The following discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements and the notes
thereto included elsewhere in this Quarterly Report on Form 10-Q, which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of such financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. On an ongoing basis, we evaluate these estimates,
including those related to useful lives of real estate assets, bad debts,
impairment, contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. There can be no assurance that actual
results will not differ from those estimates. The analysis set forth below is
provided pursuant to applicable SEC regulations and is not intended to serve as
a basis for projections of future events. See "Cautionary Statement Regarding
Forward Looking Statements" above.
Plan of Operation
Hip Cuisine, Inc. was incorporated in the state of Florida on March 24, 2014.
Our United States offices are currently located at 2250 NW 114th Ave. Unit 1P,
PTY 11020, Miami, FL 33172-3652. Our Panama offices are located at Balboa
Boutiques, Ave. Balboa, Local B104, Panama City, Panama. Our telephone number is
On September 30, 2014, we entered into a Share Exchange Agreement (the "Share
Exchange Agreement") with Hip Cuisine, Inc., a Panamanian corporation
incorporated pursuant to the laws of the Republic of Panama on February 24, 2014
("Hip Panama"), and its sole shareholder, and our Chief Executive Officer,
President and Director, Natalia Lopera, whereby we acquired one hundred percent
(100%) of the issued and outstanding common stock of Hip Panama in exchange for
5,000,000 shares of our Common Stock. Upon the consummation of the Share
Exchange Agreement, Hip Panama became a wholly-owned subsidiary of our Company.
Hip Cuisine, Inc. has created a restaurant concept that combines the Health Food
restaurant which uses the brand Healthy, Vegan & Raw to identify to the public
what it has to offer which is low sodium, low calorie, high in protein dishes
and the ingredients are Vegan Friendly, Vegetarian and a full menu with fresh
fish, chicken and steak. The vegetables are purchased fresh daily from the local
farmers market. We also added, with the restaurant, a full array of "Cold Press
Juices & Smoothies". The United States is exploding with Cold Press juice stores
to meet the demand of the general public who has moved to a Healthier Diet and
who is becoming more conscience of what foods it is consuming.
We made the decision to open the first location in Panama City Panama for
several reasons. The main reason was the fact that the Health & Fitness market
in Central and South America was growing at a very rapid pace and compared to
the United States the Cold Press and Healthy Food restaurants were virtually
nonexistent. In fact we know of only four Vegan restaurants in all of Panama
City. In addition, Panama City is one of the fastest growing cities in Latin
America and with the expansion of the Panama Canal there is a very large
international population and they are looking for Healthy alternative than what
is currently being offered in Panama. The labor is substantially less yet the
prices of the dishes are equal to that of the United States.
We opened for business in July of 2015 after 15 months of construction at the
Balboa Boutiques shopping mall located on Ave. Balboa, which is a prime location
in Panama City near the financial district and on the water. A major renovation
to the "Cinta Costera" along Balboa now offers a biking and jogging trail along
with exercise equipment, basketball and tennis courts and this extends for 5
kilometers along Balboa Ave. and continues over the water all the way to the
Amador which is Panama City's main marina. Every Sunday they close Ave. Balboa
and set up biking events and other events like Yoga classes and more.
In March 2017, we completed the construction and design project of our 2nd
restaurant in Costa del Este Panama. We expect to open this location in May
2017. This location is 288 square meters, which is much larger than our first
location in the Balboa Boutiques shopping center in Panama City. The Costa del
Este locationwill be used for our production kitchen where we will prepare the
meal packages and juices for the other spoke locations and deliveries.
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We entered into an Asset Purchase Agreement with Rawkin Bliss LLC dba Rawkin
Juice of Burbank California www.rawkinjuice.com which closed on April 14, 2017.
This will allow us to not only expand our offerings into the US market with an
established brand like Rawkin Juice, but we now can offer a Hip Cuisine in areas
that a Hip Cuisine "Vegan Friendly" offering would work better than a 100% Vegan
offering like that of Rawkin Juice in Burbank California.
We entered into a second "spoke" location for Rawkin Juice located in Santa
Monica, CA, and this location is scheduled to open on May 1st of 2017. We will
produce the products in the production kitchen in Burbank and deliver to the
Santa Monica location daily to maintain a 100% Organic, Vegan fresh line of
products including Cold Pressed Juices, Smoothies, Desserts, Salads and the
Living Gourmet line of Raw Vegan foods.
