Quarterly Report (10-q)

Datum : 21/04/2017 @ 19h29
Quelle : Edgar (US Regulatory)
Name : Hip Cuisine, Inc. (PC) (HIPC)
Kurs : 0.97  -0.029 (-2.90%) @ 16h26
Hip Cuisine, Inc. share price Chart

Quarterly Report (10-q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

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

 

For the quarterly period ended March 31, 2017

 

or

 

¨

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

 

For the transition period from __________ to __________

 

Commission File Number:  001-37807

 

HIP CUISINE, INC.

(Exact name of Registrant as specified in its charter)

 

 Florida

5812

47-3170676

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

 

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

Miami, FL 33172-3652

Ph: 011-507-6501-8105

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x No  ¨

 

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

 

Large Accelerated Filer

¨

Accelerated Filer

¨

Non-accelerated Filer

¨

Smaller reporting company

x

(Do not check if a smaller reporting company)

 

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

 

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

 

As of April 20, 2107, there were outstanding 8,126,583 shares of the issuer's common stock, par value $0.001 per share.

    

 
 
 
 

TABLE OF CONTENTS

 

Page

PART I – FINANCIAL INFORMATION

 

Item 1

Consolidated Financial Statements (Unaudited)

3

 

Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

4

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

12

 

Item 4

Controls and Procedures

12

 

PART II – OTHER INFORMATION

 

Item 1

Legal Proceedings

13

 

Item 1A

Risk Factors

13

 

Item 2

Unregistered Sale of Equity Securities and Use of Proceeds

13

 

Item 3

Defaults Upon Senior Securities

13

 

Item 4

Mine Safety Disclosures

13

 

Item 5

Other Information

13

 

Item 6

Exhibits

14

 

Signatures

15

 

 
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PART I – FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

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

 

 
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Table of Contents

 

HIP CUISINE, INC.

 

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE THREE MONTHS ENDED March 31, 2017

(UNAUDITED)

 

 

 

Page

 

 

 

 

Consolidated Unaudited Condensed Balance Sheets

 

F-2

 

 

 

 

Consolidated Unaudited Condensed Statements of Operations

 

F-3

 

 

 

 

Consolidated Unaudited Condensed Statements of Cash Flows

 

F-4

 

 

 

 

Notes to the Unaudited Condensed Consolidated Interim Financial Statements

 

F-5

 

 

 
F-1
 
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HIP CUISINE, INC.

Consolidated Condensed Balance Sheets

(Unaudited)

 

 

 

March 31,

2017

 

 

December 31,

2016

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$ 377,120

 

 

$ 191,660

 

Refundable sales taxes

 

 

14,760

 

 

 

731

 

Prepaid and deposits

 

 

66,162

 

 

 

74,685

 

Total Current Assets

 

 

458,042

 

 

 

267,076

 

Property, plant and equipment, net

 

 

632,268

 

 

 

254,686

 

Construction in Progress

 

 

12,908

 

 

 

153,930

 

Intangible Assets - Trademark

 

 

6,300

 

 

 

-

 

Goodwill

 

 

37,894

 

 

 

37,894

 

TOTAL ASSETS

 

$ 1,147,412

 

 

$ 713,586

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Checks drawn in excess of bank balance

 

$ 21,605

 

 

$ 407

 

Bank Loan, current portion

 

 

8,327

 

 

 

8,465

 

Accounts payable and accrued liabilities

 

 

73,570

 

 

 

34,145

 

Accrued Interest

 

 

6,000

 

 

 

40,500

 

Notes payable

 

 

40,000

 

 

 

300,000

 

Due to shareholder

 

 

126,646

 

 

 

192,253

 

Total Current Liabilities

 

 

276,148

 

 

 

575,770

 

Bank Loan, less current portion

 

 

68,929

 

 

 

71,016

 

TOTAL LIABILITIES

 

 

345,077

 

 

 

646,786

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 1,000,000 shares authorized;

 

 

 

 

 

 

 

 

0 shares issued and outstanding

 

 

-

 

 

 

-

 

Common stock, $0.001 par value, 100,000,000 shares authorized;

 

 

 

 

 

 

 

 

8,126,583 and 6,585,333 shares issued and outstanding, respectively

 

 

8,126

 

 

 

6,585

 

Additional paid-in capital

 

 

1,876,246

 

 

 

480,737

 

Accumulated Deficit

 

 

(1,082,037 )

 

 

(420,522 )

TOTAL STOCKHOLDERS' EQUITY

 

 

802,335

 

 

 

66,800

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$ 1,147,412

 

 

$ 713,586

 

 

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

 

 
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HIP CUISINE, INC.

