SEC Info - Hempacco Co., Inc. - ‘10-Q’ for 9/30/23

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		Alternative Formats (Word, et al.) Condensed Consolidated Balance Sheets at September 30, 2023, and December 31, 2022 (unaudited) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023, and 2022 (unaudited) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023, and 2022 (unaudited) Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2023, and 2022 (unaudited) Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Information Financial Statements Item 1 Item 2 Item 3 Item 4 Item 5 Item 6 Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Notes to Condensed Consolidated Financial Statements (unaudited) Other Information Part I -- Financial Information Part II -- Other Information Quantitative and Qualitative Disclosures about Market Risk Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds
1	1st Page – Filing Submission
"	Table of Contents
"	Part I -- Financial Information
"	Item 1
"	Financial Statements
"	Condensed Consolidated Balance Sheets at September 30, 2023, and December 31, 2022 (unaudited)
"	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023, and 2022 (unaudited)
"	Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2023, and 2022 (unaudited)
"	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023, and 2022 (unaudited)
"	Notes to Condensed Consolidated Financial Statements (unaudited)
"	Item 2
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 3
"	Quantitative and Qualitative Disclosures about Market Risk
"	Item 4
"	Controls and Procedures
"	Part II -- Other Information
"	Legal Proceedings
"	Unregistered Sales of Equity Securities and Use of Proceeds
"	Defaults Upon Senior Securities
"	Mine Safety Disclosures
"	Item 5
"	Item 6
"	Exhibits

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

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

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 during the preceding 12 months (or 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. i Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes i ☐ No ☒

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

The Joint Venture was created to market and sell hemp smokables products. Pursuant to the Operating Agreement, the Joint Venture will be owned i 50% each by the Company and Alfalfa. The Company is required to fund $ i 10,000 to the Joint Venture, manufacture product, and provide accounting, inventory management, staff training, and trade show and marketing services.

In connection with the Operating Agreement, effective January 24, 2023, HPDG, LLC entered into the Services Agreement with Spanky’s Clothing, Inc., and Calvin Broadus, Jr. p/k/a “Snoop Dogg” (collectively “Talent”), pursuant to which Talent will endorse the HDPG, LLC’s smokable hemp products and serve as a spokesperson for the products in the United States. HDPG, LLC shall (i) i pay Talent’s legal expenses of $7,500 in connection with entering into the Operating Agreement and Services Agreement; (ii) cause the Company to issue to Talent a fully vested warrant to acquire 450,000 shares of Company common stock at a strike price of $1.00 per share (the “Talent Warrants”); (iii) cause the Company to issue to Talent’s designee a fully vested warrant to acquire 50,000 shares of the Company’s common stock at a strike price of $1.00 per share (the “Talent Designee Warrants”); and (iv) pay Talent royalties of 10% of HDPG, LLC’s gross revenue, with minimum annual royalty payments of $450,000 by the end of the first two years of the initial term of the Services Agreement, an additional $600,000 by the end of the third year of the initial term, and an additional $1,200,000 by the end of the fourth year of the initial term.

As of September 30, 2023, the company has accrued $ i 54,656 of the minimum annual royalty payment of $ i 450,000 which will be due and payable on i April 10, 2025.On or about January 30, 2023, the Company issued the Talent Warrants and Talent Designee Warrants as required by the Services Agreement (See Note 9).

On February 8, 2023, the Company signed, as guarantor, a lease agreement between US Tobacco de Mexico S.A. de C.V. (“US Tobacco de Mexico,” a related party), which is 100% owned by UST Mexico, Inc. (“UST Mexico,” a related party), and Grupo Fimher, S. de R.I. de C.V. (“Fimher”) for the lease of i 43,000 sf of manufacturing space located in Tijuana, Mexico. The term of the lease is three years, commencing on March 1, 2023. The first year’s rent payment is $ i 18,622 per month, with i 3.5% inflation increases on the first and second anniversaries of the lease. The estimated total contingent liability at lease inception will be $ i 694,159. Hempacco Co., Inc. and Hempacco Paper Co., Inc. are sub-tenants of US Tobacco de Mexico and will manufacture products at this facility. A liability for the guarantee has not been recorded as of September 30, 2023, as the amount is not probable.

On February 8, 2023, the Company’s subsidiary, Hempacco Paper Co., Inc., leased the above-referenced space for an initial period of one year for a monthly rental of $ i 2,500. Hempacco Paper will use this facility for the manufacture of all its paper products.

Effective February 1, 2023, the Company through its representative in Warsaw, Poland, filed the equivalent of Articles of Incorporation with the court to create Hempacco Europe Sp.z.o.o. (an LLC equivalent), the corporate entity through which the Company will distribute its smokable products throughout the EU. Ownership of the entity rests 99% with the Company, and 1% with Jakub Duda, an individual.

On February 9, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Boustead Securities, LLC, and EF Hutton, a division of Benchmark Investments, LLC, as representatives (the “Representatives”) of the underwriters (the “Underwriters”) in connection with the public offering of additional shares of common stock of the Company. The Underwriting Agreement provides for the offer and sale of i 4,200,000 shares of the Company’s common stock, par value $ i 0.001 (the “Common Stock”) at a price to the public of $ i 1.50 per share (the “Offering”). In connection therewith, the Company agreed to issue to the Representatives and/or their designees i 338,100 warrants to purchase shares of Common Stock, exercisable from February 14, 2023, through February 10, 2028, at $1.50 per share subject to adjustment as provided therein (the “Representatives’ Warrants”, see Note 9). The Company also granted the Underwriters an option (the “Option”) for a period of 45 days to purchase up to an additional i 630,000 shares of Common Stock. The Offering is being made pursuant to a Registration Statement on Form S-1 (File No. 333-269566) (the “Registration Statement”), which was declared effective by the Securities and Exchange Commission on February 9, 2023.

The Underwriting Agreement includes customary representations, warranties, and covenants by the Company. It also provides that the Company will indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”), or contribute to payments the Underwriter may be required to make because of these liabilities.

On April 6, 2023, i Hempacco Co. received a letter notification from the Nasdaq Capital Market (“Nasdaq”) advising of its non-compliance with Nasdaq listing rules because Hempacco had failed to maintain its stock price at above $1.00 for a period of 30-days. The Nasdaq rules provide for a period of 180 days in which Hempacco must restore compliance. This period expires on October 3, 2023.

On April 20, 2023, Hempacco received a further letter notification from Nasdaq advising of its non-compliance with Nasdaq listing rules because Hempacco had failed to file its Annual Report on Form 10-K (for the 2022 fiscal year) with the Securities and Exchange Commission by the required due date. The deficiency was cured by Hempacco by the filing of the Annual Report on Form 10-K on May 15, 2023.

On May 23, 2023, Hempacco received a letter notification from Nasdaq advising of its non-compliance with Nasdaq listing rules because Hempacco had failed to file its Quarterly Report on Form 10-Q (for the quarter ended March 31, 2023) with the Securities and Exchange Commission by the required due date. The deficiency was cured by the filing of the Quarterly Report on Form 10-Q on July 5, 2023.

On October 2, 2023, the Company officially responded to Nasdaq requesting an additional six-months in which to bring its share price back over the $1,00 minimum price required by Nasdaq rules. The Company also confirmed its willingness to implement a reverse stock split in order to achieve its goal should it not be able to increase its share price through organic growth of the business.

On May 7, 2023, Hempacco entered into a joint venture agreement with Nasir Ghesani, a New York distribution company doing business as “Reliable Distributor,” with each party to own i 50% of the joint venture and working capital needs to be paid by Hempacco. The joint venture is intended to enter new master distributor agreements for Hempacco smokable products to be placed in New York area convenience stores, gas stations and specialty smoke shops. On May 16, 2023. the Company formed a new Nevada Corporation, RD-HPCO, Inc. as the joint venture entity between the Company and Nasir Ghesani.

