RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 11 - RELATED PARTY TRANSACTIONS

As of September 30, 2023, and December 31, 2022, the Company owed Primus $0 and $5,163 respectively, for rent and storage fees. As of September 30, 2023, and December 31, 2022, Primus had been paid $342,638 and $25,000 respectively, in advance, for rent and storage fees. During the nine months ended September 30, 2023, and 2022, the Company expensed $222,883 and $206,821, respectively, for services provided by Primus.  The Company’s CEO owns 90% of Primus.

As of September 1, 2022, the salaries of the CEO and the CMO, as defined in their respective employment agreements, were paid through the Company’s payroll service. These payments replace the prior independent contractor payments received by their entities, Strategic Global Partners, Inc. and Cube 17, Inc., respectively. Although employment contracts were dated from January 2022, salaries were paid with effect from September 1, 2022. During the three and nine months ended September 30, 2023, the Company incurred expenses of $60,000 and $180,000, respectively, related to salaries for the CEO and CMO. During the three and nine months ended September 30, 2022, the Company incurred expenses of $40,000 and $160,000, respectively, related to consulting fees for the CEO and CMO.  The Company does not believe there is substantial risk that employer taxes with penalties and interest may be due related to payments made to the CEO and CMO as consultants. 

As of September 30, 2023, and December 31, 2022, the Company was owed $0 and $0, respectively, and owed $0, and $0, respectively, by and, to UST Mexico, Inc / US Tobacco de Mexico. (“UST Mexico”) under a mutual line of credit agreement.

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

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

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

As of September 30, 2023 and December 31, 2022, the balance owed to the Company by GGII was $1,684,053 and $692,119 respectively. The Company recorded a reserve of $1,684,053 against this balance as of September 30, 2023. Subsequent to September 30, 2023, the Company made additional loans of $96,400 to GGII. 

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

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