Consolidated Condensed Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

REVENUES

 

$ 127,737

 

 

$ 35,208

 

COST OF GOODS SOLD

 

 

91,932

 

 

 

11,852

 

GROSS PROFIT

 

 

35,805

 

 

 

23,356

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Depreciation

 

 

21,680

 

 

 

5,252

 

General and administrative

 

 

114,727

 

 

 

29,044

 

Professional fees

 

 

40,480

 

 

 

19,543

 

Salaries and wages

 

 

13,312

 

 

 

7,739

 

Stock based compensation

 

 

242,000

 

 

 

-

 

Total Operating Expenses

 

 

432,199

 

 

 

61,578

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(396,394 )

 

 

(38,222 )

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES)

 

 

 

 

 

 

 

 

Interest Income

 

 

49

 

 

 

-

 

Interest Expense

 

 

(263 )

 

 

-

 

Loss on debt settlement

 

 

(266,250 )

 

 

-

 

Other Income

 

 

1,343

 

 

 

-

 

Total Other Expenses

 

 

(265,121 )

 

 

-

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

 

(661,515 )

 

 

(38,222 )

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$ (661,515 )

 

$ (38,222 )

 

 

 

 

 

 

 

 

 

Basic and Diluted Income per Common Share

 

$ (0.09 )

 

$ (0.01 )

 

 

 

 

 

 

 

 

 

Basic and Diluted Weighted Average Common Shares Outstanding

 

 

7,134,347

 

 

 

5,520,000

 

 

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

 

 
F-3
 
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HIP CUISINE, INC.

Consolidated Condensed Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

NET LOSS

 

$ (661,515 )

 

$ (38,222 )

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

21,680

 

 

 

5,252

 

Loss on debt settlement

 

 

266,250

 

 

 

-

 

Stock based compensation

 

 

242,000

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Refundable sales taxes

 

 

(14,029 )

 

 

(730 )

Other receivable

 

 

-

 

 

 

(1,222 )

Prepaid expenses

 

 

8,523

 

 

 

(20,709 )

Checks drawn in excess of bank balance

 

 

21,198

 

 

 

-

 

Accounts payable and accrued liabilities

 

 

39,425

 

 

 

(1,180 )

Accrued interest

 

 

(34,500 )

 

 

-

 

Unearned revenue

 

 

-

 

 

 

3,120

 

Net cash used in operating activities

 

 

(110,968 )

 

 

(53,691 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(245,332 )

 

 

(11,007 )

Construction in progress

 

 

(12,908 )

 

 

-

 

Net cash used in investing activities

 

 

(258,240 )

 

 

(11,007 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

750,000

 

 

 

-

 

Repayment of notes payable

 

 

(127,500 )

 

 

-

 

Repayment of bank loan

 

 

(2,225 )

 

 

-

 

Repayment of shareholder loans

 

 

(65,607 )

 

 

64,340

 

Net cash provided by financing activities

 

 

554,668

 

 

 

64,340

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

185,460

 

 

 

(358 )

Cash and cash equivalents - beginning of period

 

 

191,660

 

 

 

2,354

 

Cash and cash equivalents - end of period

 

$ 377,120

 

 

$ 1,996

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Disclosures

 

 

 

 

 

 

 

 

Cash paid for interest

 

$ 34,763

 

 

$ -

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Non-cash Financing and Investing Activities

 

 

 

 

 

 

 

 

Shares issued for acquisition of trademark

 

$ 6,300

 

 

$ -

 

Shares issued for payment of Notes Payable

 

$ 132,500

 

 

$ -

 

Advances forgiven by prior officer

 

$ -

 

 

$ 7,443

 

 

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

 

 
F-4
 
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HIP CUISINE, INC.

