The accompanying notes are an integral part of these unaudited condensed financial statements
Notes to Condensed Financial Statements (Unaudited)
September 30, 2019
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
HST Global, Inc. (the "Company") was incorporated on April 11, 1984 under the laws of the State of Delaware under the name of NT Holding Corporation. The Company has made several acquisitions and disposals of various business entities and activities. On May 9, 2008, the Company entered into a Merger and share exchange agreement with Health Source Technologies, Inc. This business acquisition has been accounted for as a reverse merger or recapitalization of Health Source Technologies, Inc. At the time of the merger NT Holding Corporation had disposed of its assets and liabilities and had minimal operations. Immediately after the acquisition the Company changed its name to HST Global, Inc. Health Source Technologies, Inc. was incorporated under the laws of the State of Nevada on August 6, 2007. The Company is currently headquartered in Hampton, Virginia.
The accompanying interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnotes necessary for a complete presentation of the Company’s 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. The unaudited quarterly financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Annual Report on Form 10-K of the Company as of and for the fiscal year ended December 31, 2018. The results of operations for the period ended September 30, 2019, are not necessarily indicative of the results for a full-year period.
HST Global, Inc. is an integrated Health and Wellness Biotechnology company that is developing and/or acquiring a network of Wellness Centers worldwide with the primary focus on homeopathic and alternative treatments of late stage cancer and other life threatening diseases. In addition, the Company intends to acquire innovative products for the treatment of life threatening diseases. The Company primarily focuses on homeopathic and alternative product candidates that are undergoing or have already completed significant clinical testing for the treatment of late stage cancer and/or life threatening diseases.
NOTE 2 – PROPOSED ASSET PURCHASE AGREEMENT
On June 26, 2019, the Company held a special meeting of shareholders based on the request of the Board of Directors. A majority of shareholders voted to approve and provide majority consent to authorize the officers of the Corporation to (i) effect a reverse stock split of all the outstanding shares of the Corporation’s common stock at an exchange ratio of 1 post-split share for 15 pre-split shares (1:15); and (ii) amend the Corporation’s Articles of Incorporation with the State of Nevada to increase the number of authorized shares of common stock of the Corporation to 200,000,000 shares, and the number of authorized shares of preferred stock of the Corporation to 10,000,000 shares. The reverse stock split is not effective as of the date the financial statements were issued. The split has been applied for with FINRA and the Company is waiting for the Effective date to be granted by FINRA which will only become effective based on review by FINRA.
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On August 9, 2019, HST Global, Inc., a Nevada corporation (the “Company”), entered into an Asset Purchase Agreement (the “Agreement”) with Orbital Group, Inc., a Nevada corporation (the “Seller”) to purchase the Seller’s contract rights (the “Assets”) to a revenue sharing agreement (referred to herein as the “Acquisition”) between Orbital Group, Inc. (also referred to herein as “Seller” or “OGI”) and VeraClaim, Ltd. (referred to herein as “VeraClaim,”). Subject to the terms and conditions of the Agreement between VeraClaim, Ltd. and Orbital Group, Inc., Orbital Group, Inc has limited Rights to market the services and products known as and based on the RevSource Platform and its associated products and services owned by VeraClaim, Ltd. in the Territory, which includes all countries of the world to potential clients in all countries of the world. VeraClaim, Ltd. has not sold, transferred or assigned to Orbital Group, Inc. intellectual and physical property relating to the RevSource Platform or any associated products or services.
As of the date of this filing the Acquisition has not been completed and is still subject to customary closing conditions and is expected to close on or around November 26, 2019. It is anticipated that prior to closing of the Acquisition, the Company will have been able to implement the change in its capital structure based on the approval of shareholders which was approved on June 26, 2019. Based on the terms of the Acquisition Terms the recapitalization is required to be declared effective to ensure that there are no more than 4,500,000 shares of post reverse split common stock outstanding immediately prior to closing the Acquisition. At the closing of the Acquisition, the Company will pay to the Seller 19,500,000 post reverse split shares of Company common stock as the purchase price for the Assets.