We have already designed and can order the packaging, labels and bottles for
delivery. We currently use a POS system called LAVU and this can handle
everything from inventory control, orders, menu and employee payroll. It is a
complete system designed for restaurants and is scalable. The only additional
cost is for the equipment for the additional restaurants, such as I-Pads,
kitchen printer, fiscal printer and cashier I-pad and register, which is
approximately $4,500 per location. Then we pay a monthly service fee that is
approximately $105 per month.
We currently offer to our customers at both the Balboa Boutiques location and
Rawkin Juice in Burbank the ability to purchase one day detox (6 juices) or 3
day detox (18 juices), as well as weekly meal plans. These plans range from
$37.50 to $55.00 for the 1 day, $112.50 to $155.00 for the 3 day detox and
for the weekly meal plan.
We have budgeted a total cost of $12,000 to complete the website which will
allow us to accept online orders for our customers who want deliveries.
Currently we use a delivery service to deliver orders, and they charge a
delivery fee and pay for the order when they pick up. The Rawkin Juice location
in Burbank utilizes several 3rd party delivery companies that offer our menu for
a fee such as Grub Hub, Uber Eats, Eat 24 and Door Dash. We plan to launch our
own application for deliveries in May of 2017, through our online ordering
Our goals over the next twelve (12) months are to:
† Open the second location in Plaza 770 in Costa del Este Panama.
† Open a second "spoke" location for Rawkin Juice located in Santa Monica,
† Locate and start construction of the "Hub & Spoke" locations. The
production kitchens in Burbank and Costa del Este will produce and bottle
the juices and smoothies, then deliver to the Spokes and other outlets
throughout Panama and California such as local gyms and Health Food
† Develop the online ordering system for deliveries through the website
The following chart provides an overview of our budgeted expenditures by
significant area of activity over the next twelve (12) months, assuming we are
able to attract sufficient debt or equity financing. There can be no assurance
that we will be able to attract financing and we may be required to scale back
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Months 1-3 Months 4 - 6 Months 7-9 Months 10-12 Total 12 months
Rent $ 26,625$ 36,625$ 41,625$ 71,625 $ 176,500
Payroll $ 37,000$ 54,000$ 66,000$ 96,000 $ 253,000
Loans $ 10,000$ 10,000$ 15000$ 25,000 $ 60,000
Supplies $ 57,750$ 84,000$ 98,000$ 131,600 $ 371,350
Utilities $ 16,500$ 20,500$ 22,000$ 28,000 $ 87,000
Accounting $ 4,500$ 4,500$ 4,500$ 4,500 $ 18,000
Legal $ 6,000$ 6,000$ 6,000$ 6,000 $ 24,000
Auditing $ 5,000$ 5,000$ 20,000$ 5,000 $ 35,000
CFO $ 4,500$ 4,500$ 4,500$ 4,500 $ 18,000
Advertising $ 3,500$ 4,500$ 4,500$ 4,500 $ 17,000
Relations $ 15,000$ 15,000$ 15,000$ 15,000 $ 60,000
Expenditures $ 186,375$ 244,625$ 297,125$ 391,725$ 1,119,850
Months 1 through 9
During the first nine (9) months we plan to:
o Open Costa del Este Panama and the production kitchen.
o Enter into deliveries and monthly diet programs.
o Open a second "spoke" location for Rawkin Juice located in Santa Monica, CA.
o Enter contract with four (4) Spoke locations for processing facilities.
o Launch new website to handle online deliveries and POS processing.
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Months 9 through 12
During the following three (3) months, we expect to achieve the following:
o Enter into 3rd round of financing to open six (6) more spokes which will
include one restaurant with the production kitchen.
o Build an established board of directors with experience in the sector.
o Set up an audit committee and employee ESOP plan.
In March 2017, the Company completed and closed a private offering exempt from
registration pursuant to Rule 506(b) of Regulation D of 1,000,000 shares of the
Company's common stock, par value $0.001, issued at $0.75 per share for cash
proceeds of $750,000. No brokers or underwriters were utilized in this
offering and no commissions were paid.