On July 10, 2023, the Company signed a Purchase Agreement and an accompanying Assignment Agreement with Viva Veritas LLC (“Veritas”) (successor to Curated Nutra) whereby Veritas agreed to assign its i 50% interest in Green Star labs, Inc. (“GSL”) to Hempacco together with additional equipment lines related to bottling and gummy production.

Green Globe International, Inc. Hempacco’s parent company owns a i 50% interest and the management control of Green Star Labs, Inc. through the existing joint venture agreement and will continue to fully consolidated GSL under the guidance of ASC 810-10. Hempacco, having a significant interest in GSL will account for its investment under the equity method following the guidelines of ASC 323. The company will record its share of earnings or losses after elimination of intercompany gains and losses, as a single amount on its income statement.

The total purchase price to be paid by the Company is $ i 3,500,000. i The preliminary purchase price has been allocated as to $1,776,000 for the interest in Green Star Labs, and $1,724,000 for the equipment. $3,200,000 of the $3,500,000 total purchase price was paid by the Company’s issuance of a convertible promissory note to the seller, which became effective on July 10, 2023. As noted above, Hempacco had already paid the sum of $300,000 to Curated Nutra as a deposit for the additional equipment, which represented the cash portion of the total $3,500,000 purchase price and was credited against the total purchase price by the seller, such that the total $3,500,000 purchase price was deemed paid after issuance of the $3,200,000 promissory note to the seller.

The promissory note carries a i 10% interest rate and matures twelve months from the issue date. The holder has the right, after 6-months after the issue date, to convert all or part of the then outstanding principal balance of the note into common stock of the issuer, provided, however, that the holder may not convert the note into Company common stock to the extent that such conversion would result in the holder’s beneficial ownership of the Company common stock being in excess of 4.99% of the Company’s issued and outstanding common stock. Additionally, the note contains a maximum issuance limitation such that the note will no longer be convertible after the Company has issued an aggregate of i 5,572,000 shares upon conversion of the Note.

The applicable conversion price shall be 95.238% of the average closing price of the Company’s common stock during the three days immediately preceding the conversion.

In accordance with ASC 323-10-50-3 the following additional disclosures are made with regard to this equity investment:

A review of the preliminary financial statements of Green Star labs, Inc. resulted in the Company reducing its equity investment in GSL by $ i 28,619, being i 50% of the preliminary net losses of GSL for the three months ended September 30, 2023. There will potentially be further adjustments needed in the fourth quarter of 2023.

The non-controlling interests of these ventures have been disclosed on the consolidated balance sheet and income statement.

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”), which contemplates the Company’s continuation as a going concern. The Company incurred a net loss of $ i 6,251,412 during the nine months ended September 30, 2023, and has an accumulated deficit of $ i 16,640,974 as of September 30, 2023. During the nine months ended September 30, 2023, the Company’s net cash used in operations was $ i 4,972,225.

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. Due to uncertainties related to these matters, there exists a substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. If we are not able to successfully execute our future operating plans, our financial condition and results of operation may be materially adversely affected, and we may not be able to continue as a going concern.

Joint Venture entities where the company owns at least 51% and controls the accounting and administration of the entities will be accounted for under ASC 810-10 which will allow full consolidation of the assets and liabilities into the Company’s balance sheet, with non-controlling interests being calculated and disclosed in the balance sheet and operating statement of the Company. Joint Venture entities where the company owns less than 51% are evaluated for treatment as variable interest entities. The Company may provide accounting and administration for these entities, may have board of director control, and may provide the majority of funding for these entities. Any entities not falling within this criterion will be accounted for under ASC 323-30. These consolidated financial statements include the operating results and the assets of the nine currently operating, joint venture entities, all of which have been deemed variable interest entities for the period ended September 30, 2023.

The following are the expected lease payments as of September 30, 2023, including the total amount of imputed interest/present value discount.

Rent expenses, on the straight-line basis, were $ i 32,340 and $ i 97,020 during the three and nine months ended September 30, 2023, respectively, and $ i 32,340 and $ i 97,020 during the three and nine months ended September 30, 2022, respectively.

See Note 1 for information on a new lease between Hempacco Paper Co., Inc., and UST Mexico.

The Company’s note payable to Miguel Cambero, including accrued interest, was converted into i 332,398 shares of common stock on August 9, 2023.The conversion terms of the promissory note date May 6, 2021, called for conversion of the principal and accrued interest $ i 117,907 into common shares of Hempacco at a 25% discount to the weighted average closing price for the 30-days prior to the conversion date, which calculation produced a conversion rate of $ i 0.3547. The additional interest expense due to the discounted conversion rate was $ i 15,052.

On or about March 18, 2022, the Company issued a promissory note to a related party, Jerry Halamuda for $ i 50,000. The note carries an interest rate of i 8% and the initial maturity date was September 18, 2022. The note is secured by i 50,000 common shares of the Company. On September 18, 2022, the Company and the investor signed Amendment No. 1 to the promissory note extending the maturity date to March 18, 2023. Subsequently, additional amendments were executed which extended the maturity date to i June 18, 2023, and then to September 18, 2023. The $ i 50,000 principal balance of the note was repaid on August 1, 2023. Accrued interest will be repaid in cash at a later date.

The Black-Scholes model uses the following variables to calculate the value of an option or warrant for the nine months ended September 30, 2023, and the twelve months ended December 31, 2022:

The Company sells hemp products to UST Mexico and provides manufacturing consulting services. The value of goods and services provided to UST Mexico, which are recorded as revenue, was $ i 8,800 and $ i 15,359, respectively, for the three and nine months ended September 30, 2023, and $ i 16,840 and $ i 31,840 for the three and nine months ended September 30, 2022. UST Mexico is a manufacturer of tobacco cigarettes in Mexico and provides consulting services and parts for the Company’s equipment. The value of goods and services provided by UST Mexico was $ i 190,807 and $ i 428,753, respectively, for the three and nine months ended September 30, 2023, and $ i 57,181 and $ i 147,184, respectively, for the three and nine months ended September 30, 2022. As of September 30, 2023, the Company prepaid expenses of $ i 616,000 for products and services related to Hempacco Paper Company that are covered by open purchase orders. Subsequent to September 30, 2023, the Company advanced $ i 66,000 to UST Mexico and received $ i 62,600 from UST Mexico.

As of September 30, 2023, UST Mexico owned i 947,200,000 shares of common stock of Green Globe International, Inc. UST Mexico is a related party by virtue of the CEO’s i 25% interest in UST Mexico.

On or about March 1, 2022, the Company entered into a mutual line of credit agreement with its parent company, Green Globe International, Inc. (“GGII”). The purpose of the credit agreement is to facilitate short-term borrowing needs on an interest-free basis, with advances being subject to repayment within 90 days with a maximum of $ i 500,000 allowed to be outstanding within any 90-day period. On December 1, 2022, the maximum amount was increased to $ i 1,500,000 and on September 30, 2023, the maximum loan amount was increased to $ i 1,800,000.

During 2023 and 2022, the Company made short term cash advances directly to Green Star Labs, Inc., a subsidiary joint venture of the Company’s parent, Green Globe International, Inc. On July 10, 2023, the Company acquired a i 50% equity interest in Green Star Labs, Inc. As of September 30, 2023, and December 31, 2022, the balance owed by Green Star Labs, Inc. to the Company was $ i 1,232,009 and $ i 605,994, respectively. The Company concluded that collection of a portion of the loan balance may not be recoverable and therefore a partial impairment allowance of $ i 945,835 was created as of September 30, 2023.

During the nine-month period ended September 30, 2023, the Company made payments of approximately $ i 0 (net of repayments) as pre-payment against purchase orders for new products primarily related to the Alfalfa Holdings LLC joint venture (“Snoop Dogg”). During the nine months ended September 30, 2023, the Company received approximately $ i 409,342 in inventory from Green Star Labs, Inc. In the three months ended September 30, 2023, Green Star Labs shipped i $416,551 of product to the Company as a form of repayment of the related party loans. Subsequent to September 30, 2023, the Company made additional loans of $230,500 to Green Star Labs, Inc. The value of all shipments of product by GSL to Hempacco will first be credited against the loans payable to Hempacco.