Notes to the Condensed Consolidated Financial Statements

For the Three Months Ended March 31, 2017 and 2016

(Unaudited)

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

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

 

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

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

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

 

Basis of Consolidation

 

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

 

Recently Issued Accounting Pronouncements

 

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

 

NOTE 3 – PROPERTY, PLANT AND EQUIPMENT

 

 

 

March 31,

2017

 

 

December 31,

2016

 

Equipment

 

$ 161,180

 

 

$ 100,184

 

Furniture

 

 

52,312

 

 

 

10,113

 

Leasehold improvement

 

 

485,821

 

 

 

189,754

 

Less accumulated depreciation

 

 

(67,045 )

 

 

(45,365 )

 

 

$ 632,268

 

 

$ 254,686

 

 

 
F-5
 
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Property and equipment are stated at cost. Depreciation is computed using the straight-line method. The depreciation methods are designed to amortize the cost of the assets over their estimated useful lives, in years, of the respective assets as follows:

 

Equipment

5 Years

Furniture and Fixtures

5 Years

Leasehold Improvement

3 Years

 

During the three months ended March 31, 2017 and 2016, the depreciation cost was $21,680 and $5,252, respectively.

 

NOTE 4 – CONSTRUCTION IN PROGRESS

 

The construction and design project of Hip Cuisine’s 2 nd restaurant in Costa del Este Panama was completed in March 2017 and operations will commence in May 2017. $153,930 of costs of construction at December 31, 2016 have, accordingly, been placed in service and will be depreciated in April 2017.

 

The construction and design project in Rawkin Juice, Inc.’s 2 nd restaurant is expected to be completed in May 2017.

 

As of March 31, 2017, the total costs of the construction project for Rawkin Juice, Inc. have been capitalized in the amount of $12,908.

 

NOTE 5 – INTANGIBLE ASSET - TRADEMARK

 

 

 

March 31,

2017

 

 

December 31,

2016

 

 

 

 

 

 

 

 

 

 

Trademark

 

$ 6,300

 

 

$ -

 

 

In February 2017, the Company issued 10,000 restricted common shares valued at $0.63 for the acquisition of a Trademark from an unaffiliated party. As per management assessment, the Trademark has an estimated useful life of 15 years. The intangible asset is not currently in use and therefore no amortization has been taken for the period ending March 31, 2017. The Company will pay royalty of 20% of the net profits generated from the use of the Trademark in the future. The intangible asset is expected to be put into use in April 2017.


 
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NOTE 6 – GOODWILL

 

 

 

March 31,

2017

 

 

December 31,

2016

 

 

 

 

 

 

 

 

Goodwill

 

$ 37,894

 

 

$ 37,894

 

 

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

 

NOTE 7 – NOTES PAYABLE

 

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

 

 

 

March 31,

2017

 

 

December 31,

2016

 

Notes Payable

 

$ 40,000

 

 

$ 300,000

 

Less: current portion

 

 

(40,000 )

 

 

(300,000 )

Long-term Notes payable

 

$ -

 

 

$ -

 

 

During the three months ended March 31, 2017, $260,000 notes payable and $37,500 accrued interest were repaid with cash of $162,000 and share issuance of 306,250 restricted common shares valued at $398,750 with loss on debt settlement recorded at $266,250.

 

NOTE 8 – BANK LOAN

 

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

 

 

 

March 31,

2017

 

 

December 31,

2016

 

Bank loan, unsecured at $80,000 principal, repayable in monthly instalments of $829 with an annual interest rate of 2%, maturing Nov 29, 2026.

 

$ 77,256

 

 

$ 79,481

 

Less: current portion

 

 

(8,327 )

 

 

(8,465 )

Long-term note payable

 

$ 68,929

 

 

$ 71,016

 

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

During the three months ended March 31, 2016, the Company’s sole officer advanced $64,340 by the way of loans to the Company to finance the general operation of the Company. During the three months ended March 31, 2017, the Company repaid the sole officer in the amount of $65,607.

