UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___
Commission
File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
telephone number, including area code:
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
| The
|
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 for 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. Yes ☐
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
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 Exchange Act). Yes ☐
As of August 12, 2022 there were shares of the registrant’s common stock outstanding.
TABLE OF CONTENTS
| i |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “continues,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “will,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. They appear in a number of places throughout this Quarterly Report on Form 10-Q, and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, future acquisitions and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those described in the “Risk Factors” section of this Quarterly Report on Form 10-Q.
These factors should not be construed as exhaustive and should be read with the other cautionary statements in this Quarterly Report on Form 10-Q.
Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. The matters summarized under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Quarterly Report on Form 10-Q could cause our actual results to differ significantly from those contained in our forward-looking statements. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.
In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Quarterly Report on Form 10-Q speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments, except as required by applicable law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.
| ii |
| PART I. | FINANCIAL INFORMATION |
| ITEM 1. | FINANCIAL STATEMENTS (UNAUDITED) |
Condensed Financial Statements (Unaudited)
BRIGHT GREEN CORPORATION
June 30, 2022 and 2021
(Expressed in United States Dollars)
BRIGHT GREEN CORPORATION
For the Three Months and Six Months Ended June 30, 2022 and 2021 (Unaudited)
Table of Contents
BRIGHT GREEN CORPORATION
Condensed Balance Sheets
As at June 30, 2022 and December 31, 2021
(Expressed in United States Dollars)
| June 30, 2022 | December 31, 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | |||||||
| Prepaid expenses and other assets | ||||||||
| Total current assets | ||||||||
| Property, plant, and equipment (Note 6) | ||||||||
| Intangible assets (Note 7) | ||||||||
| Total assets | $ | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | |||||||
| Accrued liabilities | ||||||||
| Due to related party (Note 10) | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Due to related party (Note 10) | ||||||||
| Related party line of credit (Note 8) | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock; $ par value; stock authorized; and stock issued and outstanding at June 30, 2022 and December 31, 2021, respectively (Note 9) | ||||||||
| Additional paid-in capital (Note 9) | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | |||||||
Contingencies (Note 11)
Subsequent events (Note 12)
The accompanying notes are an integral part of the condensed financial statements
| 1 |
BRIGHT GREEN CORPORATION
Condensed Statements of Operations and Comprehensive Loss (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| Revenue | $ | |||||||||||||||
| Expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Net loss and comprehensive loss | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
| Net loss per common share - basic and diluted | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
The accompanying notes are an integral part of the condensed financial statements
| 2 |
BRIGHT GREEN CORPORATION
Condensed Statements of Changes in Stockholders’ Equity (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| Three Months and Six Months Ended June 30, 2022 | ||||||||||||||||||||||||
| Common Stock | Common Stock to be | Additional paid-in | Accumulated | Total | ||||||||||||||||||||
| Shares | Amount | issued | capital |
deficit | equity | |||||||||||||||||||
| Balance at March 31, 2022 | $ | ( | ) | |||||||||||||||||||||
| Common stock issued for cash (Note 9) | ||||||||||||||||||||||||
| Common stock issued for services (Note 9) | ||||||||||||||||||||||||
| Common stock cancelled that was issued for services (Note 9) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2022 | $ | ( | ) | |||||||||||||||||||||
| Balance at December 31, 2021 (Audited) | $ | ( | ) | |||||||||||||||||||||
| Common stock issued for cash (Note 9) | ||||||||||||||||||||||||
| Common stock issued for services (Note 9) | ||||||||||||||||||||||||
| Common stock cancelled that was issued for services (Note 9) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2022 | $ | ( | ) | |||||||||||||||||||||
| Three Months and Six Months Ended June 30, 2021 | ||||||||||||||||||||||||
| Common Stock | Common Stock to be | Additional paid-in | Accumulated | Total | ||||||||||||||||||||
| Shares | Amount |
issued | capital | deficit | equity | |||||||||||||||||||
| Balance at March 31, 2021 | $ | ( | ) | |||||||||||||||||||||
| Common stock issued for cash (Note 9) | ||||||||||||||||||||||||
| Common stock issued for cash to be received (Note 9) | ||||||||||||||||||||||||
| Common stock issued for services (Note 9) | ||||||||||||||||||||||||
| Common stock to be issued (Note 9) | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2021 | $ | ( | ) | |||||||||||||||||||||
| Balance at December 31, 2020 (Audited) | $ | ( | ) | |||||||||||||||||||||
| Common stock issued for cash, received in 2021 (Note 9) | ||||||||||||||||||||||||
| Common stock issued for cash, received in 2020 (Note 9) | ( | ) | ||||||||||||||||||||||
| Common stock issued for cash to be received (Note 9) | ||||||||||||||||||||||||
| Common stock issued for services (Note 9) | ||||||||||||||||||||||||
| Common stock to be issued (Note 9) | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2021 | $ | ( | ) | |||||||||||||||||||||
The accompanying notes are an integral part of the condensed financial statements
| 3 |
BRIGHT GREEN CORPORATION
Condensed Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| Six Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property, plant, and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from due to related party | ||||||||
| Proceeds from related party line of credit | ||||||||
| Proceeds from sale of stock | ||||||||
| Net cash provided by financing activities | ||||||||
| NET (DECREASE) INCREASE IN CASH | ( | ) | ||||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | |||||||
| CASH PAID FOR | ||||||||
| Interest | $ | |||||||
| Taxes | $ | |||||||
The accompanying notes are an integral part of the condensed financial statements
| 4 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 1. | Description of Business and Organization |
Bright
Green Corporation (Company) was incorporated on
plants.
On May 28, 2019, the Company entered into a merger agreement with Bright Green Grow Innovation, LLC (“BGGI”) (Note 5).
