreed to an extension
on March 30, 2022 of the notes that were due April 1, 2022 until July 1, 2022 and then another extension on July 1, 2022 to October 1,
2022.
In
the initial extension agreements through July 1, 2022, the Company added $7,500 to Doug Brandt and $1,500 to Kevin Childress in their
note agreements, and then added another $7,500 to Doug Brandt and $1,500 to Kevin Childress on July 1, 2022 to extend these notes to
October 1, 2022. On July 1, 2022, the Company extended these notes to October 1, 2022 with the following terms: (i) $85,000 due July
15, 2022; (ii) $50,000 due August 1, 2022, (iii) $50,000 due September 1, 2022; and (iv) the remainder of $333,000 due October 1, 2022.
The fees of $18,000 on the two extensions did not constitute a material modification of the debt instruments. The Company has not yet
made the payment that was due October 1, 2022 and is in default under the notes.
On
February 12, 2022, the Company entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). The Company determined
this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure
is not considered a significant subsidiary under Regulation S-X Rule 1-02(w). The Company acquired a customer relationship with the US
Air Force and BizSecure’s Mobile ID technology. The Company entered into employment agreements with two BizSecure employees as
part of the agreement to help integrate the Mobile ID technology into the Company’s larger suite of products and help operate the
blockchain services division. The assets acquired from BizSecure represented the majority of the operations of the entity and BizSecure
post-acquisition has only conducted nominal operations and has no employees. The Company issued to BizSecure 13,200,000 common shares
and 26,800,000 restricted stock units that vest quarterly commencing April 1, 2022 for a period of two years. The shares and restricted
stock units have a value of $6,756,000. The Company has included the value of $4,526,520 which represents the value of the restricted
stock units in contingent consideration pursuant to ASC 805-10-55-25. Management considered several factors when making the determination
to treat the RSUs as contingent consideration and not post-combination compensation, including, but not limited to, the following: (a)
the RSUs are not automatically forfeited upon termination of the two key employees as those RSUs would vest if the employees were terminated
without cause or if the employees resigned with good reasons; (b) all selling shareholders of BizSecure receive the same pro rata compensation;
(c) the BizSecure shareholders hired by the Company receive compensation commensurate with other employees in the Company at the same
level; (d) there are no adjustments to the RSUs based on earnings and thus there is no profit-sharing component to the RSUs; and (e)
the parties desired for the compensation to be paid over time and not all up front. Therefore, the Company determined that the restricted
stock units should be treated as contingent consideration.
On
March 3, 2022, the Company acquired Ixaya Business SA de CV, a Mexican corporation (“Ixaya”), under a Stock Purchase Agreement
(“Ixaya SPA”). The acquisition of Ixaya was for $150,000 and 8,962,036 shares of common stock (a value of $1,500,000) for
a total of $1,650,000. The Company accounted for this acquisition as a business combination under ASC 805, and Ixaya is not considered
a significant subsidiary under Regulation S-X Rule 1-02(w).
On
August 11, 2022 the Company executed a definitive agreement with Ecoark Holdings, Inc. (“Ecoark”) (NASDAQ: ZEST) to acquire
100% of the issued and outstanding common stock of Ecoark’s majority owned subsidiary Agora Digital Holdings, Inc. (“Agora
Digital”) in exchange for HUMBL issuing 6,000 shares of Series C preferred stock valued at $10,000 per share. The definitive agreement
has a closing condition which has yet to be fulfilled at the time of this filing whereby Ecoark is required to source a minimum of $10,000,000
in capital for HUMBL prior to the transfer of ownership of Agora Digital to HUMBL This agreement was terminated on September 16, 2022,
and Brad Hoagland tendered his resignation as an independent director.
On
September 26, 2022, the Company announced the formation of a strategic technology partnership with Great Foods2Go (“GF2GO”).
The two companies will integrate HUMBL’s mobile application, search engine and marketplace technologies in support of GF2GO and
its sub-brand, 1Delivery. The companies will use the initial San Diego, CA location as the first “HUMBL Hub” to determine
the best technology mix of mobile payment applications, point of sale systems, search engine advertising and marketplace delivery technologies.
HUMBL
is a Web 3, digital commerce platform that was built to connect consumers, businesses and governments in the digital economy. HUMBL provides
simple tools and packaging for complex new technologies such as blockchain, in the same way that previous cycles of e-commerce and the
cloud were more simply packaged by companies such as Facebook, Apple, Amazon and Netflix over the past several decades. The Company through
their product offerings are looking to simplify and package the tokenized blockchain economy for consumers, corporations and government.
The
goal of HUMBL is to provide ready built tools, and platforms for consumers and merchants to seamlessly participate in the digital economy.
HUMBL is built on a patent-pending decentralized technology stack that utilizes both core and partner technologies, to provide faster
connections to the digital economy and each other.
The
Company is organized into two divisions: a) HUMBL Consumer and b) HUMBL Commercial. These two divisions incorporate and expand the Company’s
core products that were formerly set up into three distinct segments prior to 2022. The majority of the Company’s operations prior
to 2022 were focused on the Consumer division. With the acquisition of the Mobile ID technology from BizSecure and software capabilities
from Ixaya, the development of our newly formed HUMBL Blockchain Services unit we anticipate that the Commercial division will provide
opportunities across the governmental sector as well as businesses in search of enhancing their platforms.
HUMBL’s
core products and services are as follows:
●
HUMBL Mobile Wallet – A mobile app that allows consumers to buy, sell and hold digital assets;
●
HUMBL Marketplace – A mobile marketplace that allows consumers and merchants to connect more seamlessly in the digital economy;
and
●
HUMBL Financial – Financial products and services, targeted for simplified investing on the blockchain.
●
HUMBL Blockchain Services – Enterprise solutions for businesses and governments related primarily to credentialing and identity
verification.
HUMBL
Mobile Wallet (formerly HUMBL Pay)
HUMBL
continues the development of a mobile application that allows customers to migrate to and participate in the digital economy. The Company
has integrated a variety of useful functionality such as buying, selling, sending and receiving digital assets, storing personal digital
credentials and supporting various digital forms of payment. The Company is also working rapidly to integrate the use of search, discovery,
peer-to-peer cash and ticketing around the world, as these services migrate into digital and blockchain-based modalities. The mobile
application is designed to provide functionality to the following groups:
●
Individuals - Consumers who want to participate in acquiring digital assets discover, pay, rate and review experiences digitally
vs. paper bills and hardware point-of-sale (“POS”);
●
Freelancers - Service providers and gig workers that want to get paid from anywhere they work vs. paper bills and hardware POS;
and
●
Merchants – Primarily brick and mortar vendors that want to get paid digitally vs. paper bills and hardware POS.
We
can receive revenue from the mobile wallet in two ways. First, HUMBL can participate in any transactional fees generated from customers
using the HUMBL Pay app. In these circumstances HUMBL can typically collect a percentage of the transaction for providing these services.
Second, HUMBL can charge a monthly subscription fee for users such as merchants and freelancers that use the app. Currently, we are not
receiving revenue in either of these ways. The Company is not charging fees (in addition to those charged by the third-party services
providers) as a way to provide competitive pricing and incentivize customers to use the app. We could begin charging these fees at any
time.
We
engage the services of providers such as Stripe to process payments and Wyre and BitGo to act as custodians of the digital assets purchased
by our customers using our HUMBL Pay app. The digital assets purchased on our platform are actually purchased through the Wyre and held
by Wyre for our customers’ benefit. No digital assets are purchased through BitGo, but they do act as a custodian for certain of
our digital assets.
HUMBL
Marketplace
Through
its online marketplace, HUMBL is developing the capability for merchants to list a wide range of soft goods and digital assets to mid-market
audiences, that, where appropriate, incorporate the benefits of blockchain. HUMBL provides merchants with the ability to list and sell
goods with greater levels of authentication, by using technologies such as the HUMBL Token Engine and HUMBL Origin Assurance, to improve
the merchant’s ability to trade, track and pay for assets.
Through
our online marketplace we also allow for the listing of non-fungible tokens (“NFTs”). NFTs allow entities and individuals
such as athletes, celebrities, agencies, artists and companies to monetize their digital images, multimedia content and catalogues on
the blockchain. HUMBL provides a marketplace for artists and athletes to connect online in the sale of digital collectibles to fans and
collectors and provides a rigorous set of terms and conditions that govern what can and cannot be listed on the marketplace. We currently
review all listings to screen for graphic content, potential intellectual property rights violations, and potential securities law violations.
The NFT marketplace is operated through a third-party marketplace plug-in (OpenSea), electronic wallet extensions (such as MetaMask),
and the Ethereum blockchain. Users participate in the NFT marketplace by linking their digital wallets to our platform and engaging (e.g.,
buying, selling, bidding) with the NFTs listed on our platform. The services provided by HUMBL are administrative. HUMBL is a platform
and does not act as a broker, financial institution, or creditor. We facilitate transactions between the buyer and seller in the auction/sale
process but we are not a party to any agreement between the buyer and seller or between any users.
We
receive revenue from the NFT marketplace in two ways. First, for some clients HUMBL provides design services to help artists, athletes
and entertainers create NFTs to be sold to their fans. In these circumstances HUMBL typically receives a flat fee for providing such
services that is paid out of the sales price of the NFT. The size of the fee depends on the scope and complexity of the design services
provided. Second, HUMBL receives a transaction fee each time an NFT sells on the NFT marketplace.
The
NFT marketplace allows creators to mint NFTs using their own intellectual property and list those NFTs for sale (primary sales) on the
marketplace. The NFT marketplace also allows for NFTs to be resold (secondary sales) on the platform, but currently only NFTs that were
originally minted on the Company’s NFT Marketplace or are otherwise approved by the Company may be listed for secondary sales on
the Marketplace. The Company does not otherwise support or influence the market for the resale of NFTs sold on its platform. Other than
requiring creators to attest they own the IP used to create their NFTs and monitoring for obvious copyright violations, the Company does
not enforce any rights related to the primary or secondary sales of NFTs. Payment transactions for the purchase and sale of NFTs are
made through the use of smart contracts on the Ethereum blockchain.
The
Company does not handle separate, off-chain payments for NFTs. Tracking and payment of resale royalty fees are accomplished automatically
through the use of smart contracts. The Company is not responsible for distributing or managing resale royalty fees.
In
September of 2021, HUMBL launched HUMBL Tickets, initially focused on the offering of secondary (resale) tickets to thousands of live
events across North America. The inventory listings and ticket fulfillment are provided by Ticket Evolution and HUMBL earns a commission
for each sale. In addition to its subsidiary Tickeri, the Company will continue to work with clients to merge the realms of NFTs, event
tickets and blockchain authentication.
HUMBL
Financial
HUMBL
Financial was developed to package step-function technologies such as blockchain into “several clicks” for the customer.
In
2021, HUMBL Financial created BLOCK ETX products to simplify digital asset investing for customers and institutions seeking exposure
to a new, 24/7 digital asset class. We have launched this product in 100 countries outside the United States. HUMBL Financial has developed
proprietary, multi-factor blockchain indexes, trading algorithms and financial services for the new digital asset trading markets to
accommodate index, active and thematic investment strategies. BLOCK ETXs are completely non-custodial, algorithmically driven software
services that allow customers to purchase and hold digital assets in pre-set allocations through their own digital asset exchange accounts.
BLOCK ETXs are compatible for United States customers who have accounts with Coinbase Pro, Bittrex US or Binance US and for non-US customers
who have accounts with Bittrex Global. BLOCK ETXs were served first on the desktop and web version of the HUMBL platform, with the goal
of future applications inside the HUMBL mobile application. HUMBL Financial is open to the licensing of the BLOCK ETXs to institutions
and exchanges. HUMBL Financial also plans to offer trusted, third-party financial services in areas such as payments, investments, credit
card services and lending across the HUMBL platform over time.
In
February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the
BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue
to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal
was February 28, 2022. The Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time.
HUMBL
Blockchain Services
HUMBL
Blockchain Services (“HBS”) was formed as part of the Company’s asset acquisition of BizSecure on February 12, 2022.
Recognizing the opportunities for governments and commercial enterprises to incorporate Blockchain and Distributed Ledger Technologies
(“DLT”), HBS is focused on working with clients to identify problems and develop solutions that build upon the various capabilities
the Company has and continues to develop.
Our
solutions enable municipalities, government agencies, and other commercial entities the ability to offer mobile IDs and other credential
verification services to their constituents. We continue to make significant investments to leverage our existing technologies and further
expand both our DLT capabilities and are always exploring strategic alternatives intended to optimize the value of our Company.
Going
Concern
Liquidity
is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate
on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable
and accounts payable and capital expenditures.
We
have incurred an increased working capital deficit and accumulated deficit as of September 30, 2022 as we continued to ramp up operations
significantly in this period and incurred new debt mostly offset by exchanging some debt into shares of common stock to assist in supporting
our operations.
As
of September 30, 2022, we had $1,258,122 in cash and restricted cash. Between the growth in revenues and profitability from our subsidiaries
as well as through sales of merchandise, HUMBL Tickets and NFTs in the HUMBL Marketplace, we continue to fund the development of the
HUMBL Wallet. In February 2022 we entered into a purchase agreement with BizSecure that coincided with the commencement of HUMBL Blockchain
Services. With this acquisition of BizSecure and Ixaya in March 2022, we are growing our operations in the LatAm region of the world
and expect to be able to offer our array of core products to governmental agencies as well as the private sector not in the United States,
but throughout the world. We have generated a majority of our proceeds from the issuance of debt, the sale of common stock and through the exercise of warrants.
