NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2023
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS
Yuengling’s Ice Cream Corporation, (f/k/a
Aureus, Inc.) (“Yuengling’s,” “YCRM,” “we,” “us,” or
the “Company”) was incorporated in Nevada on April 19, 2013, under the name “Aureus Incorporated.”
We were initially organized to develop and explore mineral properties in the state of Nevada. Effective December 15, 2017, we changed
our name to “Hohme, Inc.,” and, effective February 7, 2019, we changed our name to “Aureus, Inc. and on September
14, 2021, the Company changed their name to Yuengling’s Ice Cream Corporation”. We are currently active in the state of Nevada.
We are a food brand development company that builds
and represents popular food concepts throughout the United States and international markets. Management is highly experienced at business
integration and re-branding potential. With little territory available for the older brands, we intend to bring to our customers fresh
innovative brands that have great potential. All of our brands will be unique in nature as we focus on niche markets that are still in
need of development.
We operate two lines of business. Through our
subsidiary, YIC Acquisitions Corp. (“YICA”), we acquired the assets of Yuengling’s Ice Cream in June 2019. YICA
produces and sells high-quality ice cream without artificial colors, flavoring, or preservatives and no added hormones.
In September 2020, we entered into the micro market
segment and launched our second business line, Aureus Micro Markets (“AMM”). Closely tied to the vending machine industry,
Micro Markets look and feel like modern convenience stores while functioning with the ease and efficiency of vending foodservice and refreshment
services.
On December 9, 2022, the Company entered into
an exclusive licensing agreement with GPO Plus, Inc. (OTCQB: GPOX). GPOX will develop a full line of CBD and other hemp derived cannabinoid
products based on the iconic flavors of Yuengling’s Ice Cream. The initial term of the Agreement runs through November 30, 2027,
with an option to extend for an additional five years. In consideration for the trademark license, GPOX will pay the Company a royalty
of 5% of all gross wholesale revenue generated from the sale of Yuengling’s Ice Cream branded products. Additional details regarding
products, flavors, launch date and where the product will be sold will be provided in the near future.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). The accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal
recurring items, which, in the opinion of management, are necessary for a fair statement of the results of operations for the periods
shown and are not necessarily indicative of the results to be expected for the full year ending October 31, 2023. These unaudited condensed
consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s
financial statements for the year ended October 31, 2022.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash in bank deposit accounts,
the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently
have not experienced any losses in our accounts. We believe we are not exposed to any significant credit risk on cash.
Restricted Cash
The Company has an obligation to transfer
$50,000 to Mid Penn Bank
as security pursuant to the Agreement of Sale and Security Agreement with Mid Penn Bank and Yuengling Ice Cream Corp, by April
30, 2023. If the funds are not transferred by April 30, 2023, the Bank the has option to call the loan and to require the
Company to pay any attorney’s fees incurred.
Basic and Diluted Earnings Per Share
Net income (loss) per common share is computed
pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net
income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and
potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially
outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. As of January 31, 2023
and 2022, there are 255,524,518 and 23,539,271 potentially dilutive shares, respectively, if the Preferred A were to be converted. As
of January 31, 2023 and 2022, the Company’s diluted loss per share is the same as the basic loss per share, as the inclusion of
any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary YIC Acquisitions Corp. All material transactions and balances have
been eliminated on consolidation.
Derivative Financial Instruments
The Company evaluates its convertible notes to
determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments
that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments,
the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on
subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities
or as equity, is evaluated at the end of each reporting period.
Fair Value Measurements
Fair value is defined as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. ASC Topic No. 820 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as described below:
Level 1: Level 1 inputs are unadjusted quoted
prices in active markets for identical assets or liabilities.
Level 2: Level 2 inputs are inputs other than
quoted prices included in Level 1 that are observable, either directly or indirectly.
Level 2 inputs include quoted prices for similar
assets, quoted prices in markets that are not considered to be active, and observable inputs other than quoted prices such as interest
rates.
Level 3: Level 3 inputs are unobservable inputs.
The following required disclosure of the estimated
fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies.
However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the use of different
market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The methods and assumptions used to estimate the
fair values of each class of financial instruments are as follows: Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable.
The items are generally short-term in nature, and accordingly, the carrying amounts reported on the consolidated balance sheets are reasonable
approximations of their fair values.
The carrying amounts of Notes Payable approximate
the fair value as the notes bear interest rates that are consistent with current market rates.