On or about July 15, 2022, the Company acquired from Nery’s Logistics, Inc., an entity that is owned by a significant shareholder (greater than 10%) of the Company’s parent, two cigarette production equipment lines together with multiple cigarette and cigar-related trademarks. The total acquisition price was deemed to be $ i 4,000,000 to be paid solely by the issuance of i 2,000,000 common shares of the Company. $ i 3,400,000 was initially allocated to the value of the equipment, and the balance of $ i 600,000 was allocated to intangible assets. A subsequent appraisal, performed in Mexico, valued the equipment at $ i 2,278,337. No value was allocated to the trademarks. During the year ended December 31, 2022, the Company recorded a one-time charge of $ i 1,121,663 to its statement of operations account in order to reduce the asset costs to net realizable value.

On July 15, 2022, the Company also settled two vendor accounts payable balances totaling $ i 100,000 by the issuance of i 50,000 common shares of the Company.

On September 1, 2022, the Company sold i 1,000,000 shares of Hempacco common stock at $ i 6.00 per share to its underwriter in the Company’s IPO, and to Boustead Securities, LLC (“Boustead”) pursuant to the underwriting agreement, in connection with the IPO (the “Underwriting Agreement”). After deducting the underwriting commission and expenses, the Company received net proceeds of $ i 5,390,753.

On September 6, 2022, Boustead exercised its warrants to purchase the Company’s common stock issued to it in connection with IPO, pursuant to paragraph 1.3.1 of the Underwriting Agreement. Boustead elected to convert its right to purchase i 70,000 common shares at $9.00 per share using the cashless basis formula in the warrants. The exercise resulted in the issuance of i 54,928 shares of common stock to Boustead. The market price of these shares on the issue date was $ i 4.74 per share, resulting in an increase of $ i 55 in common stock and an increase in additional paid in capital of $ i 260,303 as well as additional underwriting expenses of $ i 260,358, which was a decrease to additional paid in capital.

On September 17, 2022, the Company entered a Marketing Services Agreement with North Equities Corp. of Toronto, Canada, effective as of September 19, 2022, for an initial period of 6-months. Compensation for the initial period will be the issuance of i 41,494 restricted shares of the Company’s common stock under SEC Rule 144. This amount represents a market value of approximately $ i 100,000 as of the effective date. The shares were issued to North Equities Corp. of Toronto on October 4, 2022. The Company will also reimburse North Equities for all direct, pre-approved and reasonable expenses incurred in performing the marketing services.

On October 12, 2022, the Company entered a Broadcasting and Billboard Agreement with FMW Media Works LLC (“FMW”) of Hauppauge, New York, for a period of three months. FMW will produce an informative TV show which will discuss the Company and its business. Total compensation will be made through the issuance of i 63,292 restricted common shares of Hempacco under SEC Rule 144. The market value of the issued shares was $ i 148,103 and was expensed in full in 2022.

On February 14, 2023, the Company sold i 4,830,000 shares of Hempacco common stock at $ i 1.50 per share to its underwriters in the Company’s second public offering, and to Boustead Securities, LLC (“Boustead”) and EF Hutton pursuant to the underwriting agreement, in connection with the offering (the “Underwriting Agreement”). After deducting the underwriting commission and expenses, the Company received net proceeds of $ i 6,610,400. Further details can be found in Note 1 above.

On May 16, 2023, i 62,223 shares of the Company’s common stock were issued to Ernest Sparks for conversion of his promissory note and accrued interest (see Note 8 above).

On August 9, 2023, i 332,398 shares of the Company’s common stock were issued to Miguel Cambero for conversion of his promissory note and accrued interest (see Note 8 above).

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act of 1995. Statements that are not purely historical may be forward-looking. For example, statements in this Annual Report regarding our plans, strategy and focus areas are forward-looking statements. You can identify some forward-looking statements by the use of words such as “believe,” “anticipate,” “expect,” “intend,” “goal,” “plan,” and similar expressions. Forward-looking statements involve inherent risks and uncertainties regarding events, conditions and financial trends that may affect our future plans of operation, business strategy, results of operations and financial position. A number of important factors could cause actual results to differ materially from those included within or contemplated by such forward-looking 1supply chain disruption), the ongoing war in Ukraine and its impact on the global economy, our history of losses since inception, our dependence on a limited number of customers for a significant portion of our revenue, the demand for hemp smokables products, our dependence on key members of our management and development team, and our ability to generate and/or obtain adequate capital to fund future operations. For a discussion of these and other factors that could cause actual results to differ from those contemplated in the forward-looking statements, please see the discussion under “Risk Factors” in our other publicly available filings with the Securities and Exchange Commission. Forward-looking statements reflect our analysis only as of the date of this Quarterly Report on Form 10-Q. Because actual events or results may differ materially from those discussed in or implied by forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statement. We do not undertake responsibility to update or revise any of these factors or to announce publicly any revision to forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q.

Hempacco Co., Inc., collectively with its subsidiaries, is referred to in this Form 10-Q as “Hempacco”, “we”, “us”, “our”, “registrant”, or “Company”.

We are focused on Disrupting Tobacco™ by manufacturing and selling nicotine-free and tobacco-free alternatives to traditional cigarettes. We utilize a proprietary, patented spraying technology for terpene infusion and patent-pending flavored filter infusion technology to manufacture hemp- and herb-based smokable alternatives.

We have conducted research and development in the smokables space and are engaged in the manufacturing and sale of smokable hemp and herb products, including The Real Stuff™ Hemp Smokables. Our operational segments include private label manufacturing and sales, intellectual property licensing, and the development and sales of inhouse brands using patented counter displays. Our private label customers include well-known and established companies in the cannabis and tobacco-alternatives industries, and we currently own approximately 580 kiosk vending machines which we plan to refurbish and use to distribute our products in a wider fashion under our HempBox Vending brand.

Our hemp cigarette production facility, located in San Diego, California, has the capacity to produce up to 30 million cigarettes monthly. From our facility, we can small-to-large quantities of product—from single displays of product to targeted retail locations to truckloads of product to private label customers—with in-house processing, packing, and shipping capabilities.

On July 10, 2023, the Company signed a Purchase Agreement and an accompanying Assignment Agreement with Viva Veritas LLC (“Veritas”) (successor to Curated Nutra) whereby Veritas agreed to assign its 50% interest in Green Star labs, Inc. to Hempacco together with additional equipment lines related to bottling and gummy production.

The total purchase price to be paid by the Company is $3,500,000. The preliminary purchase price has been allocated as to $1,776,000 for the interest in Green Star Labs, and $1,724,000 for the equipment. $3,200,000 of the $3,500,000 total purchase price was paid by the Company’s issuance of a convertible promissory note to the seller, which became effective on July 10, 2023. As noted previously (see Note 1), Hempacco had already paid the sum of $300,000 to Curated Nutra for the purchase of additional equipment, which represented the cash portion of the total $3,500,000 purchase price and was credited against the total purchase price by the seller, such that the total $3,500,000 purchase price was deemed paid after issuance of the $3,200,000 promissory note to the seller.

The note carries a conversion price of 95.238% of the average closing price of the Company’s common stock during the three days immediately preceding the conversion.

This acquisition will further our plans to increase our product line to include a full range of nutraceutical products which will be produced at the 50,000-sf certified GMP facility that Green Star Labs, Inc. occupies in San Diego.

Green Star Labs, Inc. is managed by, and co-owned by our parent company, Green Globe International, Inc.

In the coming months the Company, in collaboration with its joint venture partner Snoop Dogg will manufacture and distribute many new product lines containing hemp derived CBD, starting with the “Dogg lbs” brand of gummies.

On November 6, 2023, the Company signed two agreements with Ispire North America, LLC whereby the Company, under license, will manufacture and distribute vaporizer products under the celebrity brands the Company controls through its various joint ventures. See Note 13 of the financial statements for more detailed information on this new product line.