We
had a working capital deficit of $27,739,267 and $20,965,419 as of September 30, 2022 and December 31, 2021, respectively. The majority
of our current liabilities is in the form of related party notes for the acquisitions of Tickeri and Monster. The decrease in working
capital is the direct result of these notes as well as the debt incurred related to the cash necessary to continue the development of
our mobile wallet. The Company believes it has adequate capital resources to meet its cash requirements during the next 12 months as
they continue to grow and develop suitable sources of capital. A majority of the Company’s operating expenses in 2022 (58%) were
the result of non-cash charges such as impairment of goodwill, settlement and stock-based compensation. The actual monthly cash burn
of the Company is approximately $1,137,000 per month at this time and as our core products come online, this is likely to decrease upon
our technology being completed. The Company has received $575,000 in purchases of common stock and warrants, $2,000,000 in additional
warrant exercises and $6,500,000 in related party debt proceeds in 2022, however, as a result of the operating losses and working capital
deficit, management has determined that there is substantial doubt about the Company’s ability to continue as a going concern.
We
expect that the revenue generating operations of the Company will continue to improve the liquidity of the Company moving forward. However,
going forward, the effect of the pandemic on the capital markets may limit our ability to raise additional capital on the terms acceptable
to us at the time we need it, if at all. The challenges related to remote work and travel restrictions that we as a smaller company have
faced in striving to meet our disclosure obligations in a timely manner while taking the steps to protect the health and safety of our
employees have impacted, and may continue to further impact, our ability to raise additional capital.
The
consolidated financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business over
a reasonable period. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome
of the uncertainties.
The
Company plans to raise additional capital through the exercising of their warrants as well as through future debt and equity financings
to carry out its business plan. Obtaining additional financing and the successful development of the Company’s segments including
their new Blockchain Services group, ultimately, to profitable operations, are necessary for the Company to continue operations.
Impact
of COVID-19
The
COVID-19 pandemic previously had a profound effect on the U.S. and global economy and may continue to affect the economy and the industries
in which we operate, depending on the vaccine rollouts and the emergence of virus mutations.
COVID-19
did not have a material effect on the Consolidated Statements of Operations or the Consolidated Balance Sheets.
Our
ability to access the capital markets and maintain existing operations is unknown during the COVID-19 pandemic. Any such limitation on
available financing and how we conduct business with our customers and vendors would adversely affect our business.
Because
the federal government and some state and local authorities are reacting to the many variants of COVID-19, it is creating uncertainty
on whether these actions could disrupt the operation of the Company’s business and have an adverse effect on the Company. The extent
to which the COVID-19 outbreak may impact the Company’s results will depend on future developments that are highly uncertain and
cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”)
and the rules and regulations of the United States Securities and Exchange Commission (the “Commission” or the “SEC”).
It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statement presentation.
As
the acquisition of HUMBL resulted in the owners of HUMBL gaining control over the combined entity after the transaction, and the shareholders
of Tesoro Enterprises, Inc. continuing only as passive investors, the transaction was not considered a business combination under the
ASC. Instead, this transaction was considered to be a capital transaction of the legal acquiree (HUMBL) and was equivalent to the issuance
of shares by HUMBL for the net monetary assets of Tesoro Enterprises, Inc. accompanied by a recapitalization. As a result, all historical
balances are those of HUMBL as they are the accounting acquirer.
Under
generally accepted accounting principles of the United States, any excess of the fair value of the shares issued by HUMBL over the value
of the net monetary assets of Tesoro Enterprises, Inc. is recognized as a reduction of equity. There was no excess of fair value in this
transaction.
Principles
of Consolidation
The
consolidated financial statements include the accounts of HUMBL, Inc. and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. HUMBL, Inc. holds 100% of Tickeri, Monster and Ixaya. The Company formed additional
subsidiaries that are inactive and have no activity for future use.
The
Company applies the guidance of Topic 805 Business Combinations of the Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”).
For
Tickeri, Monster, BizSecure and Ixaya, the Company accounted for these acquisitions as business combinations and the difference between
the consideration paid and the net assets was applied to goodwill as there were no identifiable intangible assets acquired.
Reclassification
The
Company has reclassified certain amounts in the 2021 financial statements to comply with the 2022 presentation. These principally relate
to classification of certain expenses and liabilities. The reclassifications had no impact on total net loss or net cash flows for the
nine months ended September 30, 2021.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates include,
but are not limited to, management’s estimate of provisions required for permanent and temporary differences related to income
taxes, liabilities to accrue, estimates of the fair value of goodwill and determination of the fair value of stock awards. Actual results
could differ from those estimates.
Cash
and Restricted Cash
Cash
consists of cash and demand deposits with an original maturity of three months or less. The Company holds no cash equivalents as of September
30, 2022 and December 31, 2021, respectively. The Company maintains cash balances in excess of the FDIC insured limit at a single bank.
In
2022, the Company established a service to their HUMBL Pay app users. The service enables HUMBL Pay app users the ability through a Company
maintained digital asset wallet with Wyre (“Wyre”) to purchase digital assets (cryptocurrency). As it can take 5 to 8 business
days to physically settle funds in the Wyre wallet, there may be delays in digital assets being received by customers and the delivery
of BLOCKS in a BitGo wallet (“BitGo”). BitGo is a third-party custodian service that provides the custody for the customers’
BLOCKS. These timing differences occur, and as of June 30, 2022, the BitGo account has been settled and no unfunded liabilities exist.
The
BitGo account is not the Company’s account; however it represents the pool of all BLOCKS held by and allocated to HUMBL Pay
users accounts. The users may choose to transfer the purchased BLOCKS to their individual wallets outside of HUMBL.
Safeguarding
Obligation
Assets
related to user cryptocurrencies safeguarding obligation and the user cryptocurrencies safeguarding obligation represent the Company’s
obligation to safeguard customers’ crypto assets in digital wallets on the Company’s platform. The Company safeguards these
assets for customers and is obligated to safeguard them from loss, theft, or other misuse. The Company recognizes the users cryptocurrencies
liabilities and corresponding assets related to the users cryptocurrencies, on initial recognition and at each reporting date, at fair
value of the crypto assets. Any loss, theft, or misuse would impact the measurement of users crypto assets.
The
majority of the cryptocurrency obligation is comprised of Bitcoin, Ethereum and BLOCKS.
Fixed
Assets and Long-Lived Assets
ASC
360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting
Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.
The
Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which
may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover
the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets
are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value
of the assets.
Fixed
assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets
with infinite lives, such as digital currency are valued at costs and reviewed for indicators of impairment at least annually, or more
depending on circumstances.
The
Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:
1.
Significant underperformance relative to expected historical or projected future operating results;
2.
Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and
3.
Significant negative industry or economic trends.
When
the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above
indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company
records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate
determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is
required in determining whether an indicator of impairment exists and in projecting cash flows.
Revenue
Recognition
The
Company accounts for a contract with a customer that is within the scope of this Topic only when the five steps of revenue recognition
under ASC 606 are met.
The
five core principles will be evaluated for each service provided by the Company and is further supported by applicable guidance in ASC
606 to support the Company’s recognition of revenue.
The
Company accounts for revenues based on the verticals in which they were earned. The four principal verticals in which the Company operates
today are HUMBL Mobile Wallet, HUMBL Marketplace, HUMBL Financial and HUMBL Blockchain Services.
HUMBL
Mobile Wallet (formerly HUMBL Pay)
The
Company is anticipated to earn transaction revenues primarily from fees charged to merchants and consumers on a transaction basis through
the Company’s mobile application. These fees may have a fixed and/or variable component. The variable component is generally a
percentage of the value of the payment amount and is known at the time the transaction is processed. For a portion of our transactions,
the variable component of the fee is eligible for reimbursement when the underlying transaction is approved for a refund. The Company
may estimate the amount of fee refunds that will be processed each quarter and record a provision against the net revenues. The volume
of activity processed on the platform, which results in transaction revenue, is referred to as Total Payment Volume (“TPV”).
The
Company will earn additional fees on transactions where currency conversion is performed, when cross-border transactions are enabled
(i.e., transactions where the merchant and consumer are in different countries), to facilitate the instant transfer of funds for customers
from their HUMBL account to their debit card or bank account, and other miscellaneous fees. The Company will rely on third party partners
to perform all money transmission services.
The
Company may earn revenues from other value-added services, which are comprised primarily of revenue earned through partnerships, referral
fees, subscription fees, gateway fees, ticketing, peer-to-peer payments and other services that will be provided to merchants and consumers.
These contracts typically have one performance obligation which is provided and recognized over the term of the contract.
The
transaction price is generally fixed and known at the end of each reporting period; however, for some agreements, it may be necessary
to estimate the transaction price using the expected value method. The Company is expected to record revenue earned in revenues from
other value-added services on a net basis when they are considered the agent with respect to processing transactions.
HUMBL
Marketplace
The
Company recognizes revenue when they transfer control of promised goods or services to customers in an amount that reflects the consideration
to which is expected to be entitled in exchange for those goods or services. Revenue is recognized net of any taxes collected, which
are subsequently remitted to governmental authorities.
Net
transaction revenues
The
net transaction revenues will primarily include final value fees, feature fees, including fees to promote listings, and listing fees
from sellers in our Marketplace. The net transaction revenues will also include store subscription and other fees often from large enterprise
sellers. The net transaction revenues are reduced by incentives provided to customers.
The
Company has identified one performance obligation to sellers on the Marketplace platform, which is to connect buyers and sellers on the
secure and trusted Marketplace platforms. Final value fees are recognized when an item is sold on a Marketplace platform, satisfying
this performance obligation. There may be additional services available to Marketplace sellers, mainly to promote or feature listings,
that are not distinct within the context of the contract.
Accordingly,
fees for these additional services are recognized when the single performance obligation is satisfied. Promoted listing fees are recognized
when the item is sold and feature and listing fees are recognized when an item is sold, or when the contract expires.
Further,
to drive traffic to the platform, the Company will provide incentives to buyers and sellers in various forms including discounts on fees,
discounts on items sold, coupons and rewards. Evaluating whether a promotion or incentive is a payment to a customer may require significant
judgment. Promotions and incentives which are consideration payable to a customer are recognized as a reduction of revenue at the later
of when revenue is recognized or when the incentive is paid or promise to be paid. Promotions and incentives to most buyers on our Marketplace
platforms, to whom there is no performance obligation, are recognized as sales and marketing expense. In addition, there may be credits
provided to customers when certain fees are refunded. Credits are accounted for as variable consideration at contract inception when
estimating the amount of revenue to be recognized when a performance obligation is satisfied to the extent that it is probable that a
significant reversal of revenue will not occur and updated as additional information becomes available.
Ticketing
Revenues
The
Company with the acquisition of Tickeri and launch of HUMBL Tickets recognizes revenues from their ticketing services primarily from
service fees, commissions and payment processing fees charged at the time a ticket for an event is sold. We also derive revenues from
providing certain creators with account management services and customer support. Our customers are primarily event creators who use
our platform to sell tickets to attendees. Revenue is recognized when control of the promised goods or services is transferred to customers,
in an amount that reflects the consideration we receive in exchange for those goods or services. We allocate the transaction price by
estimating a standalone selling price for each performance obligation using a cost plus a margin approach. For service fees and payment
processing fees, revenue is recognized when the ticket is sold. For account management services and customer support, revenue is recognized
over the period from the date of the sale of the ticket to the date of the event.
We
evaluate whether it is appropriate to recognize revenue on a gross or net basis based upon our evaluation of whether we obtain control
of the specified goods or services by considering if we are primarily responsible for fulfillment of the promise, have inventory risk,
and have the latitude in establishing pricing and selecting suppliers, among other factors.
We
determined the event creator is the party responsible for fulfilling the promise to the attendee, as the creator is responsible for providing
the event for which a ticket is sold, determines the price of the ticket and is responsible for providing a refund if the event is canceled.
Our service is to provide a platform for the creator and event attendee to transact and our performance obligation is to facilitate and
process that transaction and issue the ticket. The amount that we earn for our services is fixed. For the payment processing service,
we determined that we are the principal in providing the service as we responsible for fulfilling the promise to process the payment
and we have discretion and latitude in establishing the price of our service. Based on our assessment, we record revenue on a net basis
related to our ticketing service and on a gross basis related to our payment processing service. As a result, costs incurred for processing
the transactions are included in cost of net revenues in the consolidated statements of operations.
Revenue
is presented net of indirect taxes, value-added taxes, creator royalties and reserves for customer refunds, payment chargebacks and estimated
uncollectible amounts. If an event is cancelled by a creator, then any obligations to provide refunds to event attendees are the responsibility
of that creator.
If
a creator is unwilling or unable to fulfill their refund obligations, we may, at our discretion, provide attendee refunds. Revenue is
also presented net of the amortization of creator signing fees when applicable. The benefit we receive by securing exclusive ticketing
and payment processing rights with certain creators from creator signing fees is inseparable from the customer relationship with the
creator and accordingly these fees are recorded as a reduction of revenue in the consolidated statements of operations.
In
June 2021, the Company purchased some equipment and furniture as well as a commercial property in the form of a suite at a luxury hotel.
The Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company
has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used.
The Company recognizes rental revenue for the days in the month the suite is being rented in that month.
Marketing
services and other revenues
Marketing
services and other revenues are derived principally from the sale of advertisements, classifieds fees, and revenue sharing arrangements.
Advertising revenue is derived principally from the sale of online advertisements which are based on “impressions” (i.e.,
the number of times that an advertisement appears in pages viewed by users of our platforms) or “clicks” (which are generated
each time users on our platforms click through our advertisements to an advertiser’s designated website) delivered to advertisers.
The
Company uses the output method and apply the practical expedient to recognize advertising revenue in the amount to which they have a
right to invoice. For contracts with target advertising commitments with rebates, estimated payout is accounted for as a variable consideration
to the extent it is probable that a significant reversal of revenue will not occur.
HUMBL
Financial
Revenue
was recognized upon transfer of control of services to customers in an amount to which the Company expects to be entitled in exchange
for those services. Service subscription revenue is recognized for the month in which services are provided. If a customer pays for an
annual subscription, revenue is allocated over the months in the subscription and recognized for each month of the service provided.
In
February 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer the
BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue
to monitor the regulatory environment with respect to these products. In accordance with ASC 205-20-50-1(a), the timing of the disposal
was February 28, 2022.
HUMBL
Blockchain Services
The
Company disaggregates revenue from contracts with customers into product revenues and services revenues.
