The Financial Statements of the Registrant required
to be filed with this 10-Q Quarterly Report were prepared by management together with related notes. In the opinion of management, the
Financial Statements fairly present the financial condition of the Registrant and include all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the Registrant’s Financial Statements. The results from operations for
the three and nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December
31, 2022. The unaudited consolidated Financial Statements should be read in conjunction with the December 31, 2021 financial statements
and footnotes thereto included in the Registrant’s Form 10-K Annual Report for the year ended December 31, 2021, filed with the
Securities and Exchange Commission on March 21, 2022.
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
The accompanying footnotes are an integral part of
these unaudited consolidated financial statements.
Notes to Unaudited Condensed Consolidated Financial
Statements
September 30, 2022
NOTE 1- Summary of History and Significant Accounting Policies
Nature of Operations
Gulf & Orient Steamship Company, LTD. (“Gulf”
or the “Company”) was incorporated in the State of Colorado on May 9, 1996. Gulf originally intended to engage in the business
of marine transportation.
On December 31, 2018, Gulf entered into a Share Exchange
Agreement with High Sierra Technologies, Inc., a Nevada corporation (“High Sierra”), and all of its shareholders. The shareholders
of High Sierra were issued shares of the Gulf’s common stock on a one for one share basis in exchange for their shares of High Sierra’s
common stock. High Sierra became a wholly-owned subsidiary of Gulf in the business combination. The Share Exchange was treated as
a reverse merger and recapitalization, and as a result, the consolidated financial statements are
presented under successor entity reporting, with an inception date of August 6, 2018. Subsequently Gulf’s name was changed to High
Sierra Technologies, Inc.
High Sierra Technologies, Inc., the wholly-owned subsidiary,
was incorporated in the State of Nevada on August 6, 2018. It was formed with the intention that it would become the assignee, owner and
licensor of certain Intellectual Property (the “Intellectual Property”) that was, prior to assignment, the property of Vincent
C. Lombardi, Ph.D., who is an officer, director and co-founder of the subsidiary. The subsidiary was further formed with the goal
that it would continue to develop and expand its intellectual property portfolio with an emphasis on the recreational cannabis industry
as well as the industrial hemp industry.
Through its subsidiary, the Company is a start-up
that develops patents and other products used in the processing of cannabis, including industrial hemp, and will license these technologies
to companies in the industry. The Company will likely incur research and development expenses in the future and intends to develop
a policy regarding the same.
Basis of Presentation and Consolidation
The accompanying unaudited condensed financial statements
of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”),
including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), have been
condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information
and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements included
in our Annual Report on Form 10-K for the year ended December 31, 2021.
The Company consolidates its subsidiaries in accordance
with ASC 810, and specifically ASC 810-10-15-8 which states, "[t]he usual condition for a controlling financial interest is ownership
of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, or over 50%
of the outstanding voting shares of another entity is a condition pointing toward consolidation." All inter-company transactions
have been eliminated during consolidation.
Concentration of Risk
The Company places its cash and temporary cash investments
with established financial institutions. At times, such cash and investments may be in excess of the FDIC insurance limit.
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
September 30, 2022
Cash and Cash Equivalents
The Company considers all highly liquid investments
purchased with original maturities of three months or less to be cash equivalents.
Stock-based Compensation
The Company records stock-based compensation in accordance
with ASC 718, Compensation - Stock Based Compensation which requires the measurement and recognition of compensation expense based
on grant date fair values for all share-based awards made to third parties, employees and directors, including stock options.
ASC 718 requires companies to estimate the fair value
of share-based awards to employees and directors on the date of grant. The Company uses the Black-Scholes option-pricing model as its
method of determining fair value. This model is affected by the Company's stock price as well as assumptions regarding a number of subjective
variables. These subjective variables include but are not limited to the Company's expected stock price volatility over the term of the
awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected
to vest is recognized as an expense in the statement of operations over the requisite service period.
Long-lived Assets
Long-lived assets are stated at cost.
Maintenance and repairs are expensed as incurred. Depreciation is determined using the straight-line method over the estimated
useful lives of the assets, which is five years. Where an impairment of a property’s value is determined to be
other than temporary, impairment for the estimated potential loss is recorded to adjust the property to its net realizable
value.
When items of building or equipment are sold or retired,
the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of operations.
The Company does not have any long-lived tangible assets, which are considered impaired as of September 30, 2022.