For the three and nine months ended September 30, 2023, and 2022, revenues were as follows:

The decrease in revenues during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was a result of a temporary decline in orders from one of our largest customers due to a legal dispute, as well as the passing of AB 45 by the State of California, which banned the sale of smokable hemp products in California until such time as the legislature decided on a tax policy with regard to these products.

However, the increase in revenues of 124% for the three months ended September 30, 2023, as compared to September 30, 2022, was primarily a result of our first shipments of CBD gummies under the “Dogg lbs” brand, a product of our joint venture with Snoop Dogg as well as increasing sales by Hempacco Paper Co., Inc.

For the three and nine months ended September 30, 2023, and 2022, cost of goods sold were as follows:

The increase in relative total cost of goods sold in the three months ended September 30, 2023, is primarily due to increased production overhead expenses associated with set-up of new product production lines, compared to the same period in 2022.

The decrease in relative total cost of goods sold in the nine months ended September 30, 2023, is primarily due to decreasing sales and production in the nine months ended September 30, 2023, as compared to the same period in 2022.

For the three and nine months ended September 30, 2023, and 2022, operating expenses were as follows:

The increase in general and administrative expenses during the three and nine months ended September 30, 2023, compared to the same periods in 2022 was mainly due to accounting, legal and insurance costs related to Nasdaq/SEC compliance expenses plus additional staffing for improvement of internal systems and controls.

During the three and nine months ended September 30, 2023, related party general and administrative expenses consisted of senior management consulting fees, write offs of related party receivables and rent payable on our premises leased in San Diego, California. During the three and nine months ended September 30, 2022, related party general and administrative expenses consisted of related party fees and rent. The landlord, Primus Logistics, is 90%-owned by Sandro Piancone, the Company’s CEO.

The Company’s sales and marketing expenses decreased during the nine months ended September 30, 2023, compared to sales and marketing expenses during the nine months ended September 30, 2022, due to scaling back our expansion efforts in the current year compared to the same period of the prior year. Sales and Marketing expenses increased during the three months ended September 30, 2023, due to the promotional activities related to new joint venture product launches and trade shows.

Related party sales and marketing expenses for the three and nine months ended September 30, 2023, include costs of services provided by the CMO.

During the three months and nine months ended September 30, 2023, the Company recorded an allowance for the potential non-payment of certain inter-company receivables in the amount of $166,267 and $1,487,042, compared to an allowance of $0 and $0, respectively, during the three and nine months ended September 30, 2022.

The Company had net losses of $2,261,508 and $6,251,412, respectively, during the three and nine months ended September 30, 2023, compared to net losses of $1,049,473 and $2,024,039, respectively, during the three and nine months ended September 30, 2022. The increase in net loss for the three months ended September 30, 2023, was due primarily to increases in operations of the Company that resulted in additional overhead expenses. The increase in net loss for the nine months ended September 30, 2023, was due primarily to significant additional one-off expenses incurred in connection with the provision for impairment of inter-company loans receivable.

We had cash used in operating activities of $4,972,225 in the nine months ended September 30, 2023, as compared to cash used in operating activities of $3,217,684 during the nine months ended September 30, 2022. The increase in cash used in operating activities of $1,754,541 for the nine months ended September 30, 2023, is primarily attributable to the increase in net operating loss of $2,688,705 (after deduction of reserve for related party loans of $1,493,935) as well as increases attributable to prepaid expenses and inventory.

We had cash used in investing activities of $163,184 for the nine months ended September 30, 2023, as compared to cash used in investing activities of $282,007 for the nine months ended September 30, 2022. The increase of $1,605,177 was primarily due to the purchase of plant and equipment of $163,184 during the nine months ended September 30, 2023.

We had cash provided by financing activities of $4,604,154 in the nine months ended September 30, 2023, as compared to cash provided by financing activities of $5,539,908 in the comparative period in 2022, with this net decrease of $935,754 was primarily due to an increase of $777,000 from the sale of common stock, offset by a $300,000 acquisition investment in Green Star Labs, Inc., a net outflow of $50,000 from a shoirt-term promissory note, and loans to related parties of $1,750,649 and zero payments of equipment loans compared to $300,000 in the nine months ended September 30, 2022.

We anticipate that our cash needs for the next twelve months for working capital and capital expenditures will be approximately $3,000,000. As of September 30, 2023, we had $17,076 in cash, and we believe that our current cash and cash flow from operations will not be sufficient to meet anticipated cash needs for the next twelve months for working capital and capital expenditures. We will likely also require additional cash resources due to possible changed business conditions or other future developments. We plan to seek to sell additional equity securities to generate additional cash to continue operations. We may also sell debt securities to generate additional cash. The sale of equity securities, or of debt securities that are convertible into our equity, could result in additional dilution to our shareholders. The incurrence of additional indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including the following: investors’ perception of, and demand for, securities of cigarette and hemp companies; conditions of the U.S. and other capital markets in which we may seek to raise funds; future results of operations, financial condition and cash flow. Therefore, our management cannot assure that financing will be available in amounts or on terms acceptable to us, or if at all. Any failure by us to raise additional funds on terms favorable to us could have a material adverse effect on our liquidity and financial condition.

On February 11, 2023, the Company sold an additional 4,830,000 shares of common stock in a registered underwritten offering at a price to the public of $1.50 per share. Gross offering proceeds of $7,245,000 were reduced by commission and offering costs of $634,600, with net proceeds of $6,610,400 being received by the Company on February 11, 2023.

At the time of this writing, the Company had reached an agreement with a consortium of Convertible Promissory Note lenders to provide a commitment to purchase up to $3,000,000 of the Company’s common shares. Advances will be made in tranches, each subject to a Securities Purchase Agreement (“SPA”). To date the Company has signed promissory Notes in the aggregate amount of $1,112,778 and received net proceeds of $906,760 after deduction of Original Issuer Discount and legal expenses. Full details of the terms of this financing can be found in Note 13 of the Financial Statements above.

The Securities Purchase Agreements also (i) require the Company to satisfy the shareholder approval requirements of Nasdaq Listing Rule 5635, which currently would prohibit the issuance of more than 5,782,332 shares of Company common stock (the “Exchange Cap”) until shareholder approval has been received to issue shares in excess of the Exchange Cap under the Financing Transactions and such approval has become effective pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended, and (iii) require the Company to file a preliminary information statement on Schedule 14C in connection with the issuance of shares in excess of Exchange Cap under the Financing Transactions with the U.S. Securities and Exchange Commission (the “SEC”) within 10 calendar days of closing, and file a definitive information statement as soon as permissible but no later than December 1, 2023.

In the event we are not successful in reaching our sustained revenue targets, we anticipate that depending on market conditions and our plan of operations, we will likely incur, for the next few months, continued operating losses. We base this expectation, in part, on the fact that we may not be able to generate enough gross profit to cover our operating expenses. Consequently, there remains substantial doubt about the Company’s ability to continue as a going concern. We are subject to many factors which could detrimentally affect us. Many of these risk factors are outside management’s control, including demand for our products, our ability to hire and retain talented and skilled employees and service providers, as well as other factors. The accompanying financial statements have been prepared on a going concern basis, which assumes the Company will be able to realize its assets and settle its liabilities in the normal course of business for the foreseeable future.

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

Our financial statements are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, 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.

Our significant accounting policies are summarized in Note 2 to our financial statements. While these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.

From time to time, new accounting pronouncements are issued by FASB that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide the information under this item.

The Company has not yet, despite on-going improvement programs, achieved the level of operational effectiveness such that controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified by the Commission’s rules and forms. Disclosure controls and procedures would include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of management, including the Company’s Chief Executive Officer, the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2023, have been evaluated, and, based upon this evaluation, the Company’s Chief Executive Officer has concluded that these controls and procedures are not yet sufficiently effective in providing reasonable assurance of compliance.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management is committed to remedying this problem through a continuous process of systems and procedures analysis, together with an on-going evaluation of the training, skills and knowledge of accounting staff to ensure that the staff member is fully qualified to handle the assigned tasks. In addition, each team member will be made aware of the importance of their role in ensuring that the systems and procedures achieve the desired effect and how any errors or omissions affect the whole accounting period closing and the preparation of GAAP financial statements in accordance with the SEC rules and regulations.