Product
revenue related contracts with customers begin upon contract inception when a purchase order for a specific customer order of a product
to be delivered in the near term. These purchase orders are short-term in nature. Product revenue is recognized at a point in time upon
shipment or upon customer receipt of the product, depending on shipping terms. The Company determined that this method best represents
the transfer of goods as transfer of control typically occurs upon shipment or upon customer receipt of the product.
Service
revenues primarily consist of revenues derived from maintenance support and the use of the Company’s service platforms and application
programming interface (“APIs”) on a subscription basis. The Company generates this revenue from fees for maintenance and
support, monthly active user fees, SaaS fees, and hosting and storage fees. In most cases, the subscription or transaction arrangement
is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same
pattern of transfer (i.e., distinct days of service). The Company applies a time-based measure of progress to the total transaction price,
which results in ratable recognition over the term of the contract. The Company determined that this method best represents the transfer
of services as the customer obtains equal benefit from the service throughout the service period.
The
Company accounts for individual goods and services separately if they are distinct performance obligations, which often requires significant
judgment based upon knowledge of the products and/or services, the solution provided and the structure of the sales contract. In SaaS
agreements, the Company provides a service to the customer that combines the software functionality, maintenance and hosting into a single
performance obligation. In product-related contracts, a purchase order may cover different products, each constituting a separate performance
obligation.
Accounts
Receivable and Concentration of Credit Risk
An
allowance is based on management’s estimate of the overall collectability of accounts receivable, considering historical losses.
Based on these same factors, individual accounts are charged off against the allowance when management determines those individual accounts
are uncollectible. Credit extended to customers is generally uncollateralized. Past-due status is based on contractual terms. The Company
does not charge interest on accounts receivable. As of September 30, 2022 and December 31, 2021, there was no allowance necessary.
Income
Taxes
Income
taxes are accounted under the asset and liability method. The current charge for income tax expense is calculated in accordance with
the relevant tax regulations applicable to the entities. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. Differences between statutory tax rates and effective tax rates relate to permanent tax differences.
Uncertain
Tax Positions
The
Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes. This requires recognition and measurement of uncertain income
tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis.
The
Company files income tax returns in the U.S. federal tax jurisdiction and various state tax jurisdictions. The federal and state income
tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were
filed.
Share-Based
Compensation
The
Company follows ASC 718 Compensation – Stock Compensation and has adopted ASU 2017-09 Compensation – Stock Compensation (Topic
718) Scope of Modification Accounting. The Company calculates compensation expense for all awards granted, but not yet vested, based
on the grant-date fair values. Share-based compensation expense for all awards granted is based on the grant-date fair values. The Company
policy is to recognize these compensation costs, on a pro rata basis over the requisite service period of each vesting tranche of each
award for service-based grants, and as the criteria is achieved for performance-based grants, when such grants are made. For stock options
and warrants, the Company uses the Black-Scholes model to estimate the value of those grants. The Company has not had any forfeitures
of these grants, and these estimates of value will include a percentage of forfeitures when that percentage is able to be estimated.
The
Company adopted ASU 2016-09 Improvements to Employee Share-Based Payment Accounting. Cash paid when shares are directly withheld for
tax withholding purposes will be classified as a financing activity in the statement of cash flows.
Fair
Value of Financial Instruments
ASC
825 Financial Instruments requires the Company to disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions are set forth below for the Company’s financial instruments: The carrying amount of cash, accounts receivable,
prepaid and other current assets, accounts payable and accrued liabilities, and amounts payable to related parties, approximate fair
value because of the short-term maturity of those instruments. The Company does not utilize derivative instruments.
Leases
The
Company follows ASC 842 Leases in accounting for leased properties, when they exceed a one-year term. When the Company enters into leases
with a term in excess of one year, they will recognize a lease liability and right of use asset in accordance with the provisions of
ASC 842.
Earnings
(Loss) Per Share of Common Stock
Basic
net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share
(“EPS”) include additional dilution from common stock equivalents, such as convertible notes, preferred stock, stock issuable
pursuant to the exercise of stock options and warrants.
Common
stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so
would be anti-dilutive for periods presented, so only the basic weighted average number of common shares are used in the computations.
Currency
Translation
Ixaya’s
functional currency is the Mexican Peso and its reporting currency is the United States dollar. Transactions denominated in the functional
currency are converted into United States dollars using the exchange rate in effect at the date of the transaction or the average rate
for the period in the case of revenue and expense transactions. Monetary assets and liabilities are re-valued into the reporting currency
at each balance sheet date using the exchange rate in effect at the balance sheet date, with any resulting exchange gains or losses being
credited or charged to accumulated other comprehensive income (loss). Non-monetary assets and liabilities are recorded in the reporting
currency using the exchange rate in effect at the date of the transaction and are not revalued for subsequent changes in exchange rates.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates
all of the Company’s financial instruments, including convertible notes and warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives.
The
Company generally uses a Black-Scholes model, as applicable, to value the derivative instruments at inception and subsequent valuation
dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities,
is remeasured at the end of each reporting period.
Digital
Assets
Digital
assets, including non-fungible tokens and cryptocurrencies, are included in the consolidated balance sheets. We have ownership of and
control over our digital assets and may use third party custodial services to secure them. Digital assets are initially recorded at cost
and are subsequently remeasured at cost, net of any impairment losses on our consolidated balance sheets. We assign costs to digital
asset transactions on a first-in, first-out basis. Gains or losses are not recorded until realized upon sale(s).
We
determine the fair value of our digital assets on a nonrecurring basis, based on quoted prices on the active exchange(s) that we have
determined is the principal market for such assets (Level 1 inputs). We perform a quarterly, or more frequent review to identify whether
events or changes in circumstances, principally decreases in the quoted prices on active exchanges on any day during the quarter, indicate
that it is more likely than not that our digital assets are impaired.
The
cost basis of digital assets will not be adjusted upward for subsequent increases in fair value. Such impairment in the value of digital
assets is recorded as a component of other operating expenses in our consolidated statements of operations. We recorded an impairment
loss of approximately $1,593,570 related to digital assets during the nine months ended September 30, 2022, of which $258,217 relates
to the NFT we purchased.
Fair
Value Measurements
ASC
820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands
disclosure about fair value measurements. ASC 820 classifies these inputs into the following hierarchy:
Level
1 inputs: Quoted prices for identical instruments in active markets.
Level
2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that
are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level
3 inputs: Instruments with primarily unobservable value drivers.
Segment
Reporting
The
Company follows the provisions of ASC 280-10 Segment Reporting. This standard requires that companies disclose operating segments based
on the manner in which management disaggregates the Company in making internal operating decisions.
For
2021, the Company established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations
for the year ended December 31, 2021 were conducted in North America. Commencing January 1, 2022, the Company simplified their business
model to segment their business into two distinct divisions: Consumer and Commercial. The 2021 segments were all considered part of the
consumer division.
All
of the Company’s sales are from North America, therefore the Company has determined that segment reporting by geographic location
was not necessary. In the future, the Company will continue to monitor their activity by region to determine if it is feasible to report
segment information by location.
Recent
Accounting Pronouncements
In
August, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06,
Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40), Accounting for Convertible Instruments and Contract’s in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for it. The ASU simplifies the diluted net income per share calculation in certain areas.
The
ASU is effective for annual and interim periods beginning after December 31, 2021, and early adoption is permitted for fiscal years beginning
after December 15, 2020, and interim periods within those fiscal years. The Company does not believe that this new guidance will have
a material impact on its financial statements.
On
March 31, 2022, the SEC added Staff Accounting Bulletin (“SAB”) No. 121 (“SAB 121”) into Section FF to Topic
5. The interpretations in this SAB express views of the staff regarding the accounting for entities that have obligations to safeguard
crypto-assets held for their platform users. In connection with these services, these entities and/or their agents may safeguard the
platform users’ crypto-assets and also maintain the cryptographic key information necessary to access the crypto-asset. The obligations
associated with these arrangements involve unique risks and uncertainties not present in arrangements to safeguard assets that are not
crypto-assets, including technological, legal, and regulatory risks and uncertainties.
These
risks can have a significant impact on the entity’s operations and financial condition. The staff believes that the recognition,
measurement, and disclosure guidance in this SAB will enhance the information received by investors and other uses of financial statements
about these risks, thereby assisting them in making investment and other capital allocation decisions.
This
guidance should be applied no later than the financial statements covering the first interim or annual report ending after June 15, 2022,
with retroactive application as of the beginning of the fiscal year to which the interim or annual period relates. Upon adoption of this
guidance, the Company has reflected the asset and liability related to the user cryptocurrencies safeguarded on the Company’s platform
of $946,381. We do not have any ownership or custody of the digital assets maintained on our platform. We engage the services of Wyre
and BitGo to act as the custodians of the digital assets held on our platform.
The
Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition,
results of operations, cash flows or disclosures.
NOTE
3: DISCONTINUED OPERATIONS
BLOCK
ETX
Effective
February 28, 2022, the Company elected to suspend offering the BLOCK ETX products pending further legal analysis regarding how to offer
the BLOCK ETXs in a fully compliant manner with the evolving laws and regulatory treatment of such novel products. The Company will continue
to monitor the regulatory environment with respect to these products. Per ASC 205-20-50-1(a), the timing of the disposal was February
28, 2022. The Company met the criteria for the BLOCK ETX operations to be classified as held for sale at that time.
All
subscription revenues recognized in January and February 2022, were refunded to the subscribers. The only amounts reflected as discontinued
operations in 2022 relate to the direct expenses attributable to the BLOCK ETX product line that include direct payroll and direct subcontractor
costs. These amounts are reflected in the loss for discontinued operations as noted in the chart below.
SCHEDULE OF LOSS FOR DISCONTINUED OPERATIONS
| | |
2022 | |
| Revenue | |
$ | - | |
| Cost of revenue | |
| - | |
| Gross (loss) | |
| - | |
| Gross profit (loss) | |
| - | |
| Operating expenses | |
| 7,945 | |
| Operating and non-operating expenses | |
| - | |
| Loss from discontinued operations | |
$ | (7,945 | ) |
The
Company paid the refunds to the subscribers in the three months ended March 31, 2022, and had no expenses related to the BLOCK ETX product
line in the six months from April 1, 2022 through September 30, 2022.
The
Company commenced operations of the BLOCK ETX products in March 2021. The Company has reclassified the statement of operations for the
nine months ended September 30, 2021 to reflect the subscription revenue and the direct expenses attributable to the BLOCK ETX product
line that included direct payroll and direct subcontractor costs. These amounts are reflected in the loss for discontinued operations
as noted in the chart below.
| | |
2021 | |
| Revenue | |
$ | 191,503 | |
| Cost of revenue | |
| - | |
| Gross profit | |
| 191,503 | |
| Operating and non-operating expenses | |
| (472,105 | ) |
| Loss from discontinued operations | |
$ | (280,602 | ) |
In
addition, effective June 30, 2022, the Company determined to sell their non-residential property, and listed this property for sale in
July 2022. This represented a strategic shift for future operations and the Company as a result reclassified the net value on this property
of $328,222 as a non-current asset held for sale in accordance with ASC 205-20-45-1E. On September 16, 2022, the Company sold the property
for $270,905 and recognized a loss of $57,318 on disposal.
NOTE
4: BUSINESS COMBINATIONS
Tickeri
On
June 3, 2021, the Company acquired the assets and liabilities of Tickeri noted below in in accordance with ASC 805. Based on the fair
values at the effective date of acquisition the purchase price was recorded as follows:
SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED
| | |
| | |
| Cash | |
$ | 127,377 | |
| Accounts receivables | |
| 23,587 | |
| Goodwill | |
| 20,086,664 | |
| Accounts payable and accrued expenses | |
| (87,071 | ) |
| SBA EIDL | |
| (150,000 | ) |
| PPP loan | |
| (557 | ) |
| | |
$ | 20,000,000 | |
The
consideration paid for the acquisition of Tickeri was as follows:
SCHEDULE OF CONSIDERATION PAID FOR ACQUISITION
| | |
| | |
| Common stock | |
$ | 10,000,000 | |
| Notes payable | |
| 10,000,000 | |
| Total consideration | |
$ | 20,000,000 | |
The
Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total
acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair
values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market
data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed is recognized as goodwill. The Company had estimated the preliminary purchase price allocations based
on historical inputs and data as of June 3, 2021. There were no changes to the inputs in the one year that passed since Tickeri was acquired.
The
Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained
during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation
of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase
price allocation and has determined that there are no adjustments to be made from the original allocation.
The
goodwill is not deductible for tax purposes.
Monster
On
June 30, 2021, the Company acquired the assets and liabilities of Monster noted below in in accordance with ASC 805. Based on the fair
values at the effective date of acquisition the purchase price was recorded as follows:
SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED
| | |
| | |
| Cash | |
$ | 3,017 | |
| Accounts receivables | |
| 379,012 | |
| Goodwill | |
| 8,648,104 | |
| Due to seller | |
| (379,012 | ) |
| Accounts payable and accrued expenses | |
| (98,754 | ) |
| Notes payable – related parties | |
| (486,250 | ) |
| PPP loan | |
| (66,117 | ) |
| | |
$ | 8,000,000 | |
The
consideration paid for the acquisition of Monster was as follows:
SCHEDULE OF CONSIDERATION PAID FOR ACQUISITION
| | |
| | |
| Convertible notes payable | |
$ | 7,500,000 | |
| Non-convertible notes payable | |
| 500,000 | |
| Total consideration | |
$ | 8,000,000 | |
The
Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total
acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair
values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market
data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed is recognized as goodwill. The Company had estimated the preliminary purchase price allocations based
on historical inputs and data as of June 30, 2021. There were no changes to the inputs in the one year that passed since Monster was
acquired.
The
Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained
during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation
of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase
price allocation and has determined that there are no adjustments to be made from the original allocation.
The
goodwill is not deductible for tax purposes.