The final closing of the transaction is pending based on final review by management to include a review of relative regulatory requirements and regulations regarding HIPAA, as well as compliance with cybersecurity regulations related to managing patient medical records and other due diligence items relating to the transaction.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements and related notes include the activity of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-K and 10-Q.
Interim Financial Statements
These interim unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
Accounting Method
The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year-end.
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Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We maintain cash balances in non-interest-bearing accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.
Basic and Diluted Income (Loss) Per Share
The computations of basic loss per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements. The Company computes net income (loss) per share in accordance with ASC 260. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company had no common stock equivalents outstanding as of September 30, 2019 and 2018.
Stock-Based Compensation
The Company adopted ASC 718, “Stock Compensation”, upon inception at August 6, 2007. Under ASC 718, all share-based payments to employees, including grants of employee stock options, are to be recognized in the income statement based on their fair values. As of September 30, 2019, the Company has not issued any employer stock options.
Fair Value of Financial Instruments
The Company adopted ASC 820 which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under this standard certain assets and liabilities must be measured at fair value, and disclosures are required for items measured at fair value.
The Company currently does not have non-financial assets or non-financial liabilities that are required to be measured at fair value on a recurring basis. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
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Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. The fair value of the Company’s cash is based on quoted prices and therefore classified as Level 1.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
Recently Issued Accounting Pronouncements
ASC 842, Leases, was added by ASU 2016-02 on February 25, 2016, effective for fiscal periods beginning after December 15, 2018 and interim periods therein. ASC 842 provides the requirements of financial accounting and reporting for lessees and lessors. The Company has adopted ASC 842 on January 1, 2019 and has concluded that no adjustments were needed.
Management has considered all other recent accounting pronouncements issued since the last audit of our consolidated financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
NOTE 4 – GOING CONCERN
The Company’s financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern for a period of one year from the issuance of these financial statements. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
Management’s plan to support the Company in its operations and to maintain its business strategy is to raise funds through public offerings and to rely on officers and directors to perform essential functions with minimal compensation. If the Company does not raise all of the money it needs from public offerings, it will have to find alternative sources, such as a second public offering, a private placement of securities, or loans from its officers, directors or others. If the Company requires additional cash and is unable to raise it, it will either have to suspend operations until the cash is raised, or cease business entirely.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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NOTE 5 – RELATED PARTY TRANSACTIONS
Consulting Agreements
The Company has entered into a consulting agreement with Mr. Howell, President of the Company, whereby the Company agreed to pay Mr. Howell $10,000 per month for consulting services through December 31, 2010. The Company had agreed to continue to engage Mr. Howell as a consultant until his consulting services are no longer required. As of September 30, 2019, and December 31, 2018, the Company owed Mr. Howell $0 and $1,040,000, respectively based on the terms of the agreement entered into on June 28, 2019, in which Mr. Howell agreed to exchange this payable for restricted common stock as part of the conversion of all of the money owed to him and his affiliates. The transaction included a total conversion amount of $2,494,976 exchanged for a total of 15,000,000 shares of common stock in a series of debt exchange transactions based on a pre-reverse split basis are as follows:
1.The Company issued 11,184,920 shares of restricted common shares to Ron Howell CEO for conversion of $1,860,407 owed to him by the Company for loans, consulting fees, reimbursements or other payables to equity in full payment of all obligations.
2.The Company issued 3,639,592 shares of Common stock to The Health Network, Inc., a company controlled by Ron Howell, CEO of the Company for conversion of $605,379, the total amount of money owed to The Health Network, Inc. by the Company for loans, fees, reimbursements or other payables in full payment of all obligations.
3.The Company issued 116,996 shares of Common stock of HST Global, Inc. shares of Common stock to LIFT, LLC., a company controlled by Ron Howell, CEO of the Company to convert $19,460 the total amount of money owed to LIFT, LLC by the Company for loans, fees, reimbursements or other payables in full payment of all obligations.
4.The Company issued 58,492 shares of Common stock of HST Global, Inc shares of restricted Common stock to Biolifecycle, LLC., a company controlled by Ron Howell, CEO of the Company to convert $9,729 the total amount of money owed to Biolifecycle, LLC by the Company for loans, fees, reimbursements or other payables in full payment of all obligations.