During the nine-month period ended September 30, 2023, the Company hired additional accounting personnel, and designed and maintained a manual of policies and procedures with a view to ensuring proper procedures were executed and that transactions were regularly reviewed by management. During the audit process it became apparent that there are still inherent weaknesses in our systems and procedures. Special attention will be given to improving these areas prior to the closing of our fiscal year end.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

From time to time, the Company may be involved in litigation relating to claims arising out of commercial operations in the normal course of business. As of September 30, 2023, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations except as set forth below.

On or about October 7, 2022, the Company accepted service in a suit filed in the United States District Court for the Southern District of New York by Long Side Ventures LLC, R & T Sports Marketing Inc., Sierra Trading Corp., Taconic Group LLC, KBW Holdings LLC, Robert Huebsch and Ann E. Huebsch, Joseph Camberato, Joseph Crook, Sachin Jamdar, Michael Matilsky, Gerard Scollan, and Daisy Arnold (collectively “Plaintiffs”) against Hempacco Co., Inc., Mexico Franchise Opportunity Fund, LP, Sandro Piancone, Jorge Olson, Neville Pearson, Stuart Titus, Jerry Halamuda, Retail Automated Concepts, Inc. f/k/a Vidbox Mexico Inc., and Vidbox Mexico S.A. De C.V. (collectively “Defendants”) (Case No. 1:22-cv-08152 (ALC)), alleging that (i) Plaintiffs previously received a judgment (the “Judgment”) in a New York state court action (the “State Action”) against Retail Automated Concepts, Inc. (“RAC”) and Vidbox Mexico S.A. De C.V. (“Vidbox Mexico”), for breach of promissory notes issued by RAC to Defendants in 2018 and guaranteed by Vidbox Mexico, and (ii) prior to the filing of the State Action, Defendants fraudulently transferred and commingled assets, specifically 600 retail kiosks, in order to avoid enforcement of the Judgment, with Plaintiffs seeking monetary damages from Defendants. On or about November 29, 2022, the court granted Defendants’ request to file a motion to dismiss the suit, and on December 30, 2022, Defendants filed the motion to dismiss the suit for failure to state a claim and lack of personal jurisdiction. The court has not yet ruled upon the motion to dismiss. Defendants believe the suit is without merit and intend to defend the matter vigorously.

On or about August 31, 2023, our defense counsel received a decision from the court in response to our motion to dismiss. The court’s decision is summarized below:

The Court did not rule on the substantive merits of Plaintiffs' claims despite our request that it do so and dismiss them based on various deficiencies (likely because of its finding that jurisdiction was lacking on 7 of the 9 defendants and its directive regarding jurisdictional discovery).

A conference call with the Court and the Plaintiff was held on October 16, 2023, for the purposes of deciding how to proceed with the pending jurisdictional issues, the Court agreed to give the parties 2 weeks to continue discussions. A joint letter is now due on October 31, 2023, wherein the parties will either inform the court that an agreement of some type has been reached, (i.e., plaintiffs drop certain defendants/Hempacco and MFOF consent to jurisdiction) or will provide the Court with a proposed schedule on jurisdictional discovery.

On or about September 15, 2023, the Company accepted service in a suit filed in the Superior Court of the State of California by the People of the State of California (by and through Rob Bonta, Attorney General), alleging that the Defendant, (together with eight other co-defendants) did knowingly sell inhalable hemp products in California contrary to Assembly Bill 45. The suit also alleges that Defendants failed to warn their customers of the risks involved by the inhalation of the highly toxic chemicals that are present in all commercial hemp products, contrary to Proposition 65 that requires all such products to carry prop 65 warnings on the packaging.

The Plaintiff is asking the court for civil penalties of $2,500 against Defendants for each violation and to award Plaintiff the cost of its suit, and to grant such other and further relief as the court deems just and proper.

The Company recognizes that two transactions with on-line suppliers could have occurred subsequent to the AB 45 ban, however, for all intents and purposes the company ceased its distribution and sale of hemp smokable products as soon as was practical after AB 45 was enacted.

The Company also prints Proposition 65 warnings on all of its products that might be considered to contain (in the opinion of the State of California) “highly toxic chemicals”.

The Company feels that this matter could have been handled through the normal administrative process that applies to any business found to be committing acts or business practices that are contrary to the rules and regulations of the governing authority.

To use a lawsuit for this purpose was highly unnecessary and without merit. The Company expects to be able to negotiate a settlement of the matter without imposing on the valuable time of the Superior Court.

As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, the Company is not required to provide information under this item.

During the nine months ended September 30, 2023, the Company did not issue any unregistered equity securities except as set forth below.

On or about May 16, 2023, the Company issued 62,223 shares of its common stock to Ernest Sparks upon conversion of a convertible note and accrued interest.

On or about May 16, 2023, the Company issued 332,398 shares of its common stock to Miguel Cambero upon conversion of a convertible note and accrued interest.

The above-described shares were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) promulgated thereunder, as there was no general solicitation, the shareholders were accredited and/or financially sophisticated, and the transactions did not involve a public offering.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

As of	September 30, 2023			December 31, 2022

ASSETS
Current Assets
Cash and cash equivalents	$	i 17,076		$	i 548,331
Accounts receivable		i 554,344			i 231,269
Accounts receivable, related parties		i -			i 5,100
Loans receivable, related parties		i 286,174			i -
Inventory		i 909,750			i 645,132
Prepaid expenses and other current assets		i 673,522			i 442,366
Prepaid expenses, related parties		i 736,941			i 35,609
Total Current Assets		i 3,177,807			i 1,907,807

Property and equipment		i 8,993,603			i 7,220,565
Right of use asset, related party		i 269,634			i 351,146
Other intangible assets, net of amortization		i -			i 2,661
Equity investment – related party		i 1,747,381			i -
Other investments and Warrants		i 249,634			i -

TOTAL ASSETS	$	i 14,438,059		$	i 9,482,179

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current Liabilities
Accounts payable	$	i 665,033		$	i 335,605
Accounts payable, related parties		i 87,412			i 42,831
Accrued liabilities		i 374,444			i -
Customer prepaid invoices and deposits		i 806,029			i 838,164
Line of credit		i 100,000			i -
Loans and notes payable, related parties		i -			i 69,282
Convertible promissory notes payable		i 3,200,000			i 125,000
Other short-term loans		i 137,173			i -
Right of use liability, related party – current		i 114,926			i 109,552
Total Current Liabilities		i 5,485,017			i 1,520,434

Long Term Liabilities
Long-term debt		i -			i 142,770
Right of use liability, related party		i 170,576			i 258,776
Total Liabilities		i 5,655,593			i 1,921,980
Stockholders’ Equity
Preferred stock, $ i 0.001 par value; i 50,000,000 shares authorized as of September 30, 2023, and December 31, 2022, respectively.		i -			i -
Series A Preferred Stock, $ i 0.001 par value; i 10,000,000 Shares authorized as of September 30, 2023, and December 31, 2022, respectively. i 0 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively.		i -			i -
Common stock, $ i 0.001; i 200,000,000 shares authorized as of September 30, 2023, and December 31, 2022, respectively. i 28,926,126 and i 23,436,505 shares issued and outstanding as of September 30, 2023, and December 31, 2022, respectively.		i 28,926			i 23,436
Additional paid-in capital		i 25,563,373			i 18,095,184
Accumulated deficit		( i 16,640,974	)		( i 10,463,048	)
Total Stockholders’ Equity		i 8,951,325			i 7,655,572
Non-controlling interests		( i 168,859	)		( i 95,373	)
Total Equity Attributable to Hempacco Co., Inc.		i 8,782,466			i 7,560,199