BizSecure
On
February 12, 2022, the Company entered into an asset purchase agreement with BizSecure, Inc. (“BizSecure”). The Company determined
this was an acquisition of a business pursuant to the guidance provided in both ASC 805 and Rule 11-01(d) of Regulation S-X. BizSecure
is not considered a significant subsidiary under Regulation S-X Rule 1-02(w). The Company acquired a customer relationship with the US
Air Force and BizSecure’s Mobile ID technology. The Company entered into employment agreements with two BizSecure employees as
part of the agreement to help integrate the Mobile ID technology into the Company’s larger suite of products and help operate the
blockchain services division. The assets acquired from BizSecure represented the majority of the operations of the entity and BizSecure
post-acquisition has only conducted nominal operations and has no employees. The Company issued to BizSecure 13,200,000 common shares
and 26,800,000 restricted stock units that vest quarterly commencing April 1, 2022 for a period of two years. The shares and restricted
stock units have a value of $6,756,000. The Company has included the value of $4,526,520 which represents the value of the restricted
stock units in contingent consideration pursuant to ASC 805-10-55-25. Management considered several factors when making the determination
to treat the RSUs as contingent consideration and not post-combination compensation, including, but not limited to, the following: (a)
the RSUs are not automatically forfeited upon termination of the two key employees as those RSUs would vest if the employees were terminated
without cause or if the employees resigned with good reasons; (b) all selling shareholders of BizSecure receive the same pro rata compensation;
(c) the BizSecure shareholders hired by the Company receive compensation commensurate with other employees in the Company at the same
level; (d) there are no adjustments to the RSUs based on earnings and thus there is no profit-sharing component to the RSUs; and (e)
the parties desired for the compensation to be paid over time and not all up front. Therefore, the Company determined that the restricted
stock units should be treated as contingent consideration.
SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED
| | |
| | |
| Customer relationships | |
$ | 275,000 | |
| Intellectual property - software | |
| 2,500,000 | |
| Business combination asset acquired and liabilities assumed | |
| 2,500,000 | |
| Goodwill | |
| 3,981,000 | |
| | |
$ | 6,756,000 | |
The
consideration paid for the acquisition of assets of BizSecure was as follows:
SCHEDULE OF CONSIDERATION PAID FOR ACQUISITION
| | |
| | |
| Common stock | |
$ | 2,229,480 | |
| Contingent consideration (RSUs) | |
| 4,526,520 | |
| Total consideration | |
$ | 6,756,000 | |
The
Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total
acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair
values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market
data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based
on historical inputs and data as of February 12, 2022.
The
preliminary allocation of the purchase price is based on the best information available and is pending, amongst other things: (i) the
finalization of the valuation of the fair values and useful lives of tangible assets acquired; (ii) the finalization of the valuations
and useful lives for the intangible assets acquired; and (iii) finalization of the fair value of non-cash consideration.
The
Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained
during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation
of assets and liabilities is necessary, the Company will adjust these figures.
The
goodwill is not expected to be deductible for tax purposes.
Ixaya
On
March 3, 2022, the Company acquired the assets and liabilities of Ixaya noted below in in accordance with ASC 805. Based on the fair
values at the effective date of acquisition the purchase price was recorded as follows:
SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED
| | |
| | |
| Cash | |
$ | 1,325 | |
| Accounts receivables | |
| 24,446 | |
| Goodwill | |
| 1,008,642 | |
| Intellectual property - software | |
| 650,000 | |
| Business combination asset acquired and liabilities assumed | |
| 650,000 | |
| Accounts payable and accrued expenses | |
| (10,700 | ) |
| Payable – officer | |
| (9,834 | ) |
| Note payable - bank | |
| (13,879 | ) |
| | |
$ | 1,650,000 | |
The
consideration paid for the acquisition of Ixaya was as follows:
SCHEDULE OF CONSIDERATION PAID FOR ACQUISITION
| | |
| | |
| Cash | |
$ | 150,000 | |
| Common stock | |
| 1,500,000 | |
| Total consideration | |
$ | 1,650,000 | |
The
Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total
acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair
values. The fair value measurements utilize estimates based on key assumptions of the Acquisition, and historical and current market
data. The excess of the purchase price over the total of the estimated fair values assigned to tangible and identifiable intangible assets
acquired and liabilities assumed is recognized as goodwill. The Company has estimated the preliminary purchase price allocations based
on historical inputs and data as of March 3, 2022. The preliminary allocation of the purchase price is based on the best information
available and is pending, amongst other things: (i) the finalization of the valuation of the fair values and useful lives of tangible
assets acquired; (ii) the finalization of the valuations and useful lives for the intangible assets acquired; (iii) finalization of the
valuation of accounts payable and accrued expenses; and (iv) finalization of the fair value of non-cash consideration.
The
Company has up to one-year from the date of acquisition to adjust any of the acquired assets and liabilities for information obtained
during this measurement period. If new information is obtained about facts and circumstances that existed as of the acquisition date
that, if known, would have resulted in the recognition of additional assets or liabilities as of the acquisition date or a re-allocation
of assets and liabilities is necessary, the Company will adjust these figures. The Company has performed an analysis on the purchase
price allocation and has determined that there are no adjustments to be made from the original allocation. During the three months ended
March 31, 2022, the Company impaired $1,008,642 of the goodwill.
The
goodwill was not expected to be deductible for tax purposes.
The
following table shows the unaudited pro-forma results for the nine months ended September 30, 2022 and 2021, as if the acquisitions had
occurred on January 1, 2021. These unaudited pro forma results of operations are based on the historical financial statements and related
notes of Tickeri, Monster, BizSecure, Ixaya and the Company for 2021, and BizSecure, Ixaya and the Company for 2022.
SCHEDULE OF PRO FORMA INFORMATION
| | |
Nine Months Ended
September 30,
2021 | |
| | |
(Unaudited) | |
| Revenues | |
$ | 2,136,178 | |
| Net loss | |
$ | (35,763,233 | ) |
| Net loss per share | |
$ | (0.04 | ) |
| | |
Nine Months Ended
September 30,
2022 | |
| | |
(Unaudited) | |
| Revenues | |
$ | 3,076,646 | |
| Net loss | |
$ | (31,758,233 | ) |
| Net loss per share | |
$ | (0.02 | ) |
NOTE
5: REVENUE
The
following table disaggregates the Company’s revenue by major source for the nine months ended September 30, 2022 and 2021:
SCHEDULE OF DISAGGREGATION OF REVENUE
| | |
2022 | | |
2021 | |
| | |
Nine Months Ended
September 30, | |
| | |
2022 | | |
2021 | |
| Revenue: | |
| | | |
| | |
| Services - Production | |
$ | 1,798,585 | | |
$ | 675,119 | |
| Services - Ixaya | |
| 115,320 | | |
| - | |
| Merchandise | |
| 9,087 | | |
| 181,771 | |
| Tickets | |
| 1,090,158 | | |
| 508,818 | |
| NFTs | |
| 1,814 | | |
| 23,275 | |
| Rental income | |
| 17,691 | | |
| - | |
| Other | |
| 3,491 | | |
| - | |
| Total
revenue | |
$ | 3,036,146 | | |
$ | 1,388,983 | |
There
were no significant contract asset or contract liability balances for all periods presented. The Company does not disclose the value
of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed.
Collections
of the amounts billed are typically paid by the customers within 30 to 60 days.
NOTE
6: FIXED ASSETS
As
of September 30, 2022 and December 31, 2021, the Company has the following fixed assets:
SCHEDULE OF FIXED ASSETS
| | |
2022 | | |
2021 | |
| Non-residential property – 20 year-life | |
$ | - | | |
$ | 345,497 | |
| Equipment – 5 year-life | |
| 19,344 | | |
| 5,772 | |
| Furniture and fixtures – 5 year-life | |
| 16,307 | | |
| 16,307 | |
| Fixed asset, gross | |
| 16,307 | | |
| 16,307 | |
| Accumulated depreciation | |
| (8,739 | ) | |
| (11,129 | ) |
| Fixed
assets, net | |
$ | 26,912 | | |
$ | 356,447 | |
In
June 2021, the Company purchased some equipment and furniture as well as a commercial property in the form of a suite at a luxury hotel.
The Company is the owner of this suite and entered into a long-term rental agreement with the hotel to manage the property. The Company
has use of the suite for 28 calendar days a year and will receive their proportionate income for the other days the suite is being used.
The suite with a net value of $328,222 was reclassified to a non-current asset held for sale on June 30, 2022.
Depreciation
expense for the nine months ended September 30, 2022 and 2021 was $14,884 and $5,514, respectively, as the property was placed into service
on July 1, 2021.
NOTE
7: INTANGIBLE ASSETS AND GOODWILL
As
of September 30, 2022 and December 31, 2021, the Company has the following intangible assets:
SCHEDULE
OF FINITE LIVED INTANGIBLE ASSETS
| | |
2022 | | |
2021 | |
| Intellectual property - software – 5 year-life | |
$ | 3,150,000 | | |
$ | - | |
| Customer relationship – 5 year-life | |
| 275,000 | | |
| - | |
| Domain names – 15 year-life | |
| 275,020 | | |
| - | |
| Accumulated amortization | |
| (457,718 | ) | |
| - | |
| Intangible assets, net | |
$ | 3,242,302 | | |
$ | - | |
In
February 2022, the Company acquired intangible assets from BizSecure valued at $2,775,000, and in March 2022 in the acquisition of Ixaya
acquired intangible assets valued at $650,000. There were no intangible assets as of December 31, 2021.
Amortization
expense for the nine months ended September 30, 2022 was $457,718.
As
of September 30, 2022 and December 31, 2021, the Company has recorded goodwill as follows:
SCHEDULE OF GOODWILL
| | |
2022 | | |
2021 | |
| Tickeri | |
$ | 3,353,392 | | |
$ | 3,353,392 | |
| Monster Creative | |
| - | | |
| 3,177,954 | |
| BizSecure | |
| 3,981,000 | | |
| - | |
| Ixaya | |
| - | | |
| - | |
| Goodwill | |
$ | 7,334,392 | | |
$ | 6,531,346 | |
In
2021, the Company evaluated ASC 350-20-50 for the goodwill associated with the two acquisitions. The Company determined that there was
impairment of goodwill associated with the Tickeri acquisition of $16,733,272 and impairment of goodwill associated with the Monster
Creative transaction of $5,470,150 to be recognized in the year ended December 31, 2021, as reflected in operating expenses under the
line item Impairment - goodwill. In accordance with ASC 350-20-50-6 (a through d), the Company determined based on the qualitative factors
surrounding the Tickeri and Monster Creative acquisitions, which include the foothold of Tickeri in the Latin population of the United
States, the development of the Company’s website, and the fact that the former President of Tickeri became the CTO of HUMBL, as
well as the services being provided by Monster Creative in production, and the services for both entities in the COVID pandemic, the
fair value of Tickeri and Monster Creative did not equate to the value that was paid for these entities. As a result, we recognized the
goodwill at the time of purchase for Tickeri, and re-evaluated the goodwill determination as of December 31, 2021 for both Tickeri and
Monster Creative which resulted in additional impairment to be recognized. We determined the value based on the multiple of earnings
on similar companies evaluated in the ticketing space and in the production space for Monster Creative. Since both Tickeri and Monster
Creative services fall under the HUMBL Marketplace segment in 2021 (now Consumer division), the entire impairment of the goodwill is
reflected in that segment. The Company determined that the remaining goodwill in Monster Creative was impaired during the nine months
ended September 30, 2022.
In
2022, the Company evaluated ASC 350-20-50 for the goodwill associated with the BizSecure and Ixaya acquisitions. The Company determined
that there was impairment of goodwill associated with the Ixaya acquisition of $1,008,642 in the three months ended March 31, 2022. We
determined the value of Ixaya’s intellectual property based on the multiple of earnings on similar companies evaluated in the blockchain
technology space Since Ixaya services fall under the Commercial Division, the impairment of the goodwill for Ixaya is reflected in that
division. The Company determined there was no indication of impairment for BizSecure as of September 30, 2022, as the assets purchased
have contributed to significant enhancements to the HUMBL Pay app.
NOTE
8: INTANGIBLE ASSETS – DIGITAL ASSETS
In
2021, the Company purchased Ethereum, a digital asset to create NFTs for beta testing to determine whether they would be able to place
them onto the HUMBL Marketplace’s NFT Gallery in addition to the NFTs others create that are on the NFT Gallery. The Company purchased
$114,650 in digital currency in the year ended December 31, 2021. The Company expensed $133,660 in the digital currency to create NFTs
as beta testing for future endeavors and for payment of expenses, received commissions on sales of NFTs of $8,400, reflected $34,570
in impairment of the intangible asset for digital currency, and recognized a gain on sale of digital assets of $47,875.
In
2022, the Company established a service to their HUMBL Pay app users. The “Buy Crypto, Earn Rewards” service enables HUMBL
Pay app users the ability through a Company maintained digital asset wallet with Wyre to purchase digital assets (cryptocurrency) and
earn rewards. These rewards are not paid by the Company, but by Wyre itself. As it can take 5 to 8 business days to physically settle
funds in the Wyre wallet, there may be delays in digital assets being received by customers and the delivery of BLOCKS to BitGo. BitGo
is a third-party custodian service that provides the custody for the customers’ BLOCKS. These timing differences occur, and as
of September 30, 2022, the BitGo account has been settled and no unfunded liabilities exist.The BitGo account is not the Company’s
account; however, represents the pool of all BLOCKS held by and allocated to HUMBL Pay users accounts. The users may choose to transfer
the purchased BLOCKS to their individual wallets outside of HUMBL.
In
March 2022, the Company purchased an NFT for $406,046. The Company has evaluated the fair value of this NFT as of September 30, 2022
and has determined that there impairment of $258,217 was necessary as the value of similar priced NFTs have declined as of September
30, 2022. The value of the NFT as of September 30, 2022 is $147,823. The NFT will not be amortized as it is considered a non-statutory
based digital asset. The NFT is considered a non-current asset while the other digital assets held by the Company are considered current
assets. On May 3, 2022, the Company’s CEO contributed capital to pay for this NFT.