The value of the shares based on the trading price on June 26, 2019 was $130,000. The Company determined the difference between the debt calculated and the value of the shares, $2,359,975 was a capital transaction and was recorded in Additional Paid in Capital due to the related party nature of the transactions.
Declassification of Related Party Debt
After a review of certain debt of the Company owed to third parties, the Board of Directors determined that that debt should be declassified as a liability of the Company. The Board considered the accounting guidance under ASC 405-20-40-1, reviewing PCAOB publications and advice of legal counsel.
The Board considered the laws of all states associated with the debt and payables and determined that the law of the state of Nevada as jurisdiction for determining the support for declassification of debt, which is the longest statute of limitations for written contracts relating to HST Global, Inc. The Board and its legal
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counsel determined based on receipt of an opinion of its counsel that all of the Obligations are unenforceable and therefore should be decalcified as a liability of the Company. In addition, it was agreed that any applicable court would grant a judgment that the obligations are extinguished as was determined that there are no circumstances which would result in tolling of any of the Obligations.
Further based on the information provided to legal counsel by the company, the legal opinion stated that due to the running of applicable statutes of limitations, the Obligations are unenforceable.
As a result, the Directors by unanimous written consent pursuant to the authority contained in the Nevada Corporations Code the Board of Directors approved the “declassification” of certain debt that legal counsel has advised has become uncollectible by the parties. The Board has determined that it is in the best interest of the company to provide a clearer statement of financial condition and no longer retain these debt obligations as current and remove them from our financial statements.
Debt obligations owed by the following were declassified as debt and were written off. The declassified debt included: (i) accrued former officer compensation pursuant to a consulting arrangement dated October 1, 2007 of $70,000; (ii) accounts payable for amounts due prior to 2010 in the amount of approximately $96,728; (iii) subscription for securities dated May 13, 2008 stock and a promissory note in the amount of $200,000 as the obligation was extinguished by a third party; (iv) a promissory Note dated November 25, 2009 for $200,000; (v) a promissory Note dated May 7, 2008 and due June 20, 2008 for $100,000, together with accrued loan penalties of approximately $50,000; (vi) certain stockholder loans prior to 2010 for approximately $121,300; (vii) accrued related party interest for obligations prior to 2010 for $77,176; and (viii) accrued former related party interest for obligations prior to 2010 by other offices of approximately $46,000. Of the $961,204 in extinguished debt and payables, the company realized a total gain of $596,000, and has recorded $365,204 as additional paid in capital for related parties.
NOTE 6 – COMMON STOCK
On June 26, 2019, the Company held a special meeting of shareholders based on the request of the Board of Directors. A majority of shareholders voted to approve and provide majority consent to authorize the officers of the Corporation to (i) effect a reverse stock split of all the outstanding shares of the Corporation’s common stock at an exchange ratio of 1 post-split share for 15 pre-split shares (1:15); and (ii) amend the Corporation’s Articles of Incorporation with the State of Nevada to increase the number of authorized shares of common stock of the Corporation to 200,000,000 shares, and the number of authorized shares of preferred stock of the Corporation to 10,000,000 shares. As a result of this action and as authorized the officers of the Corporation determined that the Company was required to file a Notice of Corporate Action with FINRA. The filing with FINRA was made on November 6, 2019 the Company filed a Related Company Corporate Action Notification of this corporate actions. The reverse stock split has not been declared effective as of the issuance of these financial statements.
As stated in Note 5, a total of 15,000,000 shares of common stock were issued to the Company’s CEO and entities controlled by him in consideration for the extinguishment of $2,494,976 in debt and payables.
In the three months period from July 1, 2019 to September 30, 2019, the company agreed to issue 12,000,000 shares of pre-split common stock for proceeds of $80,000 in a private placement. The securities were agreed to be issued to investors in reliance upon the exemption from registration
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requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering.
The securities described above were issued to investors in reliance upon the exemption from registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering. No commissions were paid and no agreements to register shares were offered in the private placements. All Purchasers of shares described above represented to us in connection with their purchase that they were accredited investors and were acquiring the shares for their own account for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration statement or an available exemption from such registration.