LIABILITIES AND STOCKHOLDERS’ EQUITY	$	i 14,438,059		$	i 9,482,179

	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net loss	$	( i 6,251,412	)	$	( i 2,024,039	)
Adjustments to reconcile net loss to cash used in operating activities
Reclassification of Organipure capital contribution		( i 1,000	)		i -
Depreciation and amortization		i 116,807			i 171,098
Non-cash warrant valuation expense		i 76,249			i 437,375
Reserving of related party loans		i 1,464,475			i -
Elimination of loss from equity investment		i 28,619			i -
Gain on disposal of assets		i -			i 10,690
Stock based compensation for services		i 320,400			i 100,000
Changes in operating assets and liabilities
Trade receivables, net		( i 323,075	)		( i 159,525	)
Accounts receivable, related parties		i 5,100			( i 16,481	)
Prepaid expenses and other current assets		( i 156,265	)		( i 202,813	)
Prepaid expenses, related parties		( i 701,332	)		i -
Inventories		( i 264,619	)		( i 599,572	)
Accounts payable		i 329,427			i 253,039
Accounts payable, related parties		i 44,582			( i 86,658	)
Accrued liabilities		i 373,267			i 14,468
Customer deposits		( i 32,134	)		( i 1,115,266	)
Right of use assets and liabilities		( i 1,314	)		i -
Net cash used in operating activities		( i 4,972,225	)		( i 3,217,684	)

Cash flows from investing activities
Purchases of property, plant and equipment		( i 163,184	)		( i 169,398	)
Proceeds from disposal of equipment		i -			i 40,000
Franchise fees and licenses related to joint venture		i -			( i 152,609	)
Net cash provided by (used in) investing activities		( i 163,184	)		( i 282,007	)

Cash flows from financing activities
Line of Credit		i 100,000
Equipment loan repayment		i -			( i 300,000	)
Long term loan repayment		( i 5,597	)		i -
Loans to related parties		( i 1,750,649	)		( i 70,379	)
Proceeds from short-term promissory note, related parties		i -			i 50,000
Repayment of short term note payable		( i 50,000	)
Equity investment in related party		( i 300,000	)		i -
Proceeds from the sale of common stock		i 7,245,000			i 6,468,000
Offering costs paid in connection with sale of common stock		( i 634,600	)		( i 607,713	)
Cash flows provided by financing activities		i 4,604,154			i 5,539,908

Increase (decrease) in cash and cash equivalents		( i 531,255	)		i 2,040,217
Cash and cash equivalents at beginning of period		i 548,331			i 933,469
Cash and cash equivalents at end of period	$	i 17,076		$	i 2,973,686

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	i 6,762		$	i -
Cash paid for taxes	$	i 132		$	i 3,635

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Warrants recorded as prepaid and other assets	$	i 374,453		$	i 437,375
Conversion of convertible notes payable and accrued interest to common stock	$	i 146,940		$	i 56,592
Marketing services paid with shares	$	i 320,400		$	i 100,000
Accounts payable paid with shares		i -		$	i 100,000
Equipment paid with promissory note	$	i 1,724,000
Equity interest in affiliated entity paid with promissory note	$	i 1,476,000		$	-
Equipment loan paid with shares		-		$	i 1,182,681
Payment for equipment and intangible assets with shares		-		$	i 4,000,000

a)	As mentioned above, the owners of Green Star Labs, Inc. and the respective ownership percentages are:

	i)	Green Globe International, Inc. i 50%
	ii)	Hempacco Co., Inc. i 50%

b)	Hempacco, as the investor, will account for its interest under the equity method under GAAP/ASC 323

c)	Hempacco purchased the equity interest for the sum of $ i 1,776,000 with a further $ i 1,724,000 being used for the purchase of certain items of production equipment needed to produce a new Hempacco product line.

d)	The $ i 1,776,000 paid for the equity stake is attributable to Basis Difference / (Equity Goodwill). This basis difference will be evaluated each quarter in comparison to the Investees earnings or losses and other changes in equity in order that the value of the equity investment on the Company’s balance sheet can be adjusted accordingly.

e)	GSL was a start-up operation in January 2022 and has recently started to generate operating profits. The purchase price was based on the future profitability and growth that Hempacco’s new business lines and joint ventures will bring to GSL Hence any current comparison of the purchase price and the current net assets of GSL would be misleading.

f)	The Company will, on a quarterly basis, monitor the underlying net assets of GSL in order to evaluate whether or not any adjustment is necessary to the carrying value of the equity investment in the books of the Company. Should GSL report other comprehensive income or changes to equity accounts, the Company will make the appropriate adjustments to its carrying cost to reflect its share of these additional items in accordance with the GAAP accounting standard.

g)	GSL has no contingent issuances of shares, warrants or convertible promissory notes that might affect Hempacco’s share of reported earnings or losses.

	September 30,		September 30,
	2023		2022
	(Shares)		(Shares)
Warrants		i 838,100		-
Promissory notes convertible to shares*		i 5,572,000		i 125,000
TOTAL		i 6,410,100		i 125,000

	·	Level 1—Quoted market prices for identical assets or liabilities in active markets or observable inputs.
	·	Level 2—Significant other observable inputs that can be corroborated by observable market data; and
	·	Level 3—Significant unobservable inputs that cannot be corroborated by observable market data.

Hempacco Co., Inc. – ‘10-Q’ for 9/30/23

On: Monday, 11/20/23, at 1:50pm ET · For: 9/30/23 · Accession #: 1477932-23-8668 · File #: 1-41487

Previous ‘10-Q’: ‘10-Q’ on 8/14/23 for 6/30/23 · Latest ‘10-Q’: This Filing · 8 References:

Quarterly Report — Form 10-Q

Filing Table of Contents

‘10-Q’ — Quarterly Report

Document Table of Contents

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Dates Referenced Herein and Documents Incorporated by Reference

1 Subsequent Filing that References this Filing

7 Previous Filings that this Filing References

Large accelerated filer	☐	Accelerated filer	☐
i Non-accelerated Filer	☒	Smaller reporting company	i ☒
		Emerging growth company	i ☐

Part I – Financial Information

Item 1	Financial Statements	3
	Condensed Consolidated Balance Sheets at September 30, 2023, and December 31, 2022 (unaudited)	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023, and 2022 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023, and 2022 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023, and 2022 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4	Controls and Procedures	30

Part II – Other Information

Item 1	Legal Proceedings	31
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3	Defaults Upon Senior Securities	33
Item 4	Mine Safety Disclosures	33
Item 5	Other Information	33
Item 6	Exhibits	34

	September 30,			December 31,
	2023			2022

Accounts receivable	$	i 670,321		$	i 478,680
Accounts receivable - related parties		i -			i 5,100
Allowance for doubtful accounts		( i 115,977	)		( i 247,410	)
Total accounts receivable	$	i 554,344		$	i 236,370

Year Ending December 31	Operating Leases
2023	$	i 32,779
2024		i 135,049
2025		i 139,100
Total lease payments		i 306,928
Less: Imputed interest/present value discount		( i 21,426	)
Total	$	i 285,502

Talent Warrants (see Note 1)			i 450,000
Talent Designee Warrants (see Note 1)			i 50,000
Compensation Warrants			i 500,000
Representatives’ Warrants (see Note 1)			i 338,100
			i 838,100

	September30,	December 31,
Description	2023	2022
a) Price of the Issuer’s Security	$ i 0.75-$ i 1.25	$ i 1.00 - $ i 7.00
b) Exercise (strike) price of Security	$ i 1.00	$ i 0.75 - $ i 1.50
c) Time to Maturity in years	i 5 years	i 3 to i 5 years
d) Annual Risk-Free Rate	i 5-year T-Bill	i 2-year T-Bill
e) Annualized Volatility (Beta)	i 90% - i 100%	i 59% - i 100%

	a)	Manufacturing & Supply Agreement (“MSA”)

	b)	Exclusive Distribution Agreement (“EDA”)

	Three Months Ended September 30,				Change
	2023		2022		$			%
Revenues
Product sales	$	1,305,254	$	561,818	$	743,436			132	%
Product sales, related parties		11,709		16,940		(5,231	)		(31	)%
Manufacturing service revenue		9,049		6,653		2,396			36	%
Kiosk revenue		-		6,824		(6,824	)		(100	)%
Total Revenues	$	1,326,012	$	592,235	$	733,777			124	%