On October 30, 2020, Grants Greenhouse Growers, Inc., a New Mexico corporation, merged with the Company (Note 5).
On November 10, 2020, Naseeb, Inc., a New Mexico corporation, merged with the Company (Note 5).
On March 29, 2022, the Company filed a registration statement pursuant to the Securities Act of 1933, as amended (the “Securities Act”) on Form S-1 with the Securities and Exchange Commission (“SEC”), which was declared effective May 13, 2022, (as amended, the “Registration Statement”), in connection with the direct listing of the Company’s common stock with the Capital Market of the Nasdaq Stock Market LLC (“Nasdaq”).
On May 17, 2022, the Company’s common stock commenced trading on Nasdaq under the symbol “BGXX.”
The Company is a start-up company at June 30, 2022 and has revenue.
The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.
| 5 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 2. | Liquidity and Basis of Presentation |
The
accompanying unaudited condensed financial statements have been prepared by the Company in conformity with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the SEC instructions to Form 10-Q and Article 8 of SEC Regulation
S-X. The information
furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are
necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods
presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with
U.S. GAAP were omitted pursuant to such rules and regulations. The
financial information contained in this report should be read in conjunction with the financial information and notes thereto for
the fiscal years ended December 31, 2021 and 2020 filed as a part of the Registration Statement. The results of operations for the
three months ended June 30, 2022 are not necessarily indicative of the results for the year ending December 31, 2022. As of June 30,
2022, the Company had cash of $
The
Company is in its initial stages to start building facilities to grow, research and distribute medical plants. The Company has incurred
recurring losses from operations, and as at June 30, 2022, had an accumulated deficit of $
The Company does not have any short or long-term contractual purchases with suppliers for future purchases, capital expenditure commitments that cannot be cancelled with minimal fees, non-cancelable operating leases, or any commitment or contingency that would hinder management’s ability to scale down operations and management expenses until funding is raised.
| 6 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 3. | Summary of Significant Accounting Policies |
| A. | Basis of Measurement |
The condensed financial statements of the Company have been prepared on an historical cost basis except as indicated otherwise.
| B. | Property, Plant, Equipment |
Property is stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property, except land, which is not depreciated, is provided using the declining balance method, or straight-line method, with estimated lives as follows:
| Building and improvement - declining balance method | |
| Fixtures - straight-line method |
| C. | Long-lived Assets |
The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC Topic 360 requires that long-lived assets be reviewed annually for impairment whenever events or changes in circumstances indicate that the assets’ carrying amounts may not be recoverable; it further requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal.
| D. | Intangible Assets |
The Company’s intangible assets consist of certain licenses (Note 5) which will be amortized over the term of each license. The intangible assets with finite useful lives are reviewed for impairment when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets.
| E. | Fair Value of Financial Instruments |
For certain carrying amounts of the Company’s financial instruments, including cash, other asset, accounts payable, accrued liabilities, and due to related party, the carrying amounts approximate their fair values due to their short-term maturities.
| 7 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 3. | Summary of Significant Accounting Policies (continued) |
| E. | Fair Value of Financial Instruments (continued) |
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures.
The carrying amounts reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization, low risk of counterparty default and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. As of June 30, 2022 and December 31, 2021, there were no Level 1 assets or liabilities.
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. As of June 30, 2022 and December 31, 2021, there were no Level 2 assets or liabilities.
Level 3 inputs to the valuation methodology use one or more unobservable inputs which are significant to the fair value measurement.
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.
| F. | Advertising Costs |
Advertising
costs are charged to operations when incurred. Advertising costs totaled $
| G. | Income Taxes |
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of the deferred tax assets will not be realized.
| 8 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 3. | Summary of Significant Accounting Policies (continued) |
| G. | Income Taxes (continued) |
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.
| H. | Basic and Diluted Earnings (Loss) per share |
Basic earnings (loss) per share is calculated using the weighted average number of common shares outstanding during the period. The dilutive effect on earnings per share is calculated, presuming the exercise of outstanding options, warrants and similar instruments. It assumes that the proceeds of such exercise would be used to repurchase common shares at the average market price during the period. However, the calculation of diluted loss per share excludes the effects of various conversions and exercise of options and warrants that would be anti-dilutive.
| I. | Segment Reporting |
ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, establishes standards for how public business enterprises report information about operating segments in the Company’s condensed financial statements. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. Significantly all of the assets of the Company are located in the United States of America and the Company is a start-up company as at June 30, 2022 and 2021 and has revenue. The Company’s report-able segments and operating segments will include its growth, production and research of medicinal plants operations.
| 9 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 3. | Summary of Significant Accounting Policies (continued) |
| J. | Use of Estimates |
The preparation of the condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. This applies in particular to valuation allowance for deferred tax assets and assignment of the useful lives of property and equipment. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
| K. | Stock-based Compensation |
The Company accounts for stock-based payments in accordance with the provision of ASC 718, which requires that all stock-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations and comprehensive loss based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to stock-based awards is recognized over the requisite service period, which is generally the vesting period.
The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the guidelines in ASC 505-50. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.
| L. | Standards, Amendments, and Interpretations Adopted |
In April 2021, The FASB issued ASU 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. This update is effective for annual periods beginning after December 15, 2021, and interim periods withing those periods, and early adoption is permitted. The Company adopted this accounting policy as of January 1, 2022, which did not significantly impact its condensed financial statements.
| 10 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 3. | Summary of Significant Accounting Policies (continued) |
| M. | Standards, Amendments, and Interpretations Issued but Not Yet Adopted |
| 1) | Leases |
In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the statement of financial position for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of activities.