 

As at March 31, 2017 and December 31, 2016, the Company owed $126,646 and $192,253 to this officer, respectively. These loans are non-interest bearing and due on demand.

 

 
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NOTE 10 – SHARE CAPITAL

 

Preferred Stock

 

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

 

There were no shares of preferred stock issued and outstanding as of March 31, 2017.

 

Common Stock

 

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

  

In March 2017, the Company completed and closed a private offering exempt from registration pursuant to Rule 506(b) of Regulation D of 1,000,000 shares of the Company's common stock, par value $0.001, issued at $0.75 per share for cash proceeds of $750,000. No brokers or underwriters were utilized in this offering and no commissions were paid. During the three months ended March 31, 2017, the Company issued 225,000 restricted common shares valued at $242,000 to consultants to assist in managing its locations and locating future expansion of future restaurants.

  

During the three months March 31, 2017, the Company issued 306,250 restricted common shares valued at $398,750 to repay certain notes payable assumed from the net assets acquisition.  A loss on debt settlement of $266,250 was incurred related to the repayment of the notes payable.

 

There were 8,126,583 shares of common stock issued and outstanding as of March 31, 2017.

 

NOTE 11 – COMMITMENTS AND CONTINGENCIES

 

The Company currently leases 152.18 square meters of space at Balboa Boutiques located in Panama City, Panama. The current lease term began on July 1, 2015 and expired on February 27, 2017, and was automatically renewed for an additional thirty-six months under the original lease terms. The monthly lease payment is $3,671 per month. This location serves as the Company’s only facility for day to day operations. During the three months ended March 31, 2017 and 2016, the Company has made approximately $14,000 and $13,000 in rental payments.

 

On January 22, 2016, the Company entered into a 5 year lease agreement, which started from August 2016 with the first rental payment to be made in November 2016, for a second restaurant location in Costa del Este Panama. The total square meters is 182.72 and the rent for the location is approximately $8,222 per month. On March 1, 2016, the Company added a mezzanine level to the location and entered into an addendum to the original lease to add 99.63 square meters to the location with the addition of a mezzanine level. The additional rent for the mezzanine will be approximately $2,200 per month. The lease is a month to month rental after 5 years until a new contract is entered into. During the three months ended March 31, 2017, the Company has made approximately $32,000 in rental payments.


 
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The Company currently leases a location in Burbank, CA. The current lease term began on May 1, 2013 and expires on April 30, 2018. The current monthly lease is $5,600 until April 2017 and will be $5,800 from May 2017 to April 2018. During the three months ended March 31, 2017, the Company has made $16,800 in rental payments.

 

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

 

The Company has no other commitments or contingencies as of March 31, 2017.

 

The following is a schedule by years of minimum future rentals on leases as of March 31, 2017:

 

Year Ending December 31:

 

2017

 

$ 208,937

 

2018

 

 

244,819

 

2019

 

 

223,195

 

2020

 

 

155,216

 

Later Years

 

 

125,064

 

Total minimum future rentals

 

$ 957,231

 

 

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

 

NOTE 12 – SUBSEQUENT EVENTS

 

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

 

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

 

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

 

  Plan of Operation

 

Our Business

 

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

 

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

 

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

 

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

 

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

   

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

  

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

 

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

 

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

 

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

 

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

 

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

 

·

Open the second location in Plaza 770 in Costa del Este Panama.

 

·

Open a second "spoke" location for Rawkin Juice located in Santa Monica, CA.

 

·

Locate and start construction of the "Hub & Spoke" locations. The production kitchens in Burbank and Costa del Este will produce and bottle the juices and smoothies, then deliver to the Spokes and other outlets throughout Panama and California such as local gyms and Health Food stores.

 

·

Develop the online ordering system for deliveries through the website www.rawkintogo.com.