The table below, for the periods indicated, provides selected cash flow information:
	Nine months Ended September 30, 2023			Nine months Ended September 30, 2022

Net cash used in operating activities	$	(4,972,225	)	$	(3,217,684	)
Net cash provided by (used in) investing activities		(163,184	)		(282,007	)
Net cash provided by financing activities		4,604,154			5,539,908
Net change in cash	$	(531,255	)	$	2,040,217

	·	All defendants, except Sandro Piancone and Jorge Olson, have been dismissed without prejudice due to a lack of personal jurisdiction.
	·	Personal jurisdiction exists over Sandro Piancone and Jorge Olson because they are "closely related" to Vidbox Mexico, and thus, subject to the New York forum selection clause included in the Securities Purchase Agreements (Sandro signed the agreement on behalf of Vidbox Mexico and Jorge is purportedly a controlling officer).
	·	Despite the lack of personal jurisdiction over all defendants, except Sandro and Jorge, the Court has directed the parties to conduct jurisdictional discovery and then will allow Plaintiffs to amend the complaint for purposes of asserting jurisdiction over all defendants; and

	September 30,		December 31,
	2023		2022

Finished goods	$	i 564,778	$	i 109,879
Raw materials and labor (Net of obsolescence allowance)		i 344,972		i 535,253
Total inventory at cost less obsolescence allowance	$	i 909,750	$	i 645,132

Exhibit No.		Description
1.1		Underwriting Agreement, between Hempacco Co., Inc. and Boustead Securities, LLC, dated August 29, 2022 (incorporated by reference to Exhibit 1.1 to Current Report on Form 8-K filed on September 2, 2022)
1.2		Underwriting Agreement, dated February 9, 2023, by and between Hempacco Co., Inc. and Boustead Securities, LLC (incorporated by reference to Exhibit 1.1 to Current Report on Form 8-K filed on February 15, 2023)
3.1		Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1 filed on March 24, 2022)
3.2		Amended and Restated Articles of Incorporation dated April 23, 2021 (incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1 filed on March 24, 2022)
3.3		Amended and Restated Articles of Incorporation dated September 28, 2021 (incorporated by reference to Exhibit 3.3 to Registration Statement on Form S-1 filed on March 24, 2022)
3.4		Bylaws of Hempacco Co., Inc. (incorporated by reference to Exhibit 3.4 to Registration Statement on Form S-1 filed on March 24, 2022)
10.1		Agreement for Share Exchange between Hempacco Co., Inc. and Green Globe International, Inc., dated May 21, 2021 (incorporated by reference to Exhibit 10.1 to Registration Statement on Form S-1 filed on March 24, 2022)
10.2		Patent License Agreement between Hempacco Co., Inc., and Old Belt Extracts, LLC d/b/a Open Book Extracts, dated April 1, 2021 (incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-1 filed on March 24, 2022)
10.3		Limited Liability Company Agreement of Cali Vibes D8 LLC, dated April 20, 2021 (incorporated by reference to Exhibit 10.3 to Registration Statement on Form S-1 filed on March 24, 2022)
10.4		Joinder Agreement between Cali Vibes D8 LLC, Hempacco Co., Inc., and BX2SD Hospitality, LLC, dated June 3, 2021 (incorporated by reference to Exhibit 10.4 to Registration Statement on Form S-1 filed on March 24, 2022)
10.5		Assignment Agreement between Hempacco Co., Inc. and Green Globe International, Inc., dated December 14, 2021 (incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-1 filed on March 24, 2022)
10.6		Joinder Agreement of Hemp Hop Smokables LLC, by Hempacco Co., Inc., dated December 14, 2021 (incorporated by reference to Exhibit 10.6 to Registration Statement on Form S-1 filed on March 24, 2022)
10.7		Joint Venture Agreement between Hempacco Co., Inc. and Cheech and Chong’s Cannabis Company, dated January 1, 2022 (incorporated by reference to Exhibit 10.7 to Registration Statement on Form S-1 filed on March 24, 2022)
10.8		Joint Venture Agreement between Hempacco Co., Inc. and StickIt Ltd., dated January 19, 2022 (incorporated by reference to Exhibit 10.8 to Registration Statement on Form S-1 filed on March 24, 2022)
10.9		Purchase Finance Agreement between Hempacco Co., Inc., and Titan General Agency Ltd., dated December 3, 2019 (incorporated by reference to Exhibit 10.9 to Registration Statement on Form S-1 filed on March 24, 2022)
10.10		Loan Agreement between Hempacco Co., Inc. and Courier Labs, LLC, dated June 15, 2020 (incorporated by reference to Exhibit 10.10 to Registration Statement on Form S-1 filed on March 24, 2022)
10.11		Security Agreement between Hempacco Co., Inc. and Courier Labs, LLC, dated June 15, 2020 (incorporated by reference to Exhibit 10.11 to Registration Statement on Form S-1 filed on March 24, 2022)
10.12		Side Letter Agreement & Loan Extension between Hempacco Co., Inc. and Courier Labs, LLC (incorporated by reference to Exhibit 10.12 to Registration Statement on Form S-1 filed on March 24, 2022)
10.13		12% 6 Month Note issued to Mario Taverna, dated May 4, 2021 (incorporated by reference to Exhibit 10.13 to Registration Statement on Form S-1 filed on March 24, 2022)
10.14		Note Extension Agreement between Hempacco Co., Inc. and Mario Taverna, dated November 5, 2021 (incorporated by reference to Exhibit 10.14 to Registration Statement on Form S-1 filed on March 24, 2022)
10.15		Convertible Promissory Note issued to Miguel Cambero Villasenor, dated May 6, 2021 (incorporated by reference to Exhibit 10.15 to Registration Statement on Form S-1 filed on March 24, 2022)
10.16		Convertible Promissory Note issued to Miguel Cambero Villasenor, dated June 7, 2021 (incorporated by reference to Exhibit 10.16 to Registration Statement on Form S-1 filed on March 24, 2022)
10.17		Convertible Promissory Note issued to Ernest Sparks and Julee A. Sparks, Joint Tenants, dated May 10, 2021 (incorporated by reference to Exhibit 10.17 to Registration Statement on Form S-1 filed on March 24, 2022)
10.18		12% One Year Note issued to Dennis Holba & Raffaella Marsh, dated November 12, 2019 (incorporated by reference to Exhibit 10.18 to Registration Statement on Form S-1 filed on March 24, 2022)
10.19		Secured Promissory Note issued to Jerry Halamuda, dated February 17, 2020 (incorporated by reference to Exhibit 10.19 to Registration Statement on Form S-1 filed on March 24, 2022)
10.20		Promissory Note issued to Jerry Halamuda, dated February 16, 2021 (incorporated by reference to Exhibit 10.20 to Registration Statement on Form S-1 filed on March 24, 2022)