In November 2019, the new standard’s effective date was delayed one year to fiscal years beginning after December 15, 2020. In June 2020, the FASB issued ASU 2020-05 to defer the effective date of ASU 2016-02, an additional year to fiscal years beginning after December 15, 2021. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. Although the Company does not have leases as of June 30, 2022, the Company is currently evaluating the impact of its pending adoption of the new standard on its condensed financial statements.
| 4. | Concentration of Credit Risk |
Financial
instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
| 11 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 5. | Merger Transactions |
| A. | Bright Green Grow Innovations, LLC Merger |
On
May 28, 2019, the Company entered into a merger agreement with BGGI. Pursuant to the merger agreement, BGGI transferred to the Company
two parcels of land and a greenhouse building having a total net carrying value of $
| B. | Grants Greenhouse Growers, Inc. Merger |
On October 30, 2020, the Company entered into a merger agreement with Grants Greenhouse Growers, Inc. (“GGG”) (the “GGG Merger Agreement”). Pursuant to the GGG Merger Agreement, GGG was merged into the Company in exchange for shares of the Company. GGG had no assets or liabilities, other than the following options agreements:
| - | A
Real Estate Option Agreement dated October 5, 2020, and expiring on December 31, 2021, for
$ | |
| - | A
Real Estate Option Agreement dated October 21, 2020, and expiring on December 31, 2021, for
$ |
The
Company assessed that the merger transaction did not qualify as a business combination in accordance with the provisions of ASC 805.
The Company accounted for the merger as an acquisition of assets. The asset acquisition was accounted for at the fair value of the options
agreement of $
As of December 31, 2021 and 2020, management has assessed the value of these options to be impaired due to uncertainty surrounding their recoverability.
| 12 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 5. | Merger Transactions (continued) |
| C. | Naseeb, Inc. Merger |
On November 10, 2020, the Company entered into a merger agreement with Naseeb, Inc. (“Naseeb”) and the sole shareholder of Naseeb, who is also a shareholder and Chairman of the Company. Pursuant to the Naseeb merger agreement, Naseeb was merged into the Company in exchange for shares of the Company. Naseeb transferred to the Company their assistance that was used by the Company towards obtaining the following licenses and patents to the Company:
| - | New Mexico Hemp License: Industrial Hemp is an agricultural plant that uses all the byproducts of the plant such as seeds and twigs in the production of hemp seed, hemp fiber, and other eco-friendly products. |
New Mexico Board of Pharmacy Schedule 1 Bulk Manufacturers License: Securing the license was required as part of the application and consideration for a federal license. Additionally, being licensed as a Schedule 1 Bulk Manufacturer allows the Company to develop and distribute Schedule 1 drugs; an authorization precedent to the ability to grow, extract and distribute other cannabidiols, such as CBG and CBN. Moreover, with this license, the Company is exempt from the restrictions generally applicable to the cannabis industry, such as plant count and per plant taxes.
| - | Federal Medical Marijuana License: The Company has a formal agreement with the Drug Enforcement Administration for the construction and operation of a federally licensed agricultural center to grow and distribute marijuana, or its chemical constituents, supplying legitimate researchers in the United States. | |
| - | Patents: The patents held by the Company provide innovative medical therapies to a wide range of conditions. These patents can be sold, licensed, or directly marketed as clinical trials are conducted and approved by the FDA. |
The
Company assessed that the merger transaction did not qualify as a business combination in accordance with the provisions of ASC 805.
The Company accounted for the merger as an acquisition of assets. Since, under ASC 850, the merger was considered as a related party
transaction by virtue of common ownership and management, the assets transferred to the Company have been accounted for at historical
cost of Naseeb of $
| 6. | Property, Plant, and Equipment |
The
Company owns an expansive
| 13 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 6. | Property, Plant, and Equipment (continued) |
Property at June 30, 2022 and December 31, 2021, consisted of the following:
| June 30, 2022 | December 31, 2021 | |||||||
| Fixtures | $ | |||||||
| Land | ||||||||
| Construction in progress | ||||||||
| Building and improvement | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Net property, plant, and equipment | $ | |||||||
| 7. | Intangible Assets |
Intangible assets at June 30, 2022 and December 31, 2021, consisted of the following:
| June 30, 2022 | December 31, 2021 | |||||||
| Licenses (Note 5) | $ | |||||||
| Accumulated amortization | ||||||||
| Net intangible assets | $ | |||||||
| 8. | Related Party Line of Credit |
On
June 5, 2022, the Company and LDS Capital LLC (“Lender”), whose managing member is a member of the board of directors, entered into an
unsecured line of credit in the form of a note (the “June Note”). The Note provides that the Company may borrow up to $
| 14 |
| 9. | Stockholders’ Equity |
The Company has authorized shares of $ par value common stock and shares of $ par value preferred stock. As of June 30, 2022 and December 31, 2021, there were and , respectively, of shares of common stock issued and outstanding. The Company has not issued any preferred shares to date.