In
the nine months ended September 30, 2022, the Company purchased $1,010,934 in digital currency expensed $236,323 in the digital currency
for future endeavors and for payment of expenses, received commissions on sales of NFTs of $1,814, reflected $1,335,353 in impairment
of the intangible asset for digital currency, and recognized a gain on sale of digital assets of $187,009. The Company’s CEO contributed
$500,000 worth of BLOCKS to the Company that is included in the digital assets owned by HUMBL.
The
value of the digital assets as of September 30, 2022 and December 31, 2021 is $278,599 (of which the value of the non-fungible token
of $147,823 is considered a non-current asset) and $2,695, respectively.
The
following table presents additional information about the Company’s digital asset holdings during the period ended June 30, 2022:
SCHEDULE OF DIGITAL ASSET HOLDINGS
Digital
Assets Owned By HUMBL:
| Nine Months Ended September 30, 2022 | |
ETH | | |
BLOCKS | | |
BTC | | |
WETH | | |
DAI | | |
USDCUSDT | | |
Total | |
| Balance – January 1, 2022 | |
$ | 2,664 | | |
$ | - | | |
$ | 28 | | |
$ | - | | |
$ | - | | |
$ | 3 | | |
$ | 2,695 | |
| Contribution by CEO | |
| - | | |
| 500,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 500,000 | |
| Purchases of digital assets | |
| 983,890 | | |
| 24,860 | | |
| - | | |
| - | | |
| - | | |
| 2,184 | | |
| 1,010,934 | |
| Purchases of digital assets by customers in the HUMBL Pay App | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,775,233 | | |
| 1,775,233 | |
| Purchases of BLOCKS for HUMBL Pay users and NFT purchase | |
| (521,758 | ) | |
| (14,586 | ) | |
| - | | |
| (23,590 | ) | |
| (14,094 | ) | |
| (1,201,205 | ) | |
| (1,775,233 | ) |
| Transfers | |
| 343,842 | | |
| 184,073 | | |
| 5,191 | | |
| 20,192 | | |
| 14,852 | | |
| (568,150 | ) | |
| - | |
| NFT commissions | |
| 1,814 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,814 | |
| Consulting | |
| - | | |
| (14,038 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (14,038 | ) |
| Contract labor | |
| - | | |
| (104,960 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| (104,960 | ) |
| Exchange fees | |
| (105 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (105 | ) |
| Advertising expenses | |
| (95,945 | ) | |
| 1 | | |
| (4,719 | ) | |
| - | | |
| - | | |
| (6,907 | ) | |
| (107,570 | ) |
| Conferences | |
| (9,650 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (9,650 | ) |
| Impairment – digital assets | |
| (791,207 | ) | |
| (540,144 | ) | |
| (327 | ) | |
| (1,972 | ) | |
| (770 | ) | |
| (993 | ) | |
| (1,335,353 | ) |
| Gain (loss) on disposal of digital assets | |
| 86,568 | | |
| 95,011 | | |
| 28 | | |
| 5,370 | | |
| 12 | | |
| - | | |
| 187,009 | |
| Balance – September 30, 2022 | |
$ | 133 | | |
$ | 130,217 | | |
$ | 201 | | |
$ | - | | |
$ | - | | |
$ | 225 | | |
$ | 130,776 | |
| Digital Assets held at September 30, 2022 | |
| 0.105302 | | |
| 83,278,584 | | |
| 0.011343 | | |
| - | | |
| 0,4223 | | |
| 224.6484 | | |
| | |
Digital
Assets Owned By HUMBL Pay Users (SAB 121 disclosure):
Under
SAB 121, companies are required to present the asset and liability at fair value for any crypto-assets and obligations to safeguard crypto-assets.
The Company earns no revenue from providing this service to their customers. It is simply an added benefit that HUMBL Pay customers receive
for using the app. The “Buy Crypto, Earn Rewards” service enables HUMBL Pay app users the ability through a Company maintained
digital asset wallet with Wyre to purchase digital assets (cryptocurrency) and earn rewards. These rewards are not paid by the Company,
but by Wyre itself. As it can take 5 to 8 business days to physically settle funds in Wyre, there may be delays in digital assets being
received by customers and the delivery of BLOCKS to a BitGo. BitGo is a third-party custodian service that provides the custody for the
customers’ BLOCKS These timing differences occur, and as of September 30, 2022, the BitGo account has been settled and no unfunded
liabilities exist.
Upon
adoption of this guidance, the Company has reflected the asset and liability related to the user cryptocurrencies safeguarded on the
Company’s platform of $946,381. We do not have any ownership or custody of the digital assets maintained on our platform. We engage
the services of Wyre and BitGo to act as the custodians of the digital assets held on our platform.
NOTE
9: NOTE PAYABLE - BANK
On
March 3, 2022 with the acquisition of Ixaya, the Company assumed a loan with Citibanamex. The loan is due in monthly payments of $7,110
MXN (approximately $350 US$) inclusive of interest and matures in July 2025. As of September 30, 2022, the Company has $11,670 outstanding
under the loan. The Company has included $4,243 in current liabilities, and the balance of $7,427 in long-term liabilities.
NOTE
10: NOTES PAYABLE
The
Company entered into notes payable as follows as of September 30, 2022 and December 31, 2021. The chart below does not include notes
payable that were repaid or converted during 2021:
SCHEDULE OF NOTES PAYABLE
| | |
2022 | | |
2021 | |
| Notes payable ($250,000 each), at 2% interest, maturing July 30, 2022; payments due at maturity (see Note 19, “Subsequent Events”) | |
$ | - | | |
$ | 500,000 | |
| | |
| | | |
| | |
| EIDL loan at 3.75% interest, maturing May 18, 2050 (assumed in the acquisition of Tickeri), no payments for 2 years, then monthly payments of $731 per month inclusive of interest | |
| 150,000 | | |
| 150,000 | |
| | |
| | | |
| | |
| Total | |
| 150,000 | | |
| 650,000 | |
| Less: Current portion | |
| (3,175 | ) | |
| (501,828 | ) |
| Long-term debt | |
$ | 146,825 | | |
$ | 148,172 | |
Maturities
of notes payable for the next five years as of September 30 are as follows:
SCHEDULE OF MATURITIES NOTES PAYABLE
| | |
| | |
| 2023 | |
$ | 3,175 | |
| 2024 | |
| 3,582 | |
| 2025 | |
| 3,735 | |
| 2026 | |
| 3,878 | |
| 2027 | |
| 4,026 | |
| Thereafter | |
| 131,604 | |
| Total | |
$ | 150,000 | |
In
the acquisition of Tickeri, the Company assumed a PPP loan and an EIDL loan. The PPP loan was repaid in its entirety in the year ended
December 31, 2021. In the acquisition of Monster a $66,117 PPP loan was forgiven in the year ended December 31, 2021 and the forgiveness
of this debt is reflected in other income. Interest expense for the nine months ended September 30, 2022 and 2021 was $10,426 and $6,619,
respectively. Accrued interest at September 30, 2022 was $13,716.
NOTE
11: NOTES PAYABLE – RELATED PARTIES
The
Company entered into notes payable as follows as of September 30, 2022 and December 31, 2021:
SCHEDULE
OF NOTES PAYABLE RELATED PARTIES
| | |
2022 | | |
2021 | |
| Notes payable ($5,000,000 each), at 5% interest, maturing December 3, 2022 for acquisition of Tickeri (see Note 4) with the two principals of Tickeri, one of which is an officer of the Company as well; payments due at maturity | |
$ | 10,000,000 | | |
$ | 10,000,000 | |
| | |
| | | |
| | |
| Notes payable ($435,000 and $65,000), at 5% interest, originally maturing April 1, 2022, extended to October 1, 2022 for the acquisition of Monster (see Note 4) with the two principals of Monster; payments due at maturity (increased note balance by $18,000 to the two noteholders for the extension which did not constitute a material modification of a debt instrument) | |
| 333,000 | | |
| 500,000 | |
| | |
| | | |
| | |
| Notes payable ($271,250 and $215,000), at 3% interest, maturing December 31, 2022, with family relatives of the two principals of Monster; payments due at maturity | |
| 486,250 | | |
| 486,250 | |
| | |
| | | |
| | |
| Note payable with a company whose managing member is related to an officer and director of the Company, at 4% interest, maturing February 22, 2025, payment due at maturity | |
| 3,000,000 | | |
| - | |
| | |
| | | |
| | |
| Note payable with a company whose managing member is related to an officer and director of the Company, at 4% interest, maturing March 31, 2025, payment due at maturity | |
| 1,500,000 | | |
| - | |
| | |
| | | |
| | |
| Note payable with a company whose managing member is related to an officer and director of the Company,
at 5%
interest, maturing July
26, 2025, payment due at maturity | |
| 2,000,000 | | |
| - | |
| | |
| | | |
| | |
| Advance – officer – Ixaya, on demand, no interest | |
| 3,745 | | |
| - | |
| | |
| | | |
| | |
| Total | |
| 17,322,995 | | |
| 10,986,250 | |
| Less: Current portion | |
| (10,822,995 | ) | |
| (10,986,250 | ) |
| Long-term debt | |
$ | 6,500,000 | | |
$ | - | |
Maturities
of notes payable – related parties as of September 30 is as follows:
SCHEDULE
OF MATURITIES NOTES PAYABLE - RELATED PARTIES
| | |
| | |
| 2023 | |
$ | 10,822,995 | |
| 2024 | |
| - | |
| 2025 | |
| 6,500,000 | |
| Total | |
$ | 17,322,995 | |
Interest
expense for the nine months ended September 30, 2022 and 2021 was $525,063 and $172,962, respectively. Accrued interest at September
30, 2022 was $834,001.
NOTE
12: CONVERTIBLE PROMISSORY NOTES
The
Company entered into convertible promissory notes as follows as of September 30, 2022 and December 31, 2021:
SCHEDULE OF CONVERTIBLE PROMISSORY NOTES
| | |
2022 | | |
2021 | |
| Convertible note, at 8% interest, maturing December 23, 2022 convertible into common shares at $0.60 per share | |
$ | - | | |
$ | 112,500 | |
| | |
| | | |
| | |
| Convertible note, at 8% interest, maturing December 23, 2022 convertible into common shares at $0.60 per share | |
| - | | |
| 112,500 | |
| | |
| | | |
| | |
| Convertible note at 10% interest, maturing July 14, 2022, extended to December 31, 2022 convertible into common shares at $3.15 per share ($300,000 original issue discount) | |
| 2,500,000 | | |
| 3,300,000 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount) | |
| - | | |
| 382,500 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing March 13, 2023 convertible into common shares at $1.00 per share ($8,250 original issue discount) | |
| - | | |
| 420,750 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing March 17, 2023 convertible into common shares at $1.00 per share ($20,000 original issue discount) | |
| 1,020,000 | | |
| 1,020,000 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1,00 per share ($9,750 original issue discount) | |
| - | | |
| 497,250 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($1,500 original issue discount) | |
| - | | |
| 76,500 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing March 19, 2023 convertible into common shares at $1.00 per share ($3,000 original issue discount) | |
| - | | |
| 153,000 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount) | |
| - | | |
| 382,500 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing April 21, 2023 convertible into common shares at $1.00 per share ($7,500 original issue discount) | |
| - | | |
| 382,500 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing June 30, 2023 convertible into common shares at $0.90 per share ($3,000 original issue discount) | |
| - | | |
| 153,000 | |
| | |
| | | |
| | |
| Convertible note at 8% interest, maturing September 12, 2023 convertible into common shares at $0.60 per share ($6,000 original issue discount) | |
| - | | |
| 306,000 | |
| Long term debt, gross | |
| 3,520,000 | | |
| 7,299,000 | |
| Less: Discounts | |
| (5,294 | ) | |
| (1,674,175 | ) |
| Total | |
$ | 3,514,706 | | |
$ | 5,624,825 | |
On
April 14, 2021 we received bridge financing in the form of a loan in the principal amount of $3,300,000 from Brighton Capital Partners,
LLC (“Brighton Capital” or “BCP”) for which we issued them a convertible promissory note due 15 months after
April 14, 2021 (July 14, 2022), and extended this note to December 31, 2022 for no consideration and thus it was deemed to not be a material
modification to the debt instrument. The note bears interest at 10% per annum and is convertible at Brighton Capital’s election
at a fixed price of $3.15 per share. The Company recognized a $300,000 original issue discount at inception of this convertible note.
Under
the terms of the note, Brighton Capital has a right of redemption commencing on the earlier of an effective date of a Registration Statement
and the 12-month anniversary of the note, to cause us to redeem all or any portion of the note in cash or shares of our common stock,
at the Company’s election.
Any
redemption with shares of our common stock shall be at the “market price” which is defined as 80% of our lowest closing trade
price for the 10 consecutive trading days prior to the date on which the market price is measured. The note was to serve as a bridge
loan to a $50,000,000 Equity Financing Agreement (“EFA”), which was terminated on October 26, 2021. The Company recognized
a beneficial conversion feature on this note in the amount of $3,300,000.
During
the three months ended September 30, 2022, BCP converted $800,000 in principal for 30,338,978 shares. The Company recorded a $305,967
loss on conversion for these issuances.
On
October 26, 2021, the Company and BCP agreed to terminate the Equity Financing Agreement. The Company agreed to issue shares for the
termination of the EFA in the registration statement they file.
On
May 13, 2021, the Company issued a convertible promissory note to investors for $382,500 with an original issue discount of $7,500, for
a term of twenty-two months maturing March 13, 2023. In addition, the Company issued warrants to the same investors to purchase up to
750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $257,531 debt discount
at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31,
2022.
On
May 13, 2021, the Company issued a convertible promissory note to an investor for $420,750 with an original issue discount of $8,250,
for a term of twenty-two months maturing March 13, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 825,000 warrant shares with the convertible note. The Company recognized a $8,250 original issue discount and $283,284 debt discount
at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31,
2022.