As of September 30, 2019, there were 63,719,854 shares of our common stock issued and outstanding. Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of common stock are entitled to receive dividends out of legally available assets at such times and in such amounts as our Board of Directors may from time to time determine. There are no Preferred shares issued at the time of this filing. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not authorized.
Our common stock is not subject to conversion or redemption and holders of common stock are not entitled to preemptive rights. Upon the liquidation, dissolution or winding up of the Company, the remaining assets legally available for distribution to stockholders, after payment of claims of creditors and payment of liquidation preferences, if any, on outstanding preferred stock, are distributable ratably among the holders of common stock and any participating preferred stock outstanding at that time. Each outstanding share of common stock is fully paid and non-assessable. Our Board of Directors has the authority to issue authorized but unissued shares of common stock without any action by our stockholders.
The securities described above were issued to investors in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and Regulation D promulgated thereunder relating to transactions by an issuer not involving any public offering.
NOTE 7 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report. There are no material subsequent events to report.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the information contained in the condensed financial statements of the Company and the notes thereto appearing elsewhere herein. As used in this report, the terms "Company", "we", "our", "us" and "HSTC" refer to HST Global, Inc.
Preliminary Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "HSTC believes," "management believes" and similar language. The forward-looking statements are based on the current expectations of HSTC and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. The actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them. Investors are also advised to refer to the information in our filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.
Critical Accounting Policies and Estimates
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Results of Operations – The Three Months Ended September 30, 2019 as Compared to the Three Months Ended September 30, 2018
The Company had no revenues or costs of sales during 2019 or 2018. The Company realized net income of $540,992 for the quarter ended September 30, 2019 as compared to a net loss of $43,575 for the quarter ended September 30, 2018. The increase in net income of $584,567 for the 3rd quarter of 2019 is attributable to a gain of $596,000 as a result of declassification of debt and accounts payable. Operating expense were $55,008 for the period ended September 30, 2019 as compared to $34,638 at September 30, 2018. The expenses in the 3rd quarter 2019 were the result of added working capital obtained in a private placement and the use of those funds to further the company’s General and Administrative/Consulting
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efforts and continue the company’s strategic plans. Until the Company obtains capital required to develop the opportunities in development to build obtain the revenues needed from its future operations to meet its obligations, the Company will be dependent upon sources other than operating revenues to meet its operating and capital needs. Operating revenues may never satisfy these needs.
Results of Operations – The Nine Months Ended September 30, 2019 as Compared to the Nine Months Ended September 30, 2018
The Company had no revenues or costs of sales for the nine month periods of 2019 or 2018. The Company incurred net income of $452,052 for the nine months ended September 30, 2019 as compared to a net loss of $134,781 for the nine months ended September 30, 2018. This represents a $586,833 increase in the net income, which is attributable to a gain of $596,000 as a result of declassification of debt and accounts payable. The operating expenses in the first three quarters of 2019 were $126,074 versus $107,970 for the same period in 2018. The increase was based on the additional working capital available and were incurred to further the company’s strategic plans of developing and expanding the new lines of business that have been under development by management and third party consultants. Until the Company obtains capital required to develop new properties or businesses and builds the revenues needed from its future operations to meet its obligations, the Company will be dependent upon sources other than operating revenues to meet its operating and capital needs. Operating revenues may never satisfy these needs.
Liquidity and Capital Resources
Operating Activities.
Our cash balance as of September 30, 2019 was $16,950, with an overdraft balance of $2,975 on December 31, 2018.
Financing Activities.
The Company has paid for its operations through proceeds of $80,000 in the period of July 1, 2019 to September 30, 2019 from the private placement to unrelated third parties related parties, in addition to $13,860 received from related party notes payable. In the nine months ended September 30, 2018 the company received advances in the form of loans from related parties in an amount of $16,300.
The Company does not currently have sufficient capital in its accounts, nor sufficient firm commitments for capital to assure its ability to meet its current obligations or to continue its planned operations. The Company is continuing to pursue working capital and additional revenue through the seeking of the capital it needs to carry on its planned operations. There is no assurance that any of the planned activities will be successful.