During the six months ended June 30, 2022, the Company issued the following:
| - |
shares of common stock at a purchase price of $ per share, for gross cash proceeds of
$ | |
| - | shares of common stock for services rendered, at a fair value of $ per share determined using the per share purchase price of the latest $ private placement Round, to the Chief Financial Officer of the Company, in April 2022; | |
| - | shares of common stock for services rendered, at a fair value of $ per share determined using the per share purchase price of the latest $ private placement Round, to six consultants in April 2022; | |
| - | shares of common stock that were issued in January 2021 to a director of the Company, for services valued at $ per share determined using the per share purchase price of the $ Round, were cancelled in April 2022; | |
| - |
shares of common stock at a purchase price of $ per share, for gross cash proceeds of
$ | |
| - | shares of common stock that were issued in June 2019 to a consultant of the Company (Note 11), for services valued at $ per share determined using an asset approach, were cancelled in June 2022. |
During the six months ended June 30, 2021, the Company issued the following:
| - |
shares of common stock at a purchase price of $ per share, for gross cash proceed of
$ | |
| - | shares of common stock for services rendered, at a fair value of $ per share determined using the per share purchase price of the $ Round, to five consultants, with (i) shares issued in January 2021 and (ii) shares issued in May 2021; | |
| - |
shares of common stock for services rendered, at a fair value of $ per share determined
using the per share purchase price of the $ Round, to three directors of the Company,
with (i) shares issued in January 2021 and (ii) shares issued in February 2021. |
| 15 |
| 10. | Related Party Transactions |
Other than the transactions disclosed elsewhere in the condensed financial statements, the following are the other significant related party transactions and balances:
At
June 30, 2022 and December 31, 2021, the due to related party balance totaled $
Included in common stock issued for services during the six months ended June 30, 2022, were shares of common stock issued to the Chief Financial Officer of the Company (Note 9).
Included in common stock issued for services during the six months ended June 30, 2021, were shares of common stock issued to the three directors of the Company (Note 9).
As
of June 30, 2022, $
As
of June 30, 2022, the outstanding balance on the related party line of credit of $
| 11. | Contingencies |
In the ordinary course of business, the Company is routinely defendants in, or parties to a number of pending and threatened legal actions including actions brought on behalf of various classes of claimants. In view of the inherent difficulty of predicting the outcome of such matters, the Company cannot state what the eventual outcome of such matters will be. Legal provisions are established when it becomes probable that the Company will incur an expense related to a legal action and the amount can be reliably estimated. Such provisions are recorded at the best estimate of the amount required to settle any obligation related to these legal actions as at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Management and internal and external experts are involved in estimating any amounts that may be required. The actual costs of resolving these claims may vary significantly from the amount of the legal provisions. The Company’s estimate involves significant judgement, given the varying stages of the proceedings, the fact that the Company’s liability, if any, has yet to be determined and the fact that the underlying matters will change from time to time. Other than as set forth below, the Company is not presently a party to any litigation. The Company is not able to make a reliable assessment of the potential losses as these matters are at an early stage, accordingly, no amounts have been accrued in the condensed financial statements.
| 16 |
BRIGHT GREEN CORPORATION
Notes to the Condensed Financial Statements (Unaudited)
For the Three Months and Six Months Ended June 30, 2022 and 2021
(Expressed in United States Dollars)
| 11. | Contingencies (continued) |
Bright
Green Corporation v. John Fikany, State of New Mexico, County of Cibola, Thirteenth Judicial District. In this matter, the Company
filed a complaint for declaratory judgment against the former acting Chief Executive Officer of the
Company is exploring potential dispositive motions against the counter and third-party claims.
Bright Green Corporation v. Jerry Capussi, State of New Mexico, County of Cibola, Thirteenth Judicial District. In this matter, the Company and defendant, a former consultant of BGGI, a predecessor to the Company, have each filed claims for declaratory judgment seeking to determine by court order whether defendant is entitled to (i) shares of common stock in the Company (amounting to no more than 108,000 shares) or (ii) fair market value of defendant’s equity ownership of BGGI. The lawsuit is in early discovery stages, and the Company is preparing arguments for a summary judgment motion. There are no claims for specific monetary liability against either party.
| 12. | Subsequent Events |
The Company’s management has evaluated the subsequent events up to August 3, 2022, the date the condensed financial statements were issued, pursuant to the requirements of ASC 855, and has determined the following constitute material subsequent events:
On
July 26, 2022, pursuant to the related party line of credit agreement by and between the Company and the Lender, dated June 5, 2022,
the company received $
| 17 |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed financial statements and the accompanying notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the financial statements and the accompanying notes thereto included in our final prospectus (the “Prospectus”) dated May 13, 2022 and filed with the Securities and Exchange Commission (the “SEC”) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”). This discussion contains forward-looking statements based upon current plans, expectations, and beliefs, involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. You should review the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” in the Prospectus, our Quarterly Report on Form 10-Q for the period ended March 31, 2022 and this Quarterly Report on Form 10Q, for discussions of forward-looking statements and factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis, and elsewhere in this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview and History
Bright Green Corporation (“Company”, “BGC”, “we”, “us”, or “our”) is one of the first companies in the U.S. to receive conditional approval from the United States Drug Enforcement Administration (the “DEA”) to cultivate, manufacture and sell cannabis through DEA-approved channels on terms agreed by both the DEA and BGC. The DEA’s Final Rule on the topic estimated that it would award between three and fifteen companies with these registrations. BGC will produce cannabis in full compliance with all federal, state, and local laws for the U.S. government and pharmaceutical producers of medicinal cannabis products who are also licensed by the DEA.
BGC was incorporated in the State of Delaware in April 2019. In October 2020, BGC and GGG consummated the GGG Merger pursuant to the GGG Agreement. In November 2020, BGC and Naseeb consummated the Naseeb Merger pursuant to the Naseeb Agreement.
BGC owns a 70-acre parcel of land, on agricultural property, which includes a completed 22-acre greenhouse structure. The Company also owns a 40-acre parcel of land nearby, and holds options for two additional 300-acre properties which are adjacent to the owned properties (one is known as the “Candelaria” property, and the other is known as the “Azuz” property). Once the project is completed, the existing 22-acre greenhouse will be used to cultivate non-cannabis herbs and medicinal plants.
BGC entered into the Memorandum of Agreement with the DEA (the “MOA”) in May of 2021 following the DEA’s determination that BGC’s application materials appeared consistent with the statutory and regulatory framework. The MOA outlines how BGC will work with the DEA to facilitate the production, storage, packaging, and interstate distribution of federally legal cannabis.