10.21		Promissory Note Agreement Amendment 1 between Hempacco Co., Inc. and Jerry Halamuda, dated May 17, 2020 (incorporated by reference to Exhibit 10.21 to Registration Statement on Form S-1 filed on March 24, 2022)
10.22		12% One Year Note issued to Mario Taverna, dated March 5, 2021 (incorporated by reference to Exhibit 10.22 to Registration Statement on Form S-1 filed on March 24, 2022)
10.23		12% One Year Note issued to Mario Taverna, dated March 10, 2021 (incorporated by reference to Exhibit 10.23 to Registration Statement on Form S-1 filed on March 24, 2022)
10.24		12% One Year Note issued to Valentino Mordini, dated March 9, 2021 (incorporated by reference to Exhibit 10.24 to Registration Statement on Form S-1 filed on March 24, 2022)
10.25		12% One Year Note issued to Romeo Fiori, dated March 10, 2021 (incorporated by reference to Exhibit 10.25 to Registration Statement on Form S-1 filed on March 24, 2022)
10.26		12% One Year Note issued to J Lin Inc., dated March 15, 2021 (incorporated by reference to Exhibit 10.26 to Registration Statement on Form S-1 filed on March 24, 2022)
10.27		12% One Year Note issued to Sylvester Barnes, dated April 1, 2021 (incorporated by reference to Exhibit 10.27 to Registration Statement on Form S-1 filed on March 24, 2022)
10.28		12% One Year Note issued to Roger Ladd, dated April 13, 2021 (incorporated by reference to Exhibit 10.28 to Registration Statement on Form S-1 filed on March 24, 2022)
10.29		Standard Industrial/Commercial Multi-Tenant Lease Agreement between Hempacco Co., Inc. and Primus Logistics, Inc., dated January 1, 2020 (incorporated by reference to Exhibit 10.29 to Registration Statement on Form S-1 filed on March 24, 2022)
10.30*		Sales and Marketing Agreement between Hempacco Co., Inc., and Cube17, Inc., dated November 6, 2019 (incorporated by reference to Exhibit 10.30 to Registration Statement on Form S-1 filed on March 24, 2022)
10.31*		Consulting & Marketing Agreement between Hempacco Co., Inc., and Strategic Global Partners, Inc., dated January 3, 2020 (incorporated by reference to Exhibit 10.31 to Registration Statement on Form S-1 filed on March 24, 2022)
10.32*		Consulting & Marketing Agreement between Hempacco Co., Inc., and UST Mexico, Inc., dated January 3, 2020 (incorporated by reference to Exhibit 10.32 to Registration Statement on Form S-1 filed on March 24, 2022)
10.33*		Interim Consulting Agreement between Hempacco Co., Inc. and Neville Pearson, dated March 1, 2021 (incorporated by reference to Exhibit 10.33 to Registration Statement on Form S-1 filed on March 24, 2022)
10.34*		Employment Agreement between Hempacco Co., Inc. and Sandro Piancone, dated January 20, 2022 (incorporated by reference to Exhibit 10.34 to Registration Statement on Form S-1 filed on March 24, 2022)
10.35*		Employment Agreement between Hempacco Co., Inc. and Neville Pearson, dated January 20, 2022 (incorporated by reference to Exhibit 10.35 to Registration Statement on Form S-1 filed on March 24, 2022)
10.36*		Employment Agreement between Hempacco Co., Inc. and Jorge Olson, dated February 3, 2022 (incorporated by reference to Exhibit 10.36 to Registration Statement on Form S-1 filed on March 24, 2022)
10.37*		Indemnification Agreement, between Hempacco Co., Inc. and Sandro Piancone, dated August 29, 2022 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 2, 2022)
10.38*		Indemnification Agreement, between Hempacco Co., Inc. and Neville Pearson, dated August 29, 2022 (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on September 2, 2022)
10.39*		Indemnification Agreement, between Hempacco Co., Inc. and Jorge Olson, dated August 29, 2022 (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on September 2, 2022)

10.40*		Indemnification Agreement, between Hempacco Co., Inc. and Stuart Titus, dated August 29, 2022 (incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K filed on September 2, 2022)
10.41*		Indemnification Agreement, between Hempacco Co., Inc. and Jerry Halamuda, dated August 29, 2022 (incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K filed on September 2, 2022)
10.42*		Indemnification Agreement, between Hempacco Co., Inc. and Miki Stephens, dated August 29, 2022 (incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K filed on September 2, 2022)
10.43*		Independent Director Agreement, between Hempacco Co., Inc. and Miki Stephens, dated August 29, 2022 (incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K filed on September 2, 2022)
10.44		Broker Representation Agreement between Hempacco Co., Inc. and Wizards and Kings LLC, dated November 23, 2021 (incorporated by reference to Exhibit 10.39 to Amendment No. 1 to Registration Statement on Form S-1 filed on May 3, 2022)
10.45		Asset Purchase Agreement between Hempacco Co., Inc. and Nery’s Logistics, Inc., dated July 12, 2022 (incorporated by reference to Exhibit 10.40 to Amendment No. 4 to Registration Statement on Form S-1 filed on August 5, 2022)
10.46		8% 90 Day Note issued to Jerry Halamuda, dated May 18, 2022 (incorporated by reference to Exhibit 10.41 to Amendment No. 4 to Registration Statement on Form S-1 filed on August 5, 2022)
10.47		Promissory Note Agreement Amendment 1 between Hempacco Co., Inc. and Jerry Halamuda, dated June 18, 2022 (incorporated by reference to Exhibit 10.42 to Amendment No. 4 to Registration Statement on Form S-1 filed on August 5, 2022)
10.48		Joint Venture Agreement between Hempacco Co., Inc. and Sonora Paper Co., Inc., dated October 2, 2022 (incorporated by reference to Exhibit 10.48 to Registration Statement on Form S-1 filed on February 3, 2023)
10.49		Joint Venture Agreement between Hempacco Co., Inc. and High Sierra Technologies, Inc., dated November 10, 2022 (incorporated by reference to Exhibit 10.49 to Registration Statement on Form S-1 filed on February 3, 2023)
10.50		Operating Agreement between Hempacco Co., Inc., Alfalfa Holdings, LLC, and HPDG, LLC, dated January 24, 2023 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on February 2, 2023)
14.1		Code of Ethics and Business Conduct (incorporated by reference to Exhibit 14.1 to Registration Statement on Form S-1 filed on March 24, 2022)
31.1		Certification of Principal Executive Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial and Accounting Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63
32.2		Certification of Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63
99.1		Settlement Agreement and Mutual Release between Hempacco Co., Inc. and Titan General Agency Ltd., dated September 6, 2022 (incorporated by reference to Exhibit 99.2 to Registration Statement on Form S-1 filed on February 3, 2023)
101.INS**		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH**		Inline XBRL Taxonomy Extension Schema Document.
101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**		Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104**		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	HEMPACCO CO., INC. (Registrant)

Date: November 20, 2023	By:	/s/ *Sandro Piancone*
		Sandro Piancone
		Chief Executive Officer
Date: November 20, 2023	By:	/s/ *Neville Pearson*
		Neville Pearson

This ‘10-Q’ Filing	Date	Other Filings

	2/10/28
	4/10/25
	8/15/24
	6/30/24
	12/31/23
	12/1/23
Filed on:	11/20/23
	11/6/23
	10/31/23
	10/19/23	8-K
	10/18/23
	10/16/23
	10/3/23
	10/2/23
For Period end:	9/30/23	NT 10-Q
	9/26/23	8-K
	9/18/23
	9/15/23
	8/31/23
	8/15/23
	8/9/23
	8/1/23
	7/10/23
	7/5/23	10-Q
	7/1/23
	6/30/23	10-Q
	6/18/23
	5/23/23	8-K
	5/16/23	NT 10-Q
	5/15/23	10-K
	5/12/23	10-K
	5/7/23
	4/30/23
	4/20/23	8-K
	4/6/23	8-K
	3/31/23	10-Q, NT 10-Q
	3/18/23
	3/1/23
	2/20/23
	2/14/23
	2/11/23
	2/9/23	8-K, CORRESP, EFFECT
	2/8/23
	2/5/23
	2/2/23	8-K
	2/1/23	8-K
	1/30/23	8-K
	1/25/23
	1/24/23
	1/1/23
	12/31/22	10-K, NT 10-K
	12/30/22
	12/1/22
	11/29/22
	10/23/22
	10/12/22
	10/7/22
	10/4/22
	9/30/22	10-Q, 10-Q/A, NT 10-Q
	9/19/22
	9/18/22
	9/17/22
	9/7/22
	9/6/22
	9/1/22	3
	7/15/22
	6/30/22
	5/4/22	CORRESP
	4/7/22
	3/18/22
	3/1/22
	1/6/22
	12/31/21
	10/6/21
	9/28/21
	8/11/21
	5/21/21
	5/6/21
	4/23/21
	1/15/21
	12/31/20
	6/15/20
	1/1/20
	12/11/19
	4/1/19
		List all Filings