 

Expenditures

 

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

 

 
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Months 1-3

 

 

Months 4 - 6

 

 

Months 7-9

 

 

Months 10-12

 

 

Total 12 months

 

Rent

 

$ 26,625

 

 

$ 36,625

 

 

$ 41,625

 

 

$ 71,625

 

 

$ 176,500

 

Payroll

 

$ 37,000

 

 

$ 54,000

 

 

$ 66,000

 

 

$ 96,000

 

 

$ 253,000

 

Loans

 

$ 10,000

 

 

$ 10,000

 

 

$ 15000

 

 

$ 25,000

 

 

$ 60,000

 

Supplies

 

$ 57,750

 

 

$ 84,000

 

 

$ 98,000

 

 

$ 131,600

 

 

$ 371,350

 

Utilities

 

$ 16,500

 

 

$ 20,500

 

 

$ 22,000

 

 

$ 28,000

 

 

$ 87,000

 

Accounting

 

$ 4,500

 

 

$ 4,500

 

 

$ 4,500

 

 

$ 4,500

 

 

$ 18,000

 

Legal

 

$ 6,000

 

 

$ 6,000

 

 

$ 6,000

 

 

$ 6,000

 

 

$ 24,000

 

Auditing

 

$ 5,000

 

 

$ 5,000

 

 

$ 20,000

 

 

$ 5,000

 

 

$ 35,000

 

CFO

 

$ 4,500

 

 

$ 4,500

 

 

$ 4,500

 

 

$ 4,500

 

 

$ 18,000

 

Advertising

 

$ 3,500

 

 

$ 4,500

 

 

$ 4,500

 

 

$ 4,500

 

 

$ 17,000

 

Investor Relations

 

$ 15,000

 

 

$ 15,000

 

 

$ 15,000

 

 

$ 15,000

 

 

$ 60,000

 

Total Expenditures

 

$ 186,375

 

 

$ 244,625

 

 

$ 297,125

 

 

$ 391,725

 

 

$ 1,119,850

 

 

Milestones

 

Months 1 through 9

 

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

 

o

Open Costa del Este Panama and the production kitchen.

 

o

Enter into deliveries and monthly diet programs.

 

o

Open a second "spoke" location for Rawkin Juice located in Santa Monica, CA.

 

o

Enter contract with four (4) Spoke locations for processing facilities.

 

o

Launch new website to handle online deliveries and POS processing.

 

 
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Months 9 through 12

 

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

 

o

Enter into 3rd round of financing to open six (6) more spokes which will include one restaurant with the production kitchen.

 

o

Build an established board of directors with experience in the sector.

 

o

Set up an audit committee and employee ESOP plan.

 

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

 

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

 

Liquidity and Results of Operations

 

Results of Operations

 

The following table summarizes our results of operations for the three months ended March 31, 2017 and 2016:

  

 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

 

 

Statement of Operations Data:

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ 127,737

 

 

$ 35,208

 

 

$ 92,529

 

Cost of Goods Sold

 

 

(91,932 )

 

 

(11,852 )

 

 

(80,080 )

Gross Profit

 

 

35,805

 

 

 

23,356

 

 

 

12,449

 

Operating Expenses

 

 

(432,199 )

 

 

(61,578 )

 

 

(370,621 )

Loss From Operations

 

 

(396,394 )

 

 

(38,222 )

 

 

(358,172 )

Other Expenses

 

 

(265,121 )

 

 

-

 

 

 

(265,121 )

Net Loss

 

$ (661,515 )

 

$ (38,222 )

 

$ (623,293 )

  

 
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For the three months ended March 31, 2017 Compared to the three months ended March 31, 2016

 

For the three months ended March 31, 2017, we earned revenue of $127,737 compared to $35,208 for the three months ended March 31, 2016. Cost of goods sold for the three months ended March 31, 2017 were $91,932 resulting in a gross profit of $35,805, compared to cost of goods sold of $11,852 and gross profit $23,356 from the three months ended March 31, 2015 due to growth and expansion of the business to new restaurants locations.

 

Operating expenses were $432,199 for the three months ended March 31, 2017, compared to $61,578 for the three months ended March 31, 2016, due to additional costs related to the completion and opening of our restaurant and costs associated with ongoing regulatory expenses.