The following table classifies the Company’s
liabilities measured at fair value on a recurring basis into the fair value hierarchy as of January 31, 2023:
Schedule of liabilities measured at fair value | |
| | |
| | |
| | |
| |
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total Gains | |
Derivative | |
$ | – | | |
$ | – | | |
$ | 190,289 | | |
$ | 65,124 | |
Total | |
$ | – | | |
$ | – | | |
$ | 190,289 | | |
$ | 65,124 | |
The following table classifies the Company’s
liabilities measured at fair value on a recurring basis into the fair value hierarchy as of October 31, 2022:
Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total Gains | |
Derivative | |
$ | – | | |
$ | – | | |
$ | 247,034 | | |
$ | 73,670 | |
Total | |
$ | – | | |
$ | – | | |
$ | 247,034 | | |
$ | 73,670 | |
Recent Accounting Pronouncements
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the condensed consolidated financial statements
unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued
that might have a material impact on our financial position or results of operations.
NOTE 3 – GOING CONCERN
The accompanying unaudited condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has an accumulated deficit of $4,138,344, had a net loss of $106,219, and net
cash used in operating activities of $31,597 for the three months ended January 31, 2023. The Company’s ability to raise additional
capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful
development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations
are necessary for the Company to continue operations. These conditions and the ability to successfully resolve these factors raise substantial
doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments
that may result from the outcome of these aforementioned uncertainties.
NOTE 4 - PROPERTY & EQUIPMENT
Property and Equipment are first recorded at cost.
Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between
three and five years.
Long lived assets, including property and equipment,
to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less
than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed
of are reported at the lower of carrying amount or fair value less cost to sell.
Maintenance and repair expenses, as incurred,
are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable
to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
Property and equipment stated at cost, less accumulated
depreciation consisted of the following:
Schedule of property and equipment | |
| | |
| |
| |
January 31, 2023 | | |
October 31, 2022 | |
Property and equipment | |
$ | 30,300 | | |
$ | 30,300 | |
Less: accumulated depreciation | |
| – | | |
| – | |
Property and equipment, net | |
$ | 30,300 | | |
$ | 30,300 | |
Depreciation Expense
Property and equipment consist of shelving and
racks purchased for the Aureus Micro Markets business, which has been temporarily put on hold. As of January 31, 2023, the Company’s
fixed assets have not yet been placed in service. Depreciation will begin on the date the assets are placed into service. If the Company
does not pursue the Micro Markets business, it may be able to use the shelving and racks in its current business.
NOTE 5 – NOTES PAYABLE
On September 9, 2015, the Company issued to Backenald
Corp. a promissory note in the principal amount of $20,000, bearing interest at the rate of 5% per annum and maturing on the first anniversary
of the date of issuance. This note is in default and its interest rate has been increased to 10%. As of January 31, 2023, accrued interest
amounted to $13,651.
On February 23, 2017, the Company issued Travel
Data Solutions a promissory note in the principal amount of $17,500, bearing interest at the rate of 8% per annum, compounded annually,
and maturing on the first anniversary of the date of issuance. This note is in default. As of January 31, 2023, accrued interest amounted
to $10,491.
On March 27, 2017, the Company issued Craigstone
Ltd. a promissory note in the principal amount of $12,465, bearing interest at the rate of 8% per annum, compounded annually, and maturing
on the first anniversary of the date of issuance. This note is in default. As of January 31, 2023, accrued interest amounted to $7,084.
On May 16, 2017, the Company issued Travel Data
Solutions a promissory note in the principal amount of $4,500, bearing interest at the rate of 8% per annum, compounded annually, and
maturing on the first anniversary of the date of issuance. This note is in default. As of January 31, 2023, accrued interest amounted
to $2,484.
On July 28, 2017, we issued Backenald Trading
Ltd. a promissory note in the principal amount of $20,000, bearing interest at the rate of 8% per annum, compounded annually, and maturing
on the first anniversary of the date of issuance. This note is in default. As of January 31, 2023, accrued interest amounted to $10,560.
On January 24, 2020, the company issued a third
party a promissory note in the principal amount of $15,000, bearing interest at the rate of 10% per annum, and maturing on April 30, 2020.
As of January 31, 2023, there is $0 and $1,155, principal and interest, respectively, due on this note.
On March 24, 2020, the company issued a third
party a promissory note in the principal amount of $20,000, bearing interest at the rate of 10% per annum, and maturing on May 30, 2020.
As of January 31, 2023, the balance due on this note for principal and interest is $5,000 and $5,475, respectively. This note is in default.
As of January 31, 2023, the Company was also indebted
to another third party for a total of $24,656. This note is non-interest bearing and currently past due and in default.
NOTE 6 – LOANS PAYABLE
The Company has an SBA loan with monthly payments
that matures on March 13, 2026. The balance due on this loan as of January 31, 2023 and October 31, 2022, is $589,092 and $595,092, respectively.
As of January 31, 2023, the interest rate on this loan has increased to 8.25% from its original 5.25%.
The Company has a line of credit requiring monthly
payments. On December 24, 2021, $106,201 from a CD was applied to the Line of Credit balance. The balance due on this loan as of January
31, 2023 and October 31, 2022, is $693,799 and $693,799, respectively. As of January 31, 2023, the interest rate on this loan has increased
to 9.5% from its original 4.25%.