The Company applies the provisions of ASC 360-10,
Property, Plant and Equipment, where applicable to all long-lived assets. ASC 360-10 addresses accounting and reporting for impairment
and disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance
with ASC 360-10. ASC 360-10 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts.
In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.
Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost
of disposal.
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
September 30, 2022
Intangible Assets
Goodwill and intangible assets are reviewed for
potential impairment in accordance with ASC 350, Intangibles - Goodwill and Other, whenever events or circumstances indicate
that their carrying amounts may not be recoverable. The Company had no such intangibles at September 30, 2022 or December 31,
2021, and recorded no impairment losses during the nine months ended September 30, 2022 or 2021. The Company currently writes off
all costs related to any intangible assets it has or is acquiring to current operating expenses.
Revenue Recognition
The Company applies ASC 606, Revenue from Contracts
with Customers. Under ASC 606, the Company will recognize revenue from the commercial sales of products, licensing agreements and
contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance
obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in
the contract; and (5) recognize revenue as each performance obligation is satisfied.
Advertising
Advertising costs are expensed as incurred. Advertising
expenses for the nine months ended September 30, 2022 and 2021 were $0.
Fair Value of Financial Instruments
The Company adopted ASC 820, Fair Value Measurements
and Disclosures, which provides a framework for measuring fair value under GAAP. 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. The standard also expands disclosures about
instruments measured at fair value and establishes a fair value hierarchy, which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be
used to measure fair value:
Level 1 — Quoted prices for identical assets
and liabilities in active markets;
Level 2 — Quoted prices for similar assets and
liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; and model-derived
valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 — Valuations derived from valuation
techniques in which one or more significant inputs or significant value drivers are unobservable.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the
best information available at the time the estimates are made; however actual results could differ materially from those estimates.
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
September 30, 2022
Emerging Growth Company Critical Accounting Policy Disclosure
The Company
qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth
company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new
or revised accounting standards. As an emerging grown company, the Company can delay the adoption of certain accounting standards
until those standards would otherwise apply to private companies. The Company has chosen to “opt out” of such
extended transition period, and as a result, the Company will comply with new or revised accounting standards on the relevant dates on
which adoption of such standards is required for non-emerging growth companies.
Income Taxes
The Company accounts for income taxes under ASC 740-10-30,
Income Taxes. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more
likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment
date.
The Company follows ASC 740-10-25, which
addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the
financial statements. Under ASC 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it
is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. ASC
740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim
periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income
tax benefits according to the provisions of ASC 740-10-25.
Loss Per Share
Net loss per common share is computed pursuant
to ASC 260-10-45, Earnings Per Share. Basic net loss per share is computed by dividing net loss by the weighted average number
of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted
average number of shares of common stock and potentially outstanding shares of common stock during each period, unless their effect
is anti-dilutive due to continuing losses. As of September 30, 2022, the Company had a total of 173,333
(40,000 from outstanding warrants and 133,333
from convertible notes payable) potentially dilutive shares outstanding. As of September 30, 2021, the Company had a total of
106,666 (40,000 from outstanding warrants and 66,666 from convertible notes payable) potentially dilutive shares outstanding.
Recent Accounting Pronouncements
We do not expect the adoption of recently issued accounting
pronouncements to have a significant impact on our results of operations or financial position.
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
September 30, 2022
NOTE 2 – Financial Condition and Going Concern
The Company’s financial statements have been
presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has sustained operating losses during the current year and may not achieve the level
of profitable operations to sustain its activities. These factors raise substantial doubt as to its ability to obtain debt and/or
equity financing and achieve profitable operations.
Management intends to raise additional operating funds
through equity and/or debt offerings. However, there can be no assurance management will be successful in its endeavors. Ultimately,
the Company will need to achieve profitable operations in order to continue as a going concern.
There are no assurances that the Company will be able
to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing
through either private placement, public offerings and/or bank financing necessary to support its working capital requirements. To
the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the
Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or
if available, will be on terms acceptable to the Company. If adequate working capital is not available to the Company, it may be
required to curtail its operations.