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

 

Operating Expenses:

 

2017

 

 

2016

 

 

Changes

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

$ 21,680

 

 

$ 5,252

 

 

$ 16,428

 

General and administrative

 

 

114,727

 

 

 

29,044

 

 

 

85,683

 

Professional fees

 

 

40,480

 

 

 

19,543

 

 

 

20,937

 

Salaries and wages

 

 

13,312

 

 

 

7,739

 

 

 

5,573

 

Stock based compensation

 

 

242,000

 

 

 

-

 

 

 

242,000

 

Total operating expenses

 

$ 432,199

 

 

$ 61,578

 

 

$ 370,621

 

 

Operating expenses for the three months ended March 31, 2017 were comprised of $21,680 for depreciation, $114,727 for general and administrative, $40,480 for professional fees, $13,312 for salaries and wages and $242,000 for stock based compensation. Operating expenses for the three months ended March 31, 2016 were comprised of $5,252 for depreciation, $29,044 for general and administrative, $19,543 for professional fees and $7,739 for salaries and wages.

 

Depreciation was $21,680 for the three months ended March 31 2017, which increased by $16,428 from $5,252 for the three months ended March 31, 2016, due to the acquisition of property, plant and equipment to support expansion of the business.

 

General and Administrative expenses were $114,727 for the three months ended March 31, 2017, which increased by $85,683 from $29,044 for the three months ended March 31, 2016, attributed to increase in rental expenses and other general administrative expenses for additional restaurant locations.


 
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Professional fees were $40,480 for the three months ended March 31, 2017, increased by $20,937 from $19,543 for the three months ended March 31, 2016, related to the increases in accounting, auditing, legal and market listing expenses and public offerings.

 

Salaries and wages were $13,312 for the three months ended March 31, 2017, increased by $5,573 from $7,739 for the three months ended March 31, 2016, as the Company hired more restaurant staffs to support operational expansion.

 

Stock based compensation $242,000 was incurred for the three months ended March 31, 2017, relates to the issuance of common shares for consulting services to support the expansion of the new restaurant locations.

 

Liquidity and Capital Resources

 

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

 

 

 

March 31,

 

 

December 31,

 

 

 

Capital Data

 

2017

 

 

2016

 

 

Changes

 

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents

 

$ 377,120

 

 

$ 191,660

 

 

$ 185,460

 

Current Assets

 

$ 458,042

 

 

$ 267,076

 

 

$ 190,966

 

Current Liabilities

 

$ 276,148

 

 

$ 575,770

 

 

$ (299,622 )

Working Capital (Deficiency)

 

$ 181,894

 

 

$ (308,694 )

 

$ 490,588

 

 

 

 

Three Months Ended

 

 

 

 

 

March 31,

 

 

 

Cash Flow Data:

 

2017

 

 

2016

 

 

Changes

 

 

 

 

 

 

 

 

 

 

 

Cash Flows used in Operating Activities

 

$ (110,968 )

 

$ (53,691 )

 

$ (57,277 )

Cash Flows used in Investing Activities

 

 

(258,240 )

 

 

(11,007 )

 

 

(247,233 )

Cash Flows provided by Financing Activities

 

 

554,668

 

 

 

64,340

 

 

 

490,328

 

Net Increase (decrease) in Cash During Period

 

$ 185,460

 

 

$ (358 )

 

$ 185,818

 

 

As of March 31, 2017 and December 31, 2016 our cash was $377,120 and $191,660, respectively. The increase in cash for the three months ended March 31, 2017 was mainly attributed from a $554,668 cash flows provided by financing activities achieved from $750,000 cash proceeds received from issuance of common stock from the Company second public offering.

 

As of March 31, 2017, we experienced an increase in our working capital of $490,588. The increase in working capital during the three months ended March 31, 2017 was primarily from increases in cash and cash equivalents of $185,460 from the $750,000 shares issuance for cash proceeds from the public offering during the quarter.

 

Cash Flows

 

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

 

 
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Operating Activities

  

For the three months ended March 31, 2017, net cash used in operating activities was $110,968, related to our net loss of $661,515 reduced by depreciation of $21,680, loss on debt settlement of $266,250, stock based compensation of $242,000, a decrease in refundable sales taxes of $14,029, an increase in prepaid expenses of $8,523, an increase in checks drawn in excess of bank balance of $21,198, an increase of $39,425 in accounts payable and a decrease of $34,500 in accrued interest. 