The MOA provides a path to Bright Green for full federal registration to grow in New Mexico and distribute across the United States, any (or all) of the following Schedule I controlled substances: “Marihuana Extract” (7350) and “Marihuana” (7360). The MOA further provides BGC may sell such products to licensed researchers and registered manufacturers in the U.S. and internationally, and may use such product for internal product development and research. Complementary licenses for the same purpose have also been issued by the State of New Mexico under the New Mexico Board of Pharmacy to BGC. The MOA also anticipates BGC will grow cannabis for its own research and product development efforts, which may include the bulk manufacturing of marijuana extracts and highly purified cannabinoids and derivatives.
In addition to the existing greenhouse, BGC will be undergoing new construction to establish a state-of-the-art facility headquartered on our property in Grants, NM. First, we will retrofit the 22-acre existing greenhouse to make it operational. This renovation is underway and we expect it to be completed in June 2022. Within the first 10- acres of that existing greenhouse retrofit, we will include a two-acre University Greenhouse to begin housing our cannabis research, development, cultivation and manufacturing operations. This greenhouse facility will have production capacity for 50,000 cannabis plants at all times of differing maturity levels. Additionally, we estimate we will harvest approximately 300,000 mature plants per year (with multiple harvests per year). The University Greenhouse will house our research and development facility pursuant to potential partnership and other arrangements with leading U.S. universities.
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BGC is constructing two additional greenhouses on the Candelaria and the Azuz properties. Each of these will be 57 acres and are substantially larger and will take longer to build than the retrofit of the existing greenhouse.
Our new construction facilities will include automated robotics such as the Visser transplanter robot, as well as automated growing systems to optimize growth at each stage of plant development. Additionally, they will include the following technological innovations:
| ● | Technologically advanced greenhouse design, which allows for maximum environmental control, cost-efficiency, and a low carbon footprint; | |
| ● | Environmentally sustainable cultivation methodology and practices in harmony with New Mexico’s unique climate, using naturally available resources; | |
| ● | Cultivation at a large scale to provide consistent, secure supply for researchers and the pharmaceutical industry; | |
| ● | A patented air ventilation system, which uses ambient physical properties to generate optimal indoor conditions based upon the data driven growing strategy, with minimum use of energy, which in turn enables the highest yield and quality of crop in the shortest time; | |
| ● | Ebb-flood irrigation to enable the use of mildew resistant cultivars; | |
| ● | Fully-implemented pest/disease scouting system; | |
| ● | Controlled output through Pharma grade drying and extraction; | |
| ● | Extraction and separation techniques allowing for specific combinations of cannabinoids and other properties from cannabis for targeted therapeutics; and | |
| ● | Tamper-proof track & trace and record keeping system. |
Once completed, the newly constructed fully automated facilities will be developed to grow medicinal plants, including cannabis. Upon receipt of final registration from the DEA as described above, we plan to cultivate and manufacture cannabis for federally sanctioned research, as well as perform authorized research on cannabis, including but not limited to CBN, CBG, and CBD. We also plan to leverage our cultivation, research, and manufacturing facilities to develop and commercialize approved medical cannabis products to sell to DEA registered pharmaceutical producers.
Our approximate budget is as follows for the capital construction project:
| ● | The Company continues to renovate the existing greenhouses and will incur $5,000,000 in costs in 2022 to make the greenhouses operational. This will also contain the University Greenhouse within the first 10-acres. The budget for that is approximately $8,500,000, of which $6,500,000 is expected to be incurred in 2022 and the remaining $2,000,000 in 2023. | |
| ● | Phase 1 Greenhouse (“Candelaria”), plus corridor, total 234,230m2 (approximately 57 acres) has a budget of approximately $160,000,000, of which $1,750,000 is expected to be incurred in 2022, $118,250,000 in 2023 and the remaining $40,000,000 in 2024. | |
| ● | Phase 2 Greenhouse (“Azuz”), plus corridor, total 234,230m2 (approximately 57 acres) has a budget of approximately $105,000,000, of which $1,000,000 is expected to be incurred in 2022, $84,000,000 in 2023 and the remaining $20,000,000 in 2024. | |
| ● | The Tissue Lab installation and turnkey consulting plus CO2 extraction installation has a budget of approximately $19,200,000 and will commence and be completed in 2023. |
Cumulatively, of the total expected expenditures of $297,700,000, $14,250,000 is expected to be incurred in 2022, $223,450,000 in 2023, and the remaining $60,000,000 in 2024.
| 19 |
| Project | Total Spend | 2022 | 2023 | 2024 | ||||||||||||
| Existing Greenhouse (including University Greenhouse) | $ | 13,500,000 | $ | 11,500,000 | $ | 2,000,000 | ||||||||||
| Phase I - Candelaria | $ | 160,000,000 | $ | 1,750,000 | $ | 118,250,000 | $ | 40,000,000 | ||||||||
| Phase II - Azuz | $ | 105,000,000 | $ | 1,000,000 | $ | 84,000,000 | $ | 20,000,000 | ||||||||
| Tissue Lab | $ | 19,200,000 | $ | 19,200,000 | ||||||||||||
| Total: | $ | 297,700,000 | $ | 14,250,000 | $ | 223,450,000 | $ | 60,000,000 | ||||||||
All timing and expenditure estimates are subject to change due to supply chain constraints and are contingent upon successful raise of capital from investors.
BGC will engage in cannabis propagation, cultivation, and manufacturing of cannabis products including cannabis flower, pre-rolls, concentrates, vape pens, capsules, tinctures, edibles, topicals and any other cannabis-related products requested for authorized sales. BGC plans to sell mostly extracted oils from medicinal plants grown in these high-tech facilities and processed onsite through a proprietary system that vertically integrates the genetically altered growth of the plants to conform to automated growing systems.