NOTE 3 – Property and Equipment
At September 30, 2022 and December 31, 2021, property and
equipment consisted of the following:
|
Useful Lives |
September 30,
2022 |
|
December
31,
2021 |
|
|
|
|
|
Equipment |
5 |
$ 176,750 |
|
$ 176,750 |
Furniture and lab equipment |
|
25,990 |
(1) |
- |
Leasehold improvements |
|
17,445 |
(1) |
- |
Less: accumulated depreciation |
|
(114,508) |
|
(86,405) |
|
|
$ 105,677 |
|
$ 90,345 |
Depreciation expense was $28,103
and $26,512 for the nine months ended September 30, 2022 and 2021, respectively.
| 1) | The new facility and equipment not put into service as of the date of this filing. |
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated
Financial Statements
September 30, 2022
NOTE 4 – Notes Payable
The Company’s debt consists of the following:
|
September
30, 2022 |
December
31,
2021 |
Notes payable, 12-16% interest, interest and principal due December 6, 2022 through August 12, 2023, unsecured. (1) |
$ 375,500 |
$ 375,500 |
|
|
|
Notes payable-Series 2 Senior Convertible Secured Promissory Notes, 8% interest, interest and principal due October 21, 2023 through February 16, 2025(2) |
200,000 |
100,000 |
|
|
|
Total due |
575,500 |
475,500 |
Current Portion |
375,500 |
375,500 |
Long-term portion |
$ 200,000 |
$ 100,000 |
| (1) | One note for $50,000 includes as an additional return on the debt a 3% interest
in the Gross Crop Yield from the Company’s hemp crop in McDermitt, NV. No accrual has been made for this interest due to failure
of crop and no proceeds received from a Gross Crop Yield. This note was purchased by another note holder and the additional return from
a Gross Crop Yield was eliminated. |
| (2) | The Series 2 Notes contain certain automatic and voluntary conversion provisions.
The Payee shall have the option to voluntarily convert this Note to shares of the common stock of the Company, at any time during the
Term of this Note, or any extension of the note. The shares so converted shall be at the price of the securities being currently offered
in the Offering, or $1.50. The Payee shall also be issued Warrants for the purchase of common stock in the Company with a value equal
to fifty percent (50%) of the face amount of this Note and effective as of the date of any Conversion to shares of common stock in the
Company. Such Warrants shall be priced at $1.50 per share during the three-year term of this Note or any extension of this Note. |
The Company has incurred interest expense of $49,808
and $43,244 during the nine months ended September 30, 2022 and 2021. The Company has interest accrued on the above notes in the amount of $100,305
and $75,361 at September 30, 2022 and December 31, 2021. The Company has paid $14,578 and $14,385 of the accrued interest in the nine months
ended September 30, 2022 and 2021.
NOTE 5 – Notes Payable-Related Party
The Company’s related party debt consists of
the following:
|
September
30, 2022 |
December 31,
2021 |
Notes payable, 12% interest, interest and principal due December 31, 2022, unsecured |
$ 13,306 |
$ 13,306 |
|
|
|
Total due |
13,306 |
13,306 |
Current Portion |
13,306 |
13,306 |
Long-term portion |
$ - |
$ - |
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated
Financial Statements
September 30, 2022
During the nine months ended September 30, 2021, the Company paid back $10,000
of the loans with the President of the Company.
The Company has incurred an interest expense of $1,194
and $1,749 during the nine months ended September 30, 2022 and 2021, respectively. The Company has interest accrued on the above notes in the
amount of $8,561 and $7,366 at September 30, 2022 and December 31, 2021.
NOTE
6 – Capital Changes
Offering of Securities
Common stock
We offered a maximum of 2,000,000
Shares of common stock (“Shares”) exclusively to “accredited investors”. There is no minimum number of
Shares to be sold pursuant to this offering other than the minimum purchase requirement. The offering price is $1.50
per Share ($3,000,000). This offering became effective February 4, 2020 and was amended February 1, 2021 to extend the date of the
offering through May 1, 2022. On January 14, 2022, the Company extended the date of the offering through October 1, 2022. This
offering has expired as of the date of this report.
The Company sold 60,002
shares of its common stock for gross proceeds of $90,000
under this offering during the nine months ended September 30, 2021.
During the nine months ended September 30, 2021, the Company issued 20,000
shares of its common stock for services valued at $30,000.
The Company sold 33,334 shares of its common stock
for gross proceeds of $50,000 under this offering during the nine months ended September 30, 2022.
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
September 30, 2022
Secured Convertible Notes
Additionally, we are offering up to $1,000,000 in
Series 2 Senior Convertible Secured Promissory Notes exclusively to “accredited investors”. The Notes will be in a minimum
face amount/increment of $10,000 for a term of three years and shall bear interest at a rate at eight Percent (8%) per annum. The Notes
will automatically convert to Common Stock of the Company if the Company has received $1,000,000 from its offering or any other source
or sources at a conversion price of $1.50 per share. The Notes can also be voluntarily converted by the holder. The Payee shall also be
issued Warrants for the purchase of common stock in the Company with a value equal to fifty percent (50%) of the face amount of the Note
and effective as of the date of any Conversion to shares of common stock in the Company. Such Warrants shall be priced at $1.50 per share
during the three-year term of the Note or any extension of the Note.