On
May 17, 2021, the Company issued a convertible promissory note to an investor for $1,020,000 with an original issue discount of $20,000,
for a term of twenty-two months maturing March 17, 2023. The Company recognized a $20,000 original issue discount at inception of this
convertible note.
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $497,250 with an original issue discount of $9,750,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 975,000 warrant shares with the convertible note. The Company recognized a $9,750 original issue discount and $317,561 debt discount
at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31,
2022.
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $76,500 with an original issue discount of $1,500,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 150,000 warrant shares with the convertible note. The Company recognized a $1,500 original issue discount and $48,855 debt discount
at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31,
2022.
On
May 19, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000,
for a term of twenty-two months maturing March 19, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 300,000 warrant shares with the convertible note. The Company recognized a $3,000 original issue discount and $97,711 debt discount
at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31,
2022.
On
June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500,
for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $274,172 debt discount
at inception of this convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that
is being amortized over the life of the convertible note. This note was exchanged for shares of common stock along with all accrued interest
on March 31, 2022.
On
June 21, 2021, the Company issued a convertible promissory note to an investor for $382,500 with an original issue discount of $7,500,
for a term of twenty-two months maturing April 21, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 750,000 warrant shares with the convertible note. The Company recognized a $7,500 original issue discount and $274,172 debt discount
at inception of this convertible note. The Company recognized a BCF discount in the amount of $100,828 on this convertible note that
is being amortized over the life of the convertible note. This note was exchanged for shares of common stock along with all accrued interest
on March 31, 2022.
On
August 30, 2021, the Company issued a convertible promissory note to an investor for $153,000 with an original issue discount of $3,000,
for a term of twenty-two months maturing June 30, 2023. In addition, the Company issued a warrant to the same investor to purchase up
to 375,000 warrant shares with the convertible note. The Company recognized a $3,000 original issue discount and $102,486 debt discount
at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31,
2022.
On
November 12, 2021, the Company issued a convertible promissory note to an investor for $306,000 with an original issue discount of $6,000,
for a term of twenty-two months maturing September 12, 2023. In addition, the Company issued a warrant to the same investor to purchase
up to 1,000,000 warrant shares with the convertible note. The Company recognized a $6,000 original issue discount and $197,791 debt discount
at inception of this convertible note. This note was exchanged for shares of common stock along with all accrued interest on March 31,
2022.
Maturities
of convertible promissory notes as of September 30 are as follows (with discount):
SCHEDULE
OF MATURITIES OF CONVERTIBLE PROMISSORY NOTES
| | |
| | |
| 2023 | |
$ | 3,514,706 | |
| | |
| | |
| Total | |
$ | 3,514,706 | |
The
Company recognized $0 and $1,857,428 in original issue discounts, debt discounts and BCF discounts on the convertible notes in the nine
months ended September 30, 2022 and 2021. The Company evaluated the terms of the convertible notes and warrant agreements and determined
that there were no terms that would necessitate the recognition of any derivative liabilities. The Company is amortizing the debt discounts
over the life of the convertible notes based on the effective interest method.
Interest
expense for the nine months ended September 30, 2022 and 2021 was $444,778 and $259,953, respectively. Amortization of debt discount,
original issue discount and BCF discount was $418,354 and $489,848 for the nine months ended September 30, 2022 and 2021, respectively.
Accrued interest at September 30, 2022 was $672,175.
On
March 31, 2022, the Company entered into exchange agreements with most of their convertible note holders to exchange $2,979,000 of notes
payable and $197,804 of accrued interest on those notes into 37,374,170 shares of common stock. The exchange agreements resulted in a
$1,250,527 adjustment for the unvested debt discount at the time of the convertible note exchanges to common stock. This amount is reflected
in the amortization of debt discounts in other income (expense) in the consolidated statement of operations for the nine months ended
September 30, 2022. The unamortized debt discount of $1,250,527 represents the loss on these exchange transactions.
NOTE
13: CONVERTIBLE PROMISSORY NOTES – RELATED PARTIES
The
Company entered into convertible promissory notes as follows as of September 30, 2022 and December 31, 2021:
SCHEDULE OF CONVERTIBLE PROMISSORY NOTES RELATED PARTIES
| | |
| | | |
| | |
| | |
2022 | | |
2021 | |
| Convertible note at 5% interest, maturing December 31, 2022 convertible into common shares at $1.20 per share (two notes – one for $6,525,000 and one for $975,000) for the acquisition of Monster Creative, LLC (see Note 4) with the two principals of Monster; payments due at maturity | |
$ | 7,500,000 | | |
$ | 7,500,000 | |
| Long term debt, gross | |
| 7,500,000 | | |
| 7,500,000 | |
| Less: Current portion | |
| (7,500,000 | ) | |
| (7,500,000 | ) |
| Total | |
$ | - | | |
$ | - | |
Maturities
of convertible promissory notes – related parties as of September 30 are as follows:
SCHEDULE OF MATURITIES NOTES PAYABLE
| | |
| | |
| 2023 | |
$ | 7,500,000 | |
| Total | |
$ | 7,500,000 | |
On
June 30, 2021, the Company acquired Monster Creative, LLC. The Monster Purchase Price included: (a) a convertible note to Phantom Power,
LLC in the amount of $6,525,000 that bears interest at 5% per annum, and matures December 31, 2022, convertible into the Company’s
common stock at $1.20 per share; and (b) a convertible note to Kevin Childress in the amount of $975,000 that bears interest at 5% per
annum, and matures December 31, 2022, convertible into the Company’s common stock at $1.20 per share.
The
Company evaluated the terms of the convertible notes and determined that there were no terms that would necessitate the recognition of
any derivative liabilities.
Interest
expense for the nine months ended September 30, 2022 and 2021 was $280,479 and $94,521, respectively, and accrued interest as of September
30, 2022 was $469,521.
NOTE
14: STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred
Stock
As
of September 30, 2022 and December 31, 2021, the Company has 10,000,000 shares of Preferred Stock authorized, designated as follows:
7,000,000 shares of Series A Preferred Stock authorized, and 570,000 shares of Series B Preferred Stock authorized. All shares of preferred
stock have a par value of $0.00001.
On
October 29, 2021, the Series B Preferred Stock had their authorized shares reduced from 900,000 shares to 570,000 and the 150,000 shares
of Series C Preferred Stock were cancelled.
Series
A Preferred Stock
Dividends.
Shares of Series A Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
There are no conversion rights.
Redemption.
Subject to certain conditions set forth in the Series A Certificate of Designation, in the event of a Change of Control (defined in the
Series A Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
A Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series A Preferred Stock in cash at a price per share of Series A Preferred Stock equal to 100% of
the liquidation value.
Voting
Rights. Holders of Series A Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of one thousand (1,000) votes for every share of Series A Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value
of the Series A Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the
assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series
A Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full.
The
7,000,000 shares were issued to a former officer of the Company and assigned to the new CEO at the time of the reverse merger of HUMBL.
Series
B Preferred Stock
Prior
to the amendment of the Certificate of Incorporation on October 29, 2021, the criteria established for the Series B Preferred Stock was
as follows:
Dividends.
Shares of Series B Preferred Stock shall be entitled to receive, out of funds legally available for that purpose, on the same terms and
conditions as that of holders of common stock, as may be declared by the Board of Directors.
Conversion.
Each share of Series B Preferred Stock shall be convertible at the option of the holder thereof at any time after December 3, 2021 at
the office of the Company or any transfer agent for such stock, into ten thousand (10,000) fully paid and nonassessable shares of common
stock subject to adjustment for any stock split or distribution of securities or subdivision of the outstanding shares of common stock.
Redemption.
Subject to certain conditions set forth in the Series B Certificate of Designation, in the event of a Change of Control (defined in the
Series B Certificate of Designation as the time at which as a third party not affiliated with the Company or any holders of the Series
B Preferred Stock shall have acquired, in one or a series of related transactions, equity securities of the Company representing more
than fifty percent 50% of the outstanding voting securities of the Company), the Company, at its option, will have the right to redeem
all or a portion of the outstanding Series B Preferred Stock in cash at a price per share of Series B Preferred Stock equal to 100% of
the liquidation value.
Voting
Rights. Holders of Series B Preferred Stock are entitled to vote on all matters, together with the holders of common stock, and have
the equivalent of ten thousand (10,000) votes for every share of Series B Preferred Stock held.
Liquidation.
Upon any liquidation, dissolution, or winding-up of the Company, whether voluntary or involuntary, the holders of Series B Preferred
Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company an amount equal to the liquidation value
of the Series B Preferred Stock before any distribution or payment shall be made to the holders of any junior securities, and if the
assets of the Company is insufficient to pay in full such amounts, then the entire assets to be distributed to the holders of the Series
B Preferred Stock shall be ratably distributed among the holders in accordance with the respective amounts that would be payable on such
shares if all amounts payable thereon were paid in full.
HUMBL
exchanged 100% of their membership interests for 552,029 shares of newly created Series B Preferred Stock. The Series B Preferred shares
were issued to the respective members of HUMBL following the approval by FINRA of the one-for-four reverse stock split of the common
shares and the increase in the authorized common shares to 7,450,000,000 shares. The FINRA approval for both the increase in the authorized
common shares and reverse stock split occurred on February 26, 2021. These shares that were issued in the reverse merger had a value
of $39,967.
These
shares have a lock-up provision that prevents the holders to convert into common stock for a period of one-year from the date of the
merger of December 3, 2020, with the exception of those held by the CEO who has a two-year lock up provision. In addition, officers and
directors that received these shares are subject to strict selling limitations, where the number of shares sold within the preceding
three months cannot exceed the greater of: (a) 1% of the total outstanding common shares; and (b) the average weekly reported trading
volume for the previous four weeks.
On
February 26, 2021, the Company issued 493 shares of Series B Preferred Stock for services rendered that were cancelled. On April 15,
2021, the Company revised their issuances and issued with an effective date of March 31, 2021, 2,272 Series B Preferred shares for services
rendered. Of the 2,272 shares issued, 528 are vested immediately, 1,219 are vested over one year, and 525 are vested over two years.
The vesting period commenced January 1, 2021. All of the Series B Preferred Shares issued have one-year lock up provisions to convert
into common stock from the date of the merger of December 3, 2020. For the nine months ended September 30, 2022 and year ended December
31, 2021, the Company expensed $16,500 and $401,900 for these Series B Preferred grants.
Between
May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These
shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two
years.
On
July 6, 2021, the CEO of the Company cancelled 9,350 shares of Series B Preferred Stock (93,500,000 if converted into common stock) for
no consideration.
On
November 19, 2021, the Company paid $215, to redeem 215 Series B Preferred Shares.
In
December 2021, there were 7,939 Series B Preferred shares converted into 79,390,000 common shares.
On
March 17, 2022, the CEO of the Company cancelled 4,900 shares of Series B Preferred Stock (49,000,000 if converted into common stock)
for no consideration.
During
the three months ended March 31, 2022, there were 22,064 Series B Preferred shares converted into 220,640,000 common shares.
During
the three months ended June 30, 2022, there were 22,451 Series B Preferred shares converted into 224,510,000 common shares.
During
the three months ended September 30, 2022, there were 20,801 Series B Preferred shares converted into 208,010,000 common shares, and
on September 21, 2022, the Company’s CEO cancelled 45,000 Series B Preferred shares (the equivalent of 450,000,000 common shares)
for no consideration.
As
of September 30, 2022, the Company has 429,543 shares of Series B Preferred Stock issued and outstanding.
On
October 29, 2021, the Company by Board consent approved an amendment to their Certificate of Amendment for the Series B Preferred Stock
to (a) reduce the number of authorized shares of Series B Preferred stock to 570,000 and (b) for Series B Preferred shareholders holding
greater than 750 shares of Series B Preferred Stock, for the calendar months of December 2021 and January 2022, Series B Preferred shareholders
shall not have the right, whether by election, operation of law, or otherwise, to convert into Common Stock shares of Series B Preferred
stock constituting more than 5% of the total number of Series B Preferred shares held by them; and for each of the calendar months from
February 2022 to May 2023, the percentage that the Series B Preferred shareholder may convert is 3% of the total number of Series B Preferred
shares held by them. This action was approved by Series B Shareholder consent.
Common
Stock
The
Company has 7,450,000,000 shares of common stock, par value $0.00001, authorized. The Company has 1,790,822,117 and 1,023,039,433 shares
issued and outstanding as of September 30, 2022 and December 31, 2021, respectively. The Company on February 26, 2021 increased its authorized
shares from 5,000,000,000 to 7,450,000,000 shares.
In
March 2021 there was an adjustment for 41,156 shares of common stock from the reverse stock split on February 26, 2021.
On
April 26, 2021, the Company, issued 437,500
shares of common stock for the sale of the Chile country rights. The value of this transaction was $1,000,000
received in cash.
Between
May 3 and May 6, 2021, the Company’s CEO converted 79,625,000 shares of common stock into 7,962 Series B Preferred shares. These
shares are subject to a lock-up provision whereby the CEO has agreed not to convert these Series B shares to common for a period of two
years.
On
June 3, 2021, the Company issued 9,345,794 shares of common stock valued at $10,000,000 using the 10-day VWAP price as part of the consideration
for Tickeri. These shares were issued to the two principals of Tickeri.
On
June 30, 2021, the Company issued 1,000,000 shares of common stock in settlement of a liability.
In
December 2021, there were 7,939 Series B Preferred shares converted into 79,390,000 common shares.
During
the year ended December 31, 2021, the Company issued 18,272,540 shares of common stock to consultants and advisors for services. These
shares were valued at the market price of the Company’s common stock on the respective dates of issuance. These shares will be
expensed as stock-based compensation expense through June 30, 2025. In addition, the Company committed to issue an additional 1,318,926
common shares that have a value of $676,408 for services rendered and to be rendered through February 2022. For the year ended December
31, 2021, the Company expensed $6,521,095, and $6,066,881 is yet to be expensed and is reflected as an offset to additional paid in capital
as of December 31, 2021.