Recent Developments
May 2022 Private Placement
On May 3, 2022, the Company consummated a private placement transaction, whereby the Company issued an aggregate of 300,000 shares of common stock at a purchase price of $10.00 per share, to two accredited investors, each of whom were existing shareholders of the Company, for gross cash proceeds of $3,000,000.
The Company relied upon the exemption provided by Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act in connection with issuance and sale of the securities described above. The persons who acquired these shares were sophisticated investors and were provided full information regarding the Company’s business and operations. There were no general solicitations in connection with the offer or sale of these securities. The persons who acquired these securities acquired them for their own accounts.
Direct Listing of Common Stock
On May 17, 2022, we completed a direct listing of our common stock (the “Direct Listing”), on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BGXX.” We incurred fees related to financial advisory service, audit, and legal expenses in connection with the Direct Listing and incurred approximately $4,000,000 in general and administrative expenses during the six months ended June 30, 2022. In addition, in connection with the Direct Listing, and pursuant to a financial advisory agreement by and between the Company and EF Hutton, division of Benchmark Investments, LLC (the “Advisor”) dated April 8, 2022, we issued the Advisor, or its permitted designees, an aggregate of 1,574,490 shares of common stock, on June 3, 2022.
| 20 |
June 2022 Shareholder Line of Credit
On June 5, 2022, the Company and the Lender, a member of the board of directors, entered into an unsecured line of credit in the form of a note (the “June Note”). The Note provides that the Company may borrow up to $5.0 million, including an initial loan in the amount of $3.0 million, through June 4, 2025 (the “June Note Maturity Date”) from Lender. Lender has committed to fund to the Company $3.0 million under the June Note by June 30, 2022. Prior to the June Note Maturity Date, the Company may borrow up to an additional $2.0 million under the June Note, at Lender’s sole discretion, and subject to the Company’s request of such additional funds form Lender (each loan furnished under the June Note individually, a “Loan,” and collectively, the “Loans”). The Company has the right, but not the obligation, to prepay any Loan, in whole or in part, prior to the June Note Maturity Date. Interest on the unpaid principal amount of any Loan accrues through the earlier of the June Note Maturity Date or the date of prepayment on such Loan, at a rate of 2% per annum plus the Prime Rate (the rate of interest per annum announced from time to time by JPMorgan Chase Bank as its prime rate). If the principal and interest, if any, of any Loan is not paid in full on the Maturity Date, additional penalty interest will accrue on such Loan in the amount of 2% per annum.
As of June 30, 2022, the Company had drawn down $2.0 million. In July 2022, the Company drew another $1.0 million.
Coronavirus (“COVID-19”) Impact
The outbreak of COVID-19, a novel strain of coronavirus first identified in China, which has spread across the globe including the U.S., has had an adverse impact on our operations and financial condition. Most recently, the response to this coronavirus by federal, state and local governments in the U.S. has resulted in the significant market and business disruptions across many industries and affecting businesses of all sizes. This pandemic has also caused significant stock market volatility and further tightened capital access for most businesses. Given that the COVID-19 pandemic and its disruptions are of unknown duration, they could have an adverse effect on our liquidity and profitability.
The ultimate magnitude of COVID-19, including the extent of its impact on our financial and operational results, which could be material, will depend on the length of time that the pandemic continues, its effect on the demand for our products and our supply chain, the effect of governmental regulations imposed in response to the pandemic, as well as uncertainty regarding all of the foregoing. We cannot at this time predict the full impact of the COVID-19 pandemic, but it could have a larger material adverse effect on our business, financial condition, results of operations and cash flows beyond what is discussed within this quarterly report.
See the section titled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q and our final Prospectus for further discussion of the possible impact of the COVID-19 pandemic on our business.
Eastern European Conflict Impact
In late February 2022, Russian military forces launched significant military action against Ukraine. Sustained conflict and disruption in the region is likely. The aggregate impact to Eastern Europe and Europe as a whole, as well as actions taken by other countries, including new and stricter sanctions by the United States, Canada, the United Kingdom, the European Union, and other countries and organizations against officials, individuals, regions, and industries in Russia, Belarus and Ukraine, and each country’s potential response to such sanctions, tensions and military actions, is not knowable at this time, and could have a material adverse effect on the Company, its business and operations.
Results of Operations
This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for the three and six months ended June 30, 2022 and June 30, 2021.
The Company has not started commercial operations but has incurred expenses in connection with corporate and administrative matters, upkeep of acquired properties for future growing, processing and distribution of medical plants, and improvements to those properties. These expenses include stock-based compensation for services rendered, legal and audit fees, and property-related expenses such as depreciation, insurance and taxes. As a result, the Company reported a net loss both reporting periods.
Three and six months ended June 30, 2022 compared to three and six months ended June 30, 2021.