We do not currently have any arrangements for financing and we can provide no
assurance to investors we will be able to find such financing. There can be no
assurance that additional financing will be available to us, or on terms that
are acceptable. Consequently, we may not be able to proceed with our intended
Liquidity and Results of Operations
Results of Operations
The following table summarizes our results of operations for the three months
ended March 31, 2017 and 2016:
Three Months Ended
Statement of Operations Data: 2017 2016 Change
Revenue $ 127,737$ 35,208$ 92,529
Cost of Goods Sold (91,932 ) (11,852 ) (80,080 )
Gross Profit 35,805 23,356 12,449
Operating Expenses (432,199 ) (61,578 ) (370,621 )
Loss From Operations (396,394 ) (38,222 ) (358,172 )
Other Expenses (265,121 ) - (265,121 )
Net Loss $ (661,515 )$ (38,222 )$ (623,293 )
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For the three months ended March 31, 2017 Compared to the three months ended
March 31, 2016
For the three months ended March 31, 2017, we earned revenue of $127,737
compared to $35,208 for the three months ended March 31, 2016. Cost of goods
sold for the three months ended March 31, 2017 were $91,932 resulting in a gross
profit of $35,805, compared to cost of goods sold of $11,852 and gross profit
$23,356 from the three months ended March 31, 2015 due to growth and expansion
of the business to new restaurants locations.
Operating expenses were $432,199 for the three months ended March 31, 2017,
compared to $61,578 for the three months ended March 31, 2016, due to additional
costs related to the completion and opening of our restaurant and costs
associated with ongoing regulatory expenses.
Three Months Ended
Operating Expenses: 2017 2016 Changes
Depreciation $ 21,680$ 5,252$ 16,428
General and administrative 114,727 29,044 85,683
Professional fees 40,480 19,543 20,937
Salaries and wages 13,312 7,739 5,573
Stock based compensation 242,000 - 242,000
Total operating expenses $ 432,199$ 61,578$ 370,621
Operating expenses for the three months ended March 31, 2017 were comprised of
$21,680 for depreciation, $114,727 for general and administrative, $40,480 for
professional fees, $13,312 for salaries and wages and $242,000 for stock based
compensation. Operating expenses for the three months ended March 31, 2016 were
comprised of $5,252 for depreciation, $29,044 for general and administrative,
$19,543 for professional fees and $7,739 for salaries and wages.
Depreciation was $21,680 for the three months ended March 31 2017, which
increased by $16,428 from $5,252 for the three months ended March 31, 2016, due
to the acquisition of property, plant and equipment to support expansion of
General and Administrative expenses were $114,727 for the three months ended
March 31, 2017, which increased by $85,683 from $29,044 for the three months
ended March 31, 2016, attributed to increase in rental expenses and other
general administrative expenses for additional restaurant locations.
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Professional fees were $40,480 for the three months ended March 31, 2017,
increased by $20,937 from $19,543 for the three months ended March 31, 2016,
related to the increases in accounting, auditing, legal and market listing
expenses and public offerings.
Salaries and wages were $13,312 for the three months ended March 31, 2017,
increased by $5,573 from $7,739 for the three months ended March 31, 2016, as
the Company hired more restaurant staffs to support operational expansion.
Stock based compensation $242,000 was incurred for the three months ended March
31, 2017, relates to the issuance of common shares for consulting services to
support the expansion of the new restaurant locations.
Liquidity and Capital Resources
The following tables present selected financial information on our capital as of
March 31, 2017 and December 31, 2016 and our cash flows as of March 31, 2017 and
March 31, 2016:
March 31, December 31,
Capital Data 2017 2016 Changes
Cash and Cash Equivalents $ 377,120$ 191,660$ 185,460
Current Assets $ 458,042$ 267,076$ 190,966
Current Liabilities $ 276,148$ 575,770$ (299,622 )
Working Capital (Deficiency) $ 181,894$ (308,694 )$ 490,588
Three Months Ended
Cash Flow Data: 2017 2016 Changes
Cash Flows used in Operating Activities $ (110,968 )$ (53,691 )
$ (57,277 )
Cash Flows used in Investing Activities (258,240 ) (11,007 ) (247,233 )
Cash Flows provided by Financing Activities 554,668 64,340
Net Increase (decrease) in Cash During Period $ 185,460$ (358 )
As of March 31, 2017 and December 31, 2016 our cash was $377,120 and $191,660,
respectively. The increase in cash for the three months ended March 31, 2017 was
mainly attributed from a $554,668 cash flows provided by financing activities
achieved from $750,000 cash proceeds received from issuance of common stock from
the Company second public offering.