NOTE 7 – CONVERTIBLE NOTE PAYABLE
On March 2, 2022, the Company issued a convertible
promissory note to Quick Capital, LLC in the amount of $87,222. The company received $73,500, after a 10% OID and transaction and legal
costs. The note bears interest at 12% and matures in one year. The difference of $13,722 was recorded as a debt discount. The note is
convertible into shares of common stock at $0.0005 per share. On October 21, 2022, the total principal and accrued interest of $93,818,
was exchanged for a new convertible note. The new note bears interest at 12% and matures on March 21, 2023. The note is convertible into
shares of common stock at 65% of the lowest trade price during the ten days prior to the date of conversion.
On September 7, 2022, the Company issued a convertible
promissory note to 1800 Diagonal Lending LLC in the amount of $44,250. The company received $40,000, after $4,250 of OID and transaction
and legal costs. The note bears interest at 12% and matures in one year. The difference of $4,250 was recorded as a debt discount. The
note is convertible into shares of common stock at 63% of the average of the two lowest trades during the fifteen days prior to the date
of conversion.
On December 8, 2022, the Company issued a Convertible
Promissory Note to 1800 Diagonal Lending LLC in the amount of $39,250. The Company received $35,000 with $4,250 retained for fees. The
difference of $4,250 was recorded as a debt discount. The Note bears interest at 12% and matures in one year. The note is convertible
into shares of common stock at 63% of the average of the two lowest trades during the fifteen days prior to the date of conversion.
The following table summarizes the convertible
notes outstanding as of January 31, 2023:
Schedule of convertible notes and related activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Holder |
|
Date |
|
Maturity Date |
|
Interest |
|
|
Balance
October 31,
2022 |
|
|
Additions |
|
|
Conversions |
|
|
Balance
January 31, 2021 |
|
Quick Capital, LLC |
|
10/21/2022 |
|
3/21/2023 |
|
|
12% |
|
|
$ |
93,818 |
|
|
$ |
– |
|
|
$ |
(33,830) |
|
|
$ |
59,988 |
|
1800 Diagonal Lending LLC |
|
9/7/2022 |
|
9/7/2023 |
|
|
12% |
|
|
|
44,250 |
|
|
|
– |
|
|
|
– |
|
|
|
44,250 |
|
1800 Diagonal Lending LLC |
|
12/8/2022 |
|
12/8/2023 |
|
|
12% |
|
|
|
– |
|
|
|
39,250 |
|
|
|
– |
|
|
|
39,250 |
|
Total |
|
|
|
|
|
|
|
|
|
$ |
138,068 |
|
|
$ |
39,250 |
|
|
$ |
(33,830) |
|
|
$ |
143,488 |
|
Less Debt Discount |
|
|
|
|
|
|
|
|
|
|
(123,813 |
) |
|
|
|
|
|
|
(72,160 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
14,255 |
|
|
|
|
|
|
|
|
|
|
$ |
71,328 |
|
A summary of the activity of the derivative liability
for the notes above is as follows:
Schedule of derivative liability | |
| |
Balance at October 31, 2021 | |
$ | – | |
Increase to derivative due to new issuances | |
| 320,704 | |
Decrease to derivative due to repayments | |
| – | |
Derivative gain due to mark to market adjustment | |
| (73,670 | ) |
Balance at October 31, 2022 | |
| 247,034 | |
Increase to derivative due to new issuances | |
| 57,331 | |
Decrease to derivative due to conversions | |
| (48,952 | ) |
Derivative gain due to mark to market adjustment | |
| (65,124 | ) |
Balance at January 31, 2023 | |
$ | 190,289 | |
A summary of quantitative information about significant
unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of
the fair value hierarchy as of January 31, 2023 is as follows:
Schedule of unobservable inputs for derivative liabilities |
|
|
|
|
|
|
|
|
Inputs |
|
January 31, 2023 |
|
|
Initial
Valuation |
|
Stock price |
|
$ |
0.004 |
|
|
$ |
0.01 - 0.026 |
|
Conversion price |
|
$ |
0.002 - 0.0025 |
|
|
$ |
0.0044 - 0.0069 |
|
Volatility (annual) |
|
|
285.6% – 317.3% |
|
|
|
222.7% - 261.37% |
|
Risk-free rate |
|
|
3.6% - 4.3% |
|
|
|
3.6% - 4.73% |
|
Dividend rate |
|
|
– |
|
|
|
– |
|
Years to maturity |
|
|
0.13 – 0.85 |
|
|
|
0.41 - 1 |
|
NOTE 8 – RELATED PARTY TRANSACTIONS
During the three months ended January 31, 2023
and 2022, the Company paid Robert Bohorad, CEO, $0 and $18,000 for compensation, respectively. As of January 31, 2023, there is $56,000
of accrued compensation due to Mr. Bohorad.