In
the three months ended March 31, 2022, the Company: (a) issued 4,000,000 shares in a settlement; (b) 10,000,000 shares in the exercise
of warrants; (c) 13,200,000 shares in the asset purchase of BizSecure (also granted 26,800,000 restricted stock units in this acquisition);
(d) 8,962,036 shares in the acquisition of Ixaya; (e) 675,000 shares for services rendered; (f) 37,374,170 shares issued for the exchange
of notes payable and accrued interest; and (g) 220,640,000 shares issued in conversion of 22,064 Series B Preferred stock. In addition,
the Company cancelled 825,000 shares.
During
the three months ended March 31, 2022, the Company expensed $1,440,464 related to shares issued to consultants and advisors for services
as noted above, leaving $4,626,417 of stock-based compensation yet to be expensed as of March 31, 2022. The Company has reduced their
obligation to issue common stock by 1,120,176 shares and as of March 31, 2022 has an obligation to issue 198,750 shares valued at $26,831.
These shares were issued in April 2022.
In
the three months ended June 30, 2022, the Company: (a) issued 198,750 shares for services rendered; and (b) issued 224,510,000 shares
in conversion of 22,451 Series B Preferred stock.
During
the three months ended June 30, 2022, the Company expensed $1,216,115 related to shares issued to consultants and advisors for services
as noted above, leaving $3,410,302 of stock-based compensation yet to be expensed as of June 30, 2022. The Company has reduced their
obligation to issue common stock by 198,750 shares and as of June 30, 2022 has an obligation to issue 198,750 shares valued at $10,236.
These shares were issued in July 2022.
In
the three months ended September 30, 2022, the Company: (a) issued 11,698,750 shares for services rendered; (b) issued 208,010,000 shares
in conversion of 20,801 Series B Preferred stock; (c) 30,338,978 shares for conversion of notes payable valued at $800,000, and recognized
a loss on conversion of these shares in the amount of $305,967; and (d) the Company redeemed 1,000,000 shares of common stock in a settlement.
In September 2022, the Company received $425,000 from three investors as part of a total of $575,000 for 38,333,333 shares and 76,666,666
warrants with a strike price of $0.03 and $0.04 (38,333,333 each). The remaining $150,000 was received in October 2022 and the shares
were issued in October 2022. The Company has included the $425,000 in additional paid in capital as of September 30, 2022.
During
the three months ended September 30, 2022, the Company expensed $1,192,808 related to shares issued to consultants and advisors for services
as noted above, leaving $2,217,494 of stock-based compensation yet to be expensed as of September 30, 2022. The Company has reduced their
obligation to issue common stock by 198,750 shares and as of September 30, 2022 has an obligation to issue 198,750 shares valued at $4,969.
These shares were issued in October 2022.
Stock
Incentive Plan
On
July 21, 2021, the Company established the HUMBL, Inc. 2021 Stock Incentive Plan (the “Plan”) for a total issuance not to
exceed 20,000,000 shares of common stock. The purpose of the Plan is to promote the long-term growth and profitability of the Company
by (i) providing key people with incentives to improve stockholder value and to contribute to the growth and financial success of the
Company, and (ii) enabling the Company to attract, retain and reward the best-available persons.
The
Plan permits the granting of Stock Options (including incentive stock options qualifying under Code Section 422 and nonqualified stock
options), Stock Appreciation Rights, restricted or unrestricted Stock Awards, Restricted Stock Units, Performance Awards, other stock-based
awards, or any combination of the foregoing.
Warrants
On
December 4, 2020, the Company granted 250,000,000 warrants to two separate holders at a price of $400,000. These warrants have a term
of 2 years and are exercisable into shares of common stock at a price of $0.20 per share. In October 2021, 20,000,000 of these warrants
have been exercise for $4,000,000.
On
December 23, 2020, the Company granted 12,500,000 warrants which were part of a country rights option HUMBL granted. These warrants have
a term of 1 year and are exercisable into shares of common stock at a price of $1.00 per share.
On
December 23, 2020, the Company entered into two separate convertible note agreements that are convertible into shares of common stock
at $0.60 per share. The note holders were each granted 112,500 warrants under the convertible note agreements. These warrants have a
term of 2 years and are exercisable into shares of common stock at a price of $1.00 per share.
On
May 13, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at $1.00
per share. The note holders were granted 1,575,000 warrants under the convertible note agreements. These warrants have a term of 2 years
and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $540,815 was
recognized as a debt discount and is being amortized over the life of the convertible notes.
On
May 19, 2021, the Company entered into three separate convertible note agreements that are convertible into shares of common stock at
$1.00 per share. The note holders were granted 1,425,000 warrants under the convertible note agreements. These warrants have a term of
2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $464,127
was recognized as a debt discount and is being amortized over the life of the convertible notes.
On
May 21, 2021, the Company entered into a consulting agreement and granted 25,000,000 warrants under this agreement. The warrants have
a term of 5 years and expire May 21, 2026. The value of the warrants is $19,132,393 and is being expensed over the 5 year period. The
Company expensed $2,869,859 for the nine months ended September 30, 2022 and $2,337,341 for the year ended December 31, 2021 for these
warrants.
On
June 21, 2021, the Company entered into two separate convertible note agreements that are convertible into shares of common stock at
$1.00 per share. The note holders were granted 1,500,000 warrants under the convertible note agreements. These warrants have a term of
2 years and are exercisable into shares of common stock at a price of $1.00 per share. The relative fair value of the warrants of $548,344
was recognized as a debt discount and is being amortized over the life of the convertible notes.
On
August 30, 2021, the Company entered into a convertible note agreement that is convertible into shares of common stock at $0.90 per share.
The note holder was granted 375,000 warrants under the convertible note agreement. These warrants have a term of 2 years. The relative
fair value of the warrants of $102,486 was recognized as a debt discount and is being amortized over the life of the convertible notes.
On
October 6, 2021, the Company entered into a consulting agreement and granted 6,000,000 warrants under this agreement. The warrants have
a term of 4 years and expire September 30, 2025. The warrants vest as follows: 750,000 per quarter for the quarters ended December 31,
2021, March 31, 2022, June 30, 2022 and September 30, 2022; 1,000,000 upon release of a fully functional cryptocurrency wallet by December
31, 2021, which criteria was satisfied; and 2,000,000 upon the completion of peer-to-peer in the mobile application by March 31, 2022.
The Company has expensed $1,146,998 with respect to these warrants for the year ended December 31, 2021 and $2,706,914 for the nine months
ended September 30, 2022.
On
November 12, 2021, the Company entered into a convertible note agreement that is convertible into shares of common stock at $0.60 per
share. The note holder was granted 1,000,000 warrants under the convertible note agreement. These warrants have a term of 2 years. The
relative fair value of the warrants of $197,791 was recognized as a debt discount and is being amortized over the life of the convertible
notes.
On
December 31, 2021, the Company entered into a consulting agreement and granted 1,500,000 warrants under this agreement. The warrants
have a term of 2 years and expire December 31, 2023. The warrants vest as follows: 500,000 immediately and 250,000 quarterly through
December 31, 2022. The Company has expensed $112,410 with respect to these warrants for the year ended December 31, 2021 and $224,820
for the nine months ended September 30, 2022. In the three months ended September 30, 2022, 250,000 of these warrants were forfeited.
On
December 31, 2021, the Company entered into a consulting agreement and granted 2,500,000 warrants under this agreement. The warrants
have a term of 2 years and expire December 31, 2023. The warrants vest as follows: 750,000 immediately and 150,000 monthly through December
31, 2022. The Company has expensed $168,615 with respect to these warrants for the year ended December 31, 2021 and $404,676 for the
nine months ended September 30, 2022. In the three months ended September 30, 2022, 450,000 of these warrants were forfeited.
On
September 29, 2022, the Company entered into subscription agreements with investors whereby the Company issued 38,333,333 shares of common
stock (issued in October 2022) and granted three-year warrants expiring September 29, 2025 for 38,333,333 warrants at $0.03 per share
and 38,333,333 warrants at $0.04 per share. The Company received $425,000 in proceeds as of September 30, 2022 with the remaining $150,000
in proceeds received in October 2022.
The
following represents a summary of the warrants:
SCHEDULE OF WARRANTS ACTIVITIES
| | |
Nine Months Ended September 30,
2022 | | |
Year Ended December 31, 2021 | |
| | |
Number | | |
Weighted
Average
Exercise
Price | | |
Number | | |
Weighted
Average
Exercise
Price | |
| Beginning balance | |
| 283,650,000 | | |
$ | 0.32627 | | |
| 262,725,000 | | |
$ | 0.23875 | |
| | |
| | | |
| | | |
| | | |
| | |
| Granted | |
| 76,666,666 | | |
| 0.035 | | |
| 40,925,000 | | |
| 0.82643 | |
| Exercised | |
| (10,000,000 | ) | |
| 0.20 | | |
| (20,000,000 | ) | |
| 0.20 | |
| Forfeited | |
| (700,000 | ) | |
| - | | |
| - | | |
| - | |
| Expired | |
| - | | |
| - | | |
| - | | |
| - | |
| Ending balance | |
| 349,616,666 | | |
$ | 0.2661 | | |
| 283,650,000 | | |
$ | 0.32627 | |
| Intrinsic value of warrants | |
$ | - | | |
| | | |
$ | 18,400,000 | | |
| | |
| Weighted Average Remaining Contractual Life (Years) | |
| 1.79 | | |
| | | |
| 2.19 | | |
| | |
As
of September 30, 2022, 267,950,000 warrants are vested.
For
the nine months ended September 30, 2022 and 2021, the Company incurred stock-based compensation expense of $6,206,269 and $1,380,721,
respectively for the warrants in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based
on the black-scholes calculation using the assumptions reflected in the chart below for both the service-based grants and the performance-based
grants.
As
of September 30, 2022, there remains unrecognized stock-based compensation expense related to these warrants of $13,925,194 comprising
of service-based grants through June 30, 2026.
Options
On
October 26, 2021, the Company granted 630,000 stock options to employees. These options have a term of 10 years and are exercisable into
shares of common stock at a price of $0.70 per share. As of September 30, 2022, none of the stock options are vested.
On
May 26, 2022, the Company granted 8,660,000 stock options to employees. These options have a term of 10 years and are exercisable into
shares of common stock at a price of $0.0983 per share. As of September 30, 2022, 2,520,000 of the stock options are vested.
SUMMARY OF STOCK OPTION
| | |
Nine Months Ended September 30, 2022 | | |
Year Ended December 31, 2021 | |
| | |
Number | | |
Weighted
Average
Exercise
Price | | |
Number | | |
Weighted
Average
Exercise
Price | |
| Beginning balance | |
| 630,000 | | |
$ | 0.70 | | |
| - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Granted | |
| 8,660,000 | | |
| 0.0983 | | |
| 630,000 | | |
| 0.70 | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
| Expired | |
| - | | |
| - | | |
| - | | |
| - | |
| Ending balance | |
| 9,290,000 | | |
$ | 0.1391 | | |
| 630,000 | | |
$ | 0.70 | |
| Intrinsic value of warrants | |
$ | - | | |
| | | |
$ | - | | |
| | |
| Weighted Average Remaining Contractual Life (Years) | |
| 9.62 | | |
| | | |
| 9.82 | | |
| | |
As
of September 30, 2022, 2,520,000 options are vested.
For
the nine months ended September 30, 2022 and 2021, the Company incurred stock-based compensation expense of $377,147 and $0, respectively
for the options in accordance with ASC 718-10-50-1 and ASC 718-10-50-2. The fair value of the grants were calculated based on the black-scholes
calculation using the assumptions reflected in the chart below for the service-based grants.
Changes
to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each option/warrant is estimated
using the Black-Scholes valuation model. The following assumptions were used for the periods as follows:
SUMMARY OF FAIR VALUE VALUATION TECHNIQUES
| | |
Nine Months Ended
September 30, 2022 | | |
Year Ended
December 31, 2021 | |
| Expected term | |
| 10 | | |
| 2-10 | |
| Expected volatility | |
| 120 | % | |
| 182-409 | % |
| Expected dividend yield | |
| - | | |
| - | |
| Risk-free interest rate | |
| 2.74 | % | |
| 0.10-0.58 | % |
Restricted
Stock Units (RSUs)
On
February 12, 2022, the Company granted 26,800,000 RSUs in the acquisition of the asserts of BizSecure that was recorded as contingent
consideration. These RSUs commence vesting on April 1, 2022.
SCHEDULE OF RESTRICTED STOCK
| | |
Nine Months Ended September 30, 2022 | | |
Year Ended December 31, 2021 | |
| | |
Number | | |
Weighted
Average
Exercise
Price | | |
Number | | |
Weighted
Average
Exercise
Price | |
| Beginning balance | |
| - | | |
$ | - | | |
| - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Granted | |
| 26,800,000 | | |
| 0.1689 | | |
| - | | |
| - | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Forfeited | |
| - | | |
| - | | |
| - | | |
| - | |
| Vested | |
| (6,700,000 | ) | |
| - | | |
| - | | |
| - | |
| Ending balance | |
| 20,100,000 | | |
$ | 0.1689 | | |
| - | | |
$ | - | |
For
the nine months ended September 30, 2022 and 2021, the Company amortized $1,310,630 and $0, of the contingent consideration to additional
paid in capital, respectively for the RSUs.
NOTE
15: RELATED-PARTY TRANSACTIONS
Since
May 13, 2019 when HUMBL was incorporated, they relied on entities that had common ownership to HUMBL for either assistance with payment
of bills or for services rendered to assist HUMBL in bringing their products to market. The Company has not relied on these entities
since early 2021 for this assistance. The amounts were largely for shared services that have ceased in 2021. The Company had recorded
$0 and $15,200 in the nine months ended September 30, 2022 and 2021 that were recorded in development costs.
In
March 2022, the Company’s CEO cancelled 4,900 Series B Preferred shares and in September 2022, the Company’s CEO cancelled
45,000 Series B Preferred shares. These shares are the equivalent of 499,000,000 common shares. The cancellations were done for no consideration.