Revenue:
We are a start-up company and have not generated any revenues for the three and six months ended June 30, 2022 and 2021. We can provide no assurance that we will generate sufficient revenues from our intended business operations to sustain a viable business operation. In order to generate revenues, we must first receive receipt of final registration from the DEA as described above and begin
| 21 |
Operating Expenses:
We incurred operating expenses in the amount of $12,883,133 for the three months ended June 30, 2022, as compared with $431,471 for the same period ended 2021. We incurred operating expenses in the amount of $13,609,479 for the six months ended June 30, 2022, as compared with $941,012 for the same period ended 2021. Our operating expenses for all periods consisted entirely of general and administrative expenses and depreciation. The detail by major category within General and administrative expenses for the three months ended June 30, 2022 and 2021 is reflected in the table below.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||
| Share based compensation | $ | 8,280,508 | 30,000 | $ | 8,280,508 | 130,000 | ||||||||||
| Professional fees | 4,069,967 | 166,336 | 4,532,173 | 324,017 | ||||||||||||
| Travel | 120,691 | - | 132,337 | - | ||||||||||||
| Other expenses | 88,370 | 5,812 | 99,435 | 20,372 | ||||||||||||
| Licenses | 70,335 | 5,635 | 81,658 | 10,935 | ||||||||||||
| Insurance | 33,602 | 8,927 | 46,903 | 28,043 | ||||||||||||
| Property taxes | 14,498 | 18,080 | 28,997 | 35,593 | ||||||||||||
| Land option | 10,500 | 9,250 | 21,000 | 19,250 | ||||||||||||
| Total general and administrative expenses | $ | 12,688,471 | 244,040 | $ | 13,223,011 | 568,210 | ||||||||||
| Depreciation | 194,662 | 187,431 | 386,468 | 372,802 | ||||||||||||
| Total operating expenses | $ | 12,883,133 | 431,471 | $ | 13,609,479 | 941,012 | ||||||||||
The increase of $12,444,431 and $12,654,801 in our general and administrative expenses for the three and six months ended June 30, 2022, respectively, versus the same periods ended 2021 is largely the result of increased spending on professional fees associated with the Direct Listing and share based compensation to executives and service providers.
We expect our general and administrative expenses to increase in future quarters as we continue with our reporting obligations with the SEC and the increased expenses associated with increased operational activity, which is expected for the balance of the year.
Liquidity and Capital Resources
As of June 30, 2022, the Company had cash of $178,973 compared to $1,282,565 as of December 31, 2021. The decrease of $1,103,592 in cash was mainly from the use of funds for the construction in progress. This decrease was offset by cash received from the sales of common stock of $3,050,000 and drawn down on the Related Party Line of Credit of $2,000,000. Since its inception, the Company has incurred net losses and funded its operations primarily through the issuance of equities and an advance from a director. As at June 30, 2022, the Company had a total stockholders’ equity of $5,941,428 (December 31, 2021 - $8,220,399).
The Company is in its initial stages to start building facilities to grow, research and distribute medical plants. The Company has incurred recurring losses from operations, and as at June 30, 2022, had an accumulated deficit of $20,023,223 (December 31, 2021 -$6,413,744) and a negative working capital of $1,611,420 (December 31, 2021 - working capital of $1,282,829). The Company has also drawn down an additional $1,000,000 on the Related Party Line of Credit subsequent to June 30, 2022. The Company has sufficient working capital, inclusive of the ability to drawn down an additional $2,000,000 on the Related Party Line of Credit to pay its operating expenses for a period of at least 12 months from the date the condensed financial statements were authorized to be issued. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. The Company has developed plans to raise funds and continues to pursue sources of funding that management believes, if successful, would be sufficient to support the Company’s operating plan. During the three months ended June 30, 2022, the Company raised $3,000,000 through common stock issuances. The Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, its ability to continue to raise additional financing and the state of the general economic environment in which the Company operates. There can be no assurance that these assumptions will prove accurate in all material respects, or that the Company will be able to successfully execute its operating plan. In the event that the Company is not able to raise capital from investors in a timely manner, the Company will explore available options, including but not limited to, an equity backed loan against the property. In the absence of additional appropriate financing, the Company may have to modify its plan or slow down the pace of development and commercialization.
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The Company does not have any short or long-term contractual purchases with suppliers for future purchases, capital expenditure commitments that cannot be cancelled with minimal fees, non-cancelable operating leases, or any commitment or contingency that would hinder management’s ability to scale down operations and management expenses until funding is raised.
Inflation
Although our operations are influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the six months ended June 30, 2022.
Off-balance sheet arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and 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 available apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a detailed discussion about the Company’s significant accounting policies, refer to Note 3 “Summary of Significant Accounting Policies,” in the Company’s financial statements included in this Quarterly Report on Form 10-Q. During the six months ended June 30, 2022, no material changes were made to the Company’s significant accounting policies.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act until the earlier of the date we (1) are no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company believes that it is not subject to material foreign currency exchange rate fluctuations, as substantially all of its sales and expenses are denominated in the U.S. dollar. The Company does not hold derivative securities and has not entered into contracts embedded with derivative instruments, such as foreign currency and interest rate swaps, options, forwards, futures, collars or warrants, either to hedge existing risks or for speculative purposes.
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| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Interim Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on that evaluation, our Interim Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS |
From time to time, we may be involved in legal proceedings arising from the normal course of business activities. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Other than as set forth below, we are not presently a party to any litigation the outcome of which, if determined adversely to us, would in our estimation, have a material adverse effect on our business, operating results, cash flows or financial condition.