 

For the three months ended March 31 2016, net cash used in operating activities was $53,691.  This negative cash flow related to our net loss of $38,222, depreciation of $5,252, a decrease in refundable sales taxes of $730 a decrease in other receivable of $1,222, a decrease in prepaid expenses of $20,709, a decrease of $1,180 in accounts payables and an increase in unearned revenue of $3,120.

 

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

 

Investing Activities

 

For the three months ended March 31, 2017, net cash used in investing activities was $258,240 compared to net cash used of $11,007 during the three months ended March 31, 2016. The increase in net cash used was related primarily to $245,332 of costs for the acquisition of building and equipment for the Company’s restaurants.

 

Financing Activities

 

Net cash provided by financing activities was $554,668 for the three months ended March 31, 2017 mainly attributed to cash proceeds from issuance of common shares for $750,000 from the Company second public offering. The Company has also repaid notes payable at $127,500 and bank loans at $2,225. In additional, the Company has repaid $65,607 to its sole officer.

 

Net cash provided by financing activities for the three months ended March 31, 2016 was $64,340 through advances from related parties.

 

Material Commitments

 

On March 1, 2017 we entered into a 3 year lease agreement located at 705 Montana Ave. in Santa Monica California and this location will be the second location under Rawkin Juice which is the wholly owned subsidiary of Hip Cuisine. This will serve as a “spoke” location where products will be delivered from our production kitchen in Burbank to the Santa Monica location. The total monthly lease payment is $4,300.

 

The following is a schedule by years of minimum future rent on leases for the Company’s 3 restaurant locations as of March 31, 2017:

 

2017

 

$ 178,837

 

2018

 

 

192,316

 

2019

 

 

169,116

 

2020

 

 

132,406

 

Later Years

 

 

125,064

 

Total minimum future rentals

 

$ 797,739

 

 

Going Concern.

 

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

 

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

 

 
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Going Concern Consideration

 

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

 

Critical Accounting Policies

 

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

 

Future Financings.

 

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

 

Recently Issued Accounting Pronouncements.

 

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

 

Off-Balance Sheet Arrangements.

 

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

 

 
11
 
Table of Contents

 

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

 

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

 

Quantitative and Qualitative Disclosures about Market Risk

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluations of Disclosure Controls and Procedures

 

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

 

Changes in Internal Control over Financial Reporting

 

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

 

 
12
 
Table of Contents

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

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

 

ITEM 1A. RISK FACTORS

 

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

 

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

 

On February 7, 2017, the Company issued 10,000 restricted common shares valued at $6,300 per share for the acquisition of a trademark from an unrelated party. The Company agrees to pay a royalty of twenty percent (20%) of the net profits generated from the commercial exploitation of the trademark.

 

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

 

During the three months ended March 31, 2017, the Company issued 225,000 restricted common shares of its common stock, par value $0.001, valued at $242,000 to consultants to assist in managing its locations and locating future expansion of future restaurants.

 

During the three months March 31, 2017, the Company issued 306,250 restricted common shares of its common stock, par value $0.001, valued at $398,750 to repay certain notes payable assumed from the net assets acquisition.  A loss on debt settlement of $266,250 was incurred related to the repayment of the notes payable.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable

 

ITEM 5. OTHER INFORMATION

 

None.

 

 
13
 
Table of Contents

 

ITEM 6. EXHIBITS

 

INDEX TO EXHIBITS

 

Exhibit

Description

 

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

32.2

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  

101.INS

 

XBRL Instance Document.

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema.

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase.

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase.

 

 

 

101.PRE

 

XBRL Taxonomy Extension Label Linkbase.

 

 

 

101.LAB

 

XBRL Taxonomy Extension Presentation Linkbase.

 

 
14
 
Table of Contents

 

SIGNATURES

 

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

 

HIP CUISINE, INC. 
(Registrant)

 

Signature

Title

Date

 

/s/ Natalia Lopera

Chief Executive Officer

April 21, 2017

Natalia Lopera

 

/s/ Douglas W. Samuelson

Chief Financial Officer

April 21, 2017

Douglas W. Samuelson

 
 

15

 

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