The Company sold $100,000 of these Notes during the
nine months ended September 30, 2022. The principal balance of convertible notes payable was $200,000 and $100,000 as of September 30, 2022 and December
31, 2021, respectively.
These securities have not been registered
with the United States Securities and Exchange Commission or with any state securities agency. These securities are being offered pursuant
to exemptions from the registration requirements of the Securities Act of 1933, as amended pursuant to Rule 506 of Regulation D, and from
the registration requirements of the securities laws of the states in which the securities will be offered. The securities are subject
to certain restrictions on resale and may be resold only as permitted under applicable federal and state securities laws. The date of
this offering was extended on January 14, 2022 to July 31, 2022. The Company has decided not to extend this offering any further.
Warrants
Under an Investment Banking Agreement, the Company
issued 50,000 warrants. The exercise price per share of the Common Stock under this Warrant is $.01 and is fully vested on the Issue Date
and is non-cancellable nor non-redeemable.
Common Stock Purchase Warrants
As of September 30, 2022, the following common stock purchase
warrants were outstanding:
|
|
Warrants |
|
|
|
Weighted Average Exercise Price |
|
Outstanding – December 31, 2021 |
|
|
40,000 |
|
|
|
$ |
.01 |
|
Granted |
|
|
- |
|
|
|
|
- |
|
Canceled/forfeited |
|
|
- |
|
|
|
|
- |
|
Exercised |
|
|
- |
|
|
|
|
.01 |
|
Outstanding – September 30, 2022 |
|
|
40,000 |
|
|
|
$ |
.01 |
|
|
|
|
|
|
|
|
|
|
|
(1) The Company granted 50,000
common stock purchase warrants in December 2020 to exercise at a purchase price of $.01.
During the nine months ended September 30, 2021, 10,000
of the purchase warrants were exercised for total proceeds of $100.
HIGH SIERRA TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated Financial
Statements
September 30, 2022
The fair value of the outstanding common stock purchase warrants was calculated using
the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):
|
|
Measurement date |
|
Dividend yield |
|
|
0% |
|
Expected volatility |
|
97.90~172.75% |
|
Risk-free interest rate |
|
0.16~1.72% |
|
Expected life (years) |
|
2.71~5.00 |
|
Stock Price |
|
|
$1.50 |
|
Exercise Price |
|
|
$0.01 |
|
NOTE 7 – Contingencies, Commitments, Legal Matters and Consulting
Agreements
Management of the Company has conducted a diligent
search and concluded that there were no commitments, contingencies, or legal matters pending at the balance sheet dates, other than what
has been disclosed below. The Company has cancelled one Consulting Agreement for the marketing of its securities. Additionally, the Company
has terminated its Investment Banking Agreement on November 10, 2021.
The Company has entered into an agreement to lease
a small commercial space in Reno to be used as a Research and Development Facility. It is 1,475 square feet and the monthly rent is $1,254
plus $203 in estimated CAM charges. The lease is for one year and has options for two additional years. The Company elected to exclude
from its balance sheet recognition of right of use assets and lease liabilities on leases having a term of 12 months or less (“short-term
leases”). Lease expense is recognized on a straight-line basis over the lease term.
The Lease Agreement was amended and the
Amendment was signed on January 30, 2022 and the Lease Amendment took effect on February 1, 2022.
The Company has paid $13,115 of rent expense during
the nine months ended September 30, 2022. The Company has expensed as repairs $2,984 due to the term of the original lease being only for a
one year period.
NOTE 8 – Subsequent Events
In accordance with ASC 855-10, the Company has analyzed
its operations subsequent to June 30, 2022 through the date these financial statements were issued and has determined that it has no material
subsequent events to disclose in these financial statements.
On October 25, 2022, the Company sold 20,000
shares of stock to an individual investor pursuant to a Subscription Agreement dated October 25, 2022.
On October 27, 2022, the Company sold 10,000
shares of stock to an individual investor pursuant to a Subscription Agreement dated October 27, 2022.
On October 27, 2022, an individual loaned the
Company the sum of $10,000.00 pursuant to a Promissory Note dated October 27, 2022 which bears interest at a
rate of 12% per annum and which is due on April 27, 2023.