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| ● | Bright Green Corporation v. John Fikany, D-1333-CV-202000231, State of New Mexico, County of Cibola, Thirteenth Judicial District. On October 23, 2020, the Company filed a complaint for declaratory judgment against the former acting Chief Executive Officer of the Bright Green Group of Companies, an entity unrelated to the Company, to determine if defendant is entitled to 5,000,000 shares of the Company’s common stock, based on a failure to fulfil agreed upon conditions precedent to earning such shares from the Company. Defendant counterclaimed and filed a third-party claim against Lynn Stockwell, founder and a director of the Company, and Ms. Stockwell’s husband, for claims including wrongful termination and breach of contract. The Company denies defendants allegations and have set forth arguments refuting defendant’s counterclaims and third-party claims. The case is in the discovery phase. The Company is exploring potential dispositive motions against the counter and third-party claims. | |
| ● | Bright Green Corporation v. Jerry Capussi, D-1333-CV-202000252, State of New Mexico, County of Cibola, Thirteenth Judicial District. On November 16, 2020, the Company and defendant, a former consultant of BGGI, a predecessor to the Company, each filed claims for declaratory judgment seeking to determine by court order whether defendant is entitled to (i) shares of common stock in the Company (amounting to no more than 108,000 shares) or (ii) fair market value of defendant’s equity ownership of BGGI. The lawsuit is in early discovery stages, and we are preparing arguments for a summary judgment motion. There are no claims for specific monetary liability against either party. |
| ITEM 1A. | RISK FACTORS |
An investment in our securities involves a high degree of risk. You should carefully consider the following risks and all of the other information contained in this quarterly report before deciding whether to invest in our securities, together with the risks and information set forth in our prospectus filed with the SEC on May 17, 2022. If any of these risks are realized, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our securities could decline and you could lose all or part of your investment in our securities. Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business and results of operations. Some statements in this quarterly report, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Changes in the competitive landscape for cannabis for federally sanctioned research could significantly, negatively impact us.
The DEA has not made public how many entities received memorandums of agreement. If the DEA awards additional licenses to grow cannabis for federally sanctioned research it would limit our competitive advantage. This would have a negative impact on our business plans, operations and financial results.
The Medical Marijuana and Cannabidiol Research Expansion Act, introduced in July 2022 in the House by U.S. Reps. Earl Blumenauer, D-Ore., and Andy Harris, R-Md., is the companion bill to Senate Bill 253 (which passed the Senate in April 2022). As drafted, the bill could increase the number of federally-licensed cannabis researchers in the U.S., and would require researchers to cultivate their own product under federal authorization or purchase their product from federally legal supply channels (DEA Registrants). The House Bill does not include a provision in the Senate Bill which would allow cannabis researchers to study products available in state-legal commercial cannabis markets. The final parameters of a final bill will require reconciling the Senate and House versions, and are unknowable, as are the impacts a final bill could have on our industry or our business and operations. In July 2022, Senators Chuck Schumer (D-NY), Cory Booker (D-NJ), and Ron Wyden (D-OR) introduced the Cannabis Administration and Opportunity Act (“CAOA”), which provides for comprehensive federal legalization of cannabis. The probability that the CAOA in its current form is adopted, now or in the future, is unknowable at this time, as are the impacts the CAOA could have on our industry or business and operations.
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The market price of our common stock has been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control.
The market price of our common stock has fluctuated, and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. These factors include, without limitation:
| ● | “short squeezes”; | |
| ● | comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media; | |
| ● | an increase or decrease in the short interest in our common stock; | |
| ● | actual or anticipated fluctuations in our financial and operating results; | |
| ● | risks and uncertainties associated with events and macroeconomics events such as the ongoing COVID-19 pandemic, fluctuations in U.S. interest rates and rapid inflation; and | |
| ● | overall general market fluctuations. |
Publicly traded companies’ stock prices in general, and our stock price in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies and our company. For example, on May 18, 2022 and July 29, 2022, the closing price of our common stock was $48.08 and $1.65, respectively, and the daily trading volume on these days was approximately 3,221,100 and 569,900 shares, respectively. These broad market fluctuations may adversely affect the trading price of our common stock. In particular, a proportion of our common stock has been, and may continue to be, traded by short sellers which may put pressure on the supply and demand for our common stock, further influencing volatility in the market price. Additionally, these and other external factors have caused, and may continue to cause, the market price and demand of our common stock to fluctuate, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.
A “short squeeze” due to a sudden increase in demand for shares of our common stock could lead to extreme price volatility in shares of our common stock.
Investors may purchase shares of our common stock to hedge existing exposure or to speculate on the price of our common stock. Speculation of the price of our common stock may lead to long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for purchase on the open market, investors with short exposure may have to pay a premium to repurchase shares of our common stock for delivery to lenders of our common stock. Those repurchases may in turn, dramatically increase the price of our common stock until additional shares of our common stock are available for trading or borrowing. This is often referred to as a “short squeeze.” A proportion of our common stock has been, and may continue to be, traded by short sellers which may increase the likelihood that our common stock will be the target of a short squeeze. A short squeeze could lead to volatile price movements in shares of our common stock that are unrelated or disproportionate to our operating performance and, once investors purchase the shares of our common stock necessary to cover their short positions, the price of our common stock may rapidly decline. Investors that purchase shares of our common stock during a short squeeze may lose a significant portion of their investment.
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| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES |
During the period from April 1, 2022 through the date hereof, the Company issued the following:
| ● | 300,000 shares of common stock at a purchase price of $10.00 per share to two existing stockholders, each of whom are accredited investors, for gross cash proceeds of $3,000,000, in May 2022. | |
| ● | 1,574,490 shares of common stock for services rendered in connection with the direct listing of our common stock on Nasdaq, in June 2022. |
The Company relied upon the exemption provided by Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act in connection with issuance and sale of the securities described above. The person who acquired these shares was a sophisticated investor and was provided full information regarding the Company’s business and operations. There were no general solicitations in connection with the offer or sale of these securities. The person who acquired these securities acquired them for their own account.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
Not applicable.
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| ITEM 6. | EXHIBITS |
| * | Filed Herewith |
| † | The certifications attached as Exhibit 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
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SIGNATURES
Pursuant to the requirements 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.
| BRIGHT GREEN CORPORATION | ||
| Date: August 12, 2022 | By: | /s/ Terry Rafih |
| Terry Rafih | ||
| Interim Chief Executive Officer | ||
| Date: August 12, 2022 | By: | /s/ Saleem Elmasri |
| Saleem Elmasri | ||
| Chief Financial Officer | ||
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