On January 14, 2023, the Company granted 30 million
restricted common shares to Robert C. Bohorad. The Company signed a letter of intent with Mr. Green (Note 9) and Mr. Bohorad on October
26, 2022, where Mr. Bohorad will become Chief Operating Officer and Chief Financial Officer. The purpose of the issuance is to retain
and incentivize the individuals in their efforts to manage the Company and foster its success. The shares were valued at $0.006, the closing
stock price on the date of grant, for total non-cash compensation of $180,000. The amount is being recognized over a one-year period.
NOTE 9 – COMMON STOCK
During the three months ended January 31, 2023,
Quick Capital LLC, converted $33,830 and $4,176 of principal and interest, respectively, into 10,337,727 shares of common stock.
On January 14, 2023, the Company granted 30 million
restricted common shares to Charles Green. The Company signed a letter of intent with Mr. Green and Mr. Bohorad on October 26, 2022, where
Mr. Green will join the company as President and CEO. The purpose of the issuance is to retain and incentivize the individuals in their
efforts to manage the Company and foster its success. The shares were valued at $0.006, the closing stock price on the date of grant,
for total non-cash compensation of $180,000. The amount is being recognized over a one-year period.
NOTE 10 – PREFERRED STOCK
Series A Preferred
The Company has designated Ten Million (10,000,000)
shares of Preferred Stock the Series A Convertible Preferred Stock with a par and stated value of $0.001 per share. The holders of the
Series A Convertible Preferred Stock are not entitled to receive any dividends.
Except as otherwise required by law or by the
Articles of Incorporation and except as set forth below, the outstanding shares of Series A Convertible Preferred Stock shall vote together
with the shares of Common Stock and other voting securities of the Corporation as a single class and, regardless of the number of shares
of Series A Convertible Preferred Stock outstanding and as long as at least one of such shares of Series A Convertible Preferred Stock
is outstanding shall represent Sixty Six and Two Thirds Percent (66 2/3%) of all votes entitled to be voted at any annual or special meeting
of shareholders of the Corporation or action by written consent of shareholders. Each outstanding share of the Series A Convertible Preferred
Stock shall represent its proportionate share of the 66 2/3% which is allocated to the outstanding shares of Series A Convertible Preferred
Stock.
The entirety of the shares of Series A Convertible
Preferred Stock outstanding as such time shall be convertible, at the option of the holder thereof, at any time and from time to time,
and without the payment of additional consideration by the holder thereof, into two thirds of the after conversion outstanding fully paid
and non-assessable shares of Common Stock. Each individual share of Series A Convertible Preferred Stock shall be convertible into Common
Stock at a ratio determined by dividing the number of shares of Series A Convertible Stock to be converted by the number of shares of
outstanding pre-conversion Series A Convertible Preferred Stock. Such initial Conversion Ratio, and the rate at which shares of Series
A Convertible Preferred Stock may be converted into shares of Common Stock. As of January 31, 2023, there are 5,000,000 shares of Series
A preferred stock owned by the CEO.
As of January 31, 2023, the Company has preferred
stock to be issued in the amount of $392,022. As of January 31, 2023, the preferred Series A can be converted at $0.00195 per share, into
201,036,774 shares of common stock. As of the balance sheet date and the date of this report, these shares have not been issued to the
Purchaser. S99-3A(2) ASR 268 requires preferred securities that are redeemable for cash or other assets to be classified outside
of permanent equity if they are redeemable (1) at a fixed or determinable price on a fixed or determinable date, (2) at the option of
the holder, or (3) upon the occurrence of an event that is not solely within the control of the issuer. Given that there is an unknown
amount of preferred shares to be issued, cash has been repaid and the preferred shares are convertible at the option of the holder, the
Company determined that mezzanine treatment appears appropriate. As such, the Company feels these securities should be classified
as Mezzanine equity until they are fully issued.
Series B Preferred
The Series B preferred stock is convertible into
shares of common stock at the option of the holder at a 35% discount to the lowest closing price for the thirty days prior to conversion.
NOTE 11 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management
has performed an evaluation of subsequent events through the date that the financial statements were available to be issued and has determined
that it does not have any material subsequent events to disclose in these financial statements other than the following.
On February 3, 2023, the Company issued a convertible
promissory note to Quick Capital, LLC in the amount of $25,555.55. The company received $20,000 after a 10% OID and transaction and legal
costs. The note bears interest at 12% and matures in one year. The note is convertible into shares of common stock at 65% of the lowest
trade price during the ten days prior to the date of conversion.
Subsequent to January 31, 2023, Quick Capital
LLC, converted $16,128 and $637 of principal and interest, respectively, into 7,810,120 shares of common stock.