In
May 2022, the Company’s CEO contributed $406,040 to pay for the purchase of the NFT that is reflected as a non-current asset on
the Company’s consolidated balance sheet, as well as contributed 100 million BLOCKS valued at $500,000.
NOTE
16: COUNTRY RIGHTS OPTION
Tuigamala
Group Pty Ltd
On
December 23, 2020, the Company and Tuigamala Group Pty Ltd, an Australian corporation (“TGP”), entered into a Securities
Purchase Agreement whereby TGP agreed to purchase an option to purchase territory rights to 15 countries in the Oceania region (“Option”).
The purchase price for this Option was $5,600,000, payable in two payments. The initial payment was $600,000 and was paid on December
23, 2020. The second payment of $5,000,000 was due on or before March 31, 2021.
In
addition to receiving the Option, TGP was granted a warrant to purchase 12,500,000 shares of common stock of the Company at an exercise
price of $1.00 per share. The warrant expires two-years from the grant date, December 23, 2021. As the warrant and the Option were granted
for one price, the Company calculated the relative fair values of each instrument and recognized $556,757 of the $600,000 paid as the
value of the warrant, and the remaining $43,243 as the value of the Option, which is reflected as deferred revenue on the Consolidated
Balance Sheet as the criteria for revenue recognition under ASC 606 has not been satisfied to be recognized as revenue as of December
31, 2020. There was no guarantee that TGP would be able to make the second payment under the Option by the deadline of March 31, 2021.
On
February 26, 2021, the Company and TGP entered into a term sheet to revise the Option. The revised terms of the Option are that the Company
would form a subsidiary in the Oceania region. TGP would purchase a 35% ownership interest in the subsidiary and 3,750,000 shares of
common stock for an aggregate purchase price of $15,000,000. The subsidiary shares and common shares would be purchased as follows: (a)
by March 31, 2021, 1,250,000 shares will be issued for $5,000,000 and 33.33% of the subsidiary shares are to be sold to TGP; and (b)
by September 30, 2021 with reasonable extensions to be determined, 2,500,000 shares will be issued for $10,000,000 and the remaining
66.66% of the subsidiary shares are to be sold to TGP.
As
a result of the revised terms, the $600,000 paid on December 23, 2020, will be used in its entirety to pay for the warrants described
below, and the deferred revenue recognized will be reflected as additional paid in capital on February 26, 2021.
The
Company and TGP were unable to come to agreement on new terms of this transaction and as of April 14, 2021 have terminated negotiations.
TGP still owns the warrants received in December 2020. The Company is not obligated to return any of the $600,000 received on December
23, 2020.
These
warrants were assigned to Archumbl Pty Ltd. in May 2021.
Aurea
Group
On
March 15, 2021 we entered into a Securities Purchase Agreement with HUMBL CL SpA (“HUMBL CL”), an affiliate of Aurea Group
Ventures (“Aurea Group”), a Chilean multi-family office, under which Aurea Group purchased shares of our common stock in
return for exclusive country rights to Chile of our HUMBL products for a purchase price of up to $7,500,000.
Under
the terms of the Securities Purchase Agreement, HUMBL CL agreed to purchase 437,500 shares of our common stock for $1,000,000. The payment
for these shares was due on or before March 30, 2021 but as a result of restrictions imposed due to COVID-19 was paid in two tranches
of $500,000 each on April 5, 2021 and April 6, 2021. In addition, HUMBL CL also received the right to purchase 1,562,500 shares of HUMBL
common stock for $6,500,000 by December 31, 2021 and to receive a 35% equity interest in a Chilean subsidiary HUMBL intends to form to
conduct its operations in Chile.
The
Securities Purchase Agreement provides that if HUMBL CL exercises its right to purchase the subsidiary interest, it will receive 35%
of the profits from operations of the HUMBL family of products in Chile. In addition, HUMBL CL also received a right of first refusal
with respect to regional or country rights sales in Latin America.
On
January 3, 2022, the Company entered into a Settlement Agreement with HUMBL CL whereby HUMBL issued HUMBL CL 4,000,000 shares of common
stock and HUMBL CL agreed to waive its right to purchase the Latin America territory rights.
The
Company is still working with Aurea Group on Latin American business development opportunities for their products in key verticals such
as: banking, merchant and financial services, real estate, hospitality, tourism, sports, festivals, entertainment and ticketing services
in the region.
NOTE
17: TECHNOLOGY PARTNERSHIP AGREEMENT
On
September 25, 2022, the Company and Great Foods2Go, Inc. (“Technology Partner”) entered into a one-year Technology Partnership
Agreement (“Technology Agreement”) whereby the Technology Partner agrees to assist the Company test its products for cloud
kitchen and delivery services. These services include technology solutions across branding, payments, search and marketplaces in their
cloud kitchen and delivery environments. The Company paid $20,000 on September 22, 2022 for installation costs under this Technology
Agreement.
NOTE
18: SEGMENT REPORTING
The
Company follows the provisions of ASC 280-10 Disclosures about Segments of an Enterprise and Related Information. This standard
requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making operating
decisions.
For
2021, the Company established three distinct operating segments: HUMBL Marketplace; HUMBL Pay; and HUMBL Financial. Most of the operations
for the year ended December 31, 2021 were conducted in North America. Commencing January 1, 2022, the Company simplified their business
model to segment their business into two distinct divisions: Consumer and Commercial. The 2021 segments were all considered part of the
consumer division.
Less
than 3-4% of the Company’s sales are from outside of North America, therefore the Company has determined that segment reporting
by geographic location was not necessary. In the future, the Company will continue to monitor their activity by region to determine if
it is feasible to report segment information by location.
SCHEDULE OF SEGMENT REPORTING
| | |
| | | |
| | | |
| | |
| Nine Months Ended September 30, 2022 | |
Consumer | | |
Commercial | | |
Total | |
| Segmented operating revenues | |
$ | 2,920,827 | | |
$ | 115,319 | | |
$ | 3,036,146 | |
| Cost of revenues | |
| 1,438,932 | | |
| 72,977 | | |
| 1,511,909 | |
| Gross profit | |
| 1,481,895 | | |
| 42,342 | | |
| 1,524,237 | |
| Total operating expenses net of depreciation, amortization and impairment | |
| 22,876,740 | | |
| 1,255,737 | | |
| 24,132,477 | |
| Depreciation, amortization and impairment | |
| 4,634,356 | | |
| 1,618,412 | | |
| 6,252,768 | |
| Other expenses (income) | |
| 3,143,021 | | |
| (18,424 | ) | |
| 3,124,597 | |
| (Loss) from continuing operations | |
$ | (29,172,222 | ) | |
$ | (2,813,383 | ) | |
$ | (31,985,605 | ) |
| | |
| | | |
| | | |
| | |
| Three Months Ended September 30, 2022 | |
Consumer | | |
Commercial | | |
Total | |
| Segmented operating revenues | |
$ | 714,725 | | |
$ | 59,426 | | |
$ | 774,151 | |
| Cost of revenues | |
| 459,345 | | |
| 36,568 | | |
| 495,913 | |
| Gross profit | |
| 255,380 | | |
| 22,858 | | |
| 278,238 | |
| Total operating expenses net of depreciation, amortization and impairment | |
| 6,986,188 | | |
| 359,073 | | |
| 7,345,261 | |
| Depreciation, amortization and impairment | |
| 3,528,697 | | |
| 215,676 | | |
| 3,744,373 | |
| Other expenses (income) | |
| 782,397 | | |
| (8,998 | ) | |
| 773,399 | |
| (Loss) from continuing operations | |
$ | (11,041,902 | ) | |
$ | (542,893 | ) | |
$ | (11,584,795 | ) |
| Segmented assets as of September 30, 2022 | |
| | | |
| | | |
| | |
| Property and equipment, net | |
$ | 26,912 | | |
$ | - | | |
$ | 26,912 | |
| Intangible assets | |
$ | 266,297 | | |
$ | 2,976,005 | | |
$ | 3,242,302 | |
| Intangible assets – digital assets | |
$ | 130,776 | | |
$ | 147,823 | | |
$ | 278,599 | |
| Goodwill | |
$ | 3,353,392 | | |
$ | 3,981,000 | | |
$ | 7,334,392 | |
| Capital expenditures | |
$ | 13,572 | | |
$ | - | | |
$ | 13,572 | |
| | |
| | | |
| | | |
| | |
| Nine Months Ended September 30, 2021 | |
HUMBL Pay | | |
HUMBL Marketplace | | |
Total | |
| Segmented operating revenues | |
$ | 13,778 | | |
$ | 1,375,205 | | |
$ | 1,388,983 | |
| Cost of revenues | |
| - | | |
| 604,217 | | |
| 604,217 | |
| Gross profit | |
| 13,778 | | |
| 770,988 | | |
| 784,766 | |
| Total operating expenses net of depreciation, amortization and impairment | |
| 9,534,193 | | |
| 9,468,272 | | |
| 19,002,465 | |
| Depreciation, amortization and impairment | |
| 215 | | |
| 12,179,825 | | |
| 12,180,040 | |
| Other (income) expense | |
| 2,155,966 | | |
| 2,110,110 | | |
| 4,266,076 | |
| Income (loss) from operations | |
$ | (11,676,596 | ) | |
$ | (22,987,219 | ) | |
$ | (34,663,815 | ) |
| | |
| | | |
| | | |
| | |
| Three Months Ended September 30, 2021 | |
HUMBL Pay | | |
HUMBL Marketplace | | |
Total | |
| Segmented operating revenues | |
$ | 13,778 | | |
$ | 1,097,355 | | |
$ | 1,111,133 | |
| Cost of revenues | |
| - | | |
| 460,352 | | |
| 460,352 | |
| Gross profit | |
| 13,778 | | |
| 637,003 | | |
| 650,781 | |
| Total operating expenses net of depreciation, amortization and impairment | |
| 5,938,141 | | |
| 6,284,279 | | |
| 12,222,420 | |
| Depreciation, amortization and impairment | |
| 215 | | |
| 38,763 | | |
| 38,978 | |
| Other (income) expense | |
| 362,270 | | |
| 315,884 | | |
| 678,154 | |
| Income (loss) from operations | |
$ | (6,286,848 | ) | |
$ | (6,001,923 | ) | |
$ | (12,288,771 | ) |
| Segmented assets as of September 30, 2021 | |
| | | |
| | | |
| | |
| Property and equipment, net | |
$ | 14,087 | | |
$ | 347,975 | | |
$ | 362,062 | |
| Intangible assets, net | |
$ | - | | |
$ | 16,259 | | |
$ | 16,259 | |
| Goodwill | |
$ | - | | |
$ | 16,593,706 | | |
$ | 16,593,706 | |
| Capital expenditures | |
$ | 14,301 | | |
$ | 353,275 | | |
$ | 367,576 | |
The
HUMBL Financial sector is reflected in discontinued operations on the consolidated statement of operations for the nine months ended
September 30, 2022 and 2021.
NOTE
19: LEGAL PROCEEDINGS
We
have been sued in the United States District Court for the Southern District of California in a case styled Matt Pasquinelli and Bryan
Paysen v. HUMBL, LLC, Brian Foote, Jeffrey Hinshaw and George Sharp, Case No.22CV0723 AJB BLM, which is a putative shareholder derivative
class action since November 21, 2020 for alleged violations of the federal securities laws by allegedly making false and misleading statements
regarding our business and operations, more specifically that the HUMBL Pay App did not have the functionality that it promised to investors
and that several international business partnerships had a low chance of contributing material revenues to our bottom line and that we
sold unregistered securities through our BLOCK Exchange Traded Index products, all of which plaintiffs allege caused a decline in the
market value of our shares of common stock. Plaintiffs seek unspecified monetary damages. We intend to vigorously defend the actions
of the defendants and contest what we believe are baseless claims.
We
also have been sued in the Delaware Chancery Court in a case styled Mike Armstrong, derivatively on behalf of HUMBL, Inc. v. Brian
Foote, Jeffrey Hinshaw, George Sharp, Michele Rivera, and William B. Hoagland (Case No. 2022-0620) in a class action on behalf of
shareholders of the Company since November 21, 2020 repeating the same claims as in the Pasquinelli litigation described above and also
seeking unspecified damages. We intend to vigorously defend the actions of the defendants and contest what we believe are baseless claims.
NOTE
20: SUBSEQUENT EVENTS
In
the period October 1, 2022 through November 11, 2022, the Company issued 65,470,000 shares of common stock in the conversion of 6,547
shares of Series B Preferred stock.
In
October 2022, the Company issued 198,750 shares of common stock that were accrued as of September 30, 2022 in the Obligation to Issue
Common Stock.
The
Company issued 38,333,333 shares of common stock for investments of $575,000, of which $425,000 was received in September 2022 and the
balance in October 2022, and issued 43,661,022 shares of common stock in conversion of convertible notes payable of $513,454, and recognized
a loss on conversion on these issuances of $233,638.
On October 31, 2022, the Company’s Board of
Directors approved a 1:10 reverse stock split and filed an amendment to the Certificate of Incorporation with the State of Delaware. The
Company filed a Preliminary Schedule 14C on November 2, 2022 for the reverse stock split. Once the reverse stock split is effective, the
Company will retroactively reflect the share amounts and per share figures in accordance with SAB Topic 4C.
On
November 2, 2022, the Company acquired BM Authentics (“BM”), a provider of sports merchandise ranging from
autographed jerseys, bats, balls, helmets, and photos for $110,000
in cash and 90,000,000 shares of common stock (pre-split).
Beginning
on November 7, 2022 and ending November 10, 2022, HUMBL, Inc. (“HUMBL”) entered into Securities Purchase Agreements with
11 different investors (the “Purchase Agreements”). Under the terms of the Purchase Agreements, HUMBL sold 69,411,765 shares
of its common stock and warrants to purchase 34,705,882 shares of its common stock (the “Warrants”) for a total purchase
price of $590,000.00 ($0.0085 per share). The Warrants are exercisable for a period of three years, have a cashless exercise provision
and have an exercise price of $0.017 per share.