As of March 31, 2017, we experienced an increase in our working capital of
$490,588. The increase in working capital during the three months ended March
31, 2017 was primarily from increases in cash and cash equivalents of $185,460
from the $750,000 shares issuance for cash proceeds from the public offering
during the quarter.
We fund our operations with cash generated from restaurant sales revenue,
capital contributions, and issuances of common stock.
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For the three months ended March 31, 2017, net cash used in operating activities
was $110,968, related to our net loss of $661,515 reduced by depreciation of
$21,680, loss on debt settlement of $266,250, stock based compensation of
$242,000, a decrease in refundable sales taxes of $14,029, an increase in
prepaid expenses of $8,523, an increase in checks drawn in excess of bank
balance of $21,198, an increase of $39,425 in accounts payable and a decrease of
$34,500 in accrued interest.
For the three months ended March 31 2016, net cash used in operating activities
was $53,691. This negative cash flow related to our net loss of $38,222,
depreciation of $5,252, a decrease in refundable sales taxes of $730 a decrease
in other receivable of $1,222, a decrease in prepaid expenses of $20,709, a
decrease of $1,180 in accounts payables and an increase in unearned revenue
The increase of net cash used in operating cash flow was primarily due to an
increase in net loss for increase cash used for operating activities to support
For the three months ended March 31, 2017, net cash used in investing activities
was $258,240 compared to net cash used of $11,007 during the three months ended
March 31, 2016. The increase in net cash used was related primarily to $245,332
of costs for the acquisition of building and equipment for the Company's
Net cash provided by financing activities was $554,668 for the three months
ended March 31, 2017 mainly attributed to cash proceeds from issuance of common
shares for $750,000 from the Company second public offering. The Company has
also repaid notes payable at $127,500 and bank loans at $2,225. In additional,
the Company has repaid $65,607 to its sole officer.
Net cash provided by financing activities for the three months ended March 31,
2016 was $64,340 through advances from related parties.
On March 1, 2017 we entered into a 3 year lease agreement located at 705 Montana
Ave. in Santa Monica California and this location will be the second location
under Rawkin Juice which is the wholly owned subsidiary of Hip Cuisine. This
will serve as a "spoke" location where products will be delivered from our
production kitchen in Burbank to the Santa Monica location. The total monthly
lease payment is $4,300.
The following is a schedule by years of minimum future rent on leases for the
Company's 3 restaurant locations as of March 31, 2017:
2017 $ 178,837
Later Years 125,064
Total minimum future rentals $ 797,739
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern which contemplates, amongst other
things, the realization of assets and satisfaction of liabilities in the course
We anticipate that our future liquidity requirements will arise from the need to
fund our growth, pay our current obligations and future capital expenditures.
The primary sources of funding for such requirements are expected to be cash
generated from operations and raising additional funds from private sources
and/or debt financing.
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Going Concern Consideration
Our independent auditors included an explanatory paragraph in their report on
the accompanying financial statements expressing concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure by our
Critical Accounting Policies
The preparation of our financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
and expenses and related disclosures about contingent assets and liabilities. We
base these estimates and assumptions on historical experience and on various
other information and assumptions that are believed to be reasonable under the
circumstance. Estimates and assumptions about future events and their effects
cannot be perceived with certainty and, accordingly, these estimates may change
as additional information is obtained, as more experience is acquired, as our
operating environment changes and as new events occur. Our critical accounting
policies are listed in the notes to our audited financial statements included in
this registration Statement.
We will continue to rely on equity sales of the Company's Common Stock in order
to continue to fund business operations. Issuances of additional shares will
result in dilution to existing shareholders. There is no assurance that the
Company will achieve any additional sales of the equity securities or arrange
for debt or other financing to fund planned operations
Recently Issued Accounting Pronouncements.
The Company has implemented all new accounting pronouncements that are in
effect. These pronouncements did not have any material impact on the financial
statements unless otherwise disclosed, and the Company does not believe that
there are any other new accounting pronouncements that have been issued but not
yet adopted that might have a material impact on its financial position or
results of operations.
Off-Balance Sheet Arrangements.
The Company has no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on its financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
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Changes In and Disagreements with Accountants on Accounting and Financial
During the period covered by this report, the Company has had no changes in or
disagreements with its accountants.
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