Correspondence 0001393905-24-000435 from SANTO MINING CORP. (SANP) (CIK 0001499275)
SANTO MINING CORP. (SANP) (CIK 0001499275)
Date: Dec. 30, 2024 · CIK: 0001499275 · Accession: 0001393905-24-000435
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-54938
Referenced dates: November 27, 2024
Letter
Division of Corporation Finance Securities and Exchange Commission Registration Statement on Form 10-12G Filed October 31, 2024 File No. 000-54938
Re: SANTO MINING CORP.
Dear Sir/Madam:
In response to your letter dated November 27, 2024, the following information is hereby submitted on behalf of Santo Mining Corp (the "Company"). Amendment No. 1 to the Registration Statement on S-1 was filed on December 27, 2024. For your convenience, we have reproduced the Staff's comments below in blue italicized text immediately before our response.
QUESTION-1
We note that you have three subsidiaries. Please revise to provide a materially complete discussion of the operations of each subsidiary and the corporate history of Groove, f/k/a Santo Mining, including when each entity was formed, when they became subsidiaries of the Company, and any consideration paid for each entity or other corporate transactions completed.
PAGE-3
BlackFlamingo Ventures, LLC
FEI/EIN: 92-3281193
Date of Incorporated: 04/11/2023
State of Incorporation: Florida
Director: Franjose Yglesias
Title: MRG
Consideration Paid: NONE
Formed and incorporated by the Company
Santo Blockchain Labs, Corp
FEI/EIN: 86-2642129
Date of Incorporated: 03/15/2021
State of Incorporation: Wyoming
Director: Franjose Yglesias
Title: MRG
Consideration Paid: NONE
Formed and incorporated by the Company
Santo Blockchain Labs of Colombia S.A.S
NIT: 901-614-506-9
Date of Incorporated: 02/065/2022
State of Incorporation: Medellin, Republic of Colombia
Representante Legal: Franjose Yglesias
Title: CEO
Consideration Paid: NONE
Formed and incorporated by the Company
QUESTION-2
We note your discussion centers around your ideas for your business, but does not address your efforts to date. Please expand your discussion to address how your assets and technology have contributed to your business and operations. Reconcile those assets and technologies to your financial statements.
PAGE-9 & PAGE-67
1.Intellectual Property (IP): Groovy proprietary centralized Hyperledger Fabric layer-1 blockchain software, along with its QR-NFT system design and associated algorithms, are in the final stages of application for a utility patent with the USPTO. This intellectual property represents significant value, encompassing hundreds of thousands of lines of logical code, and is foundational to Groovy Goods' operations and future growth. The utility patent application reflects the significant development effort invested in this core technology and will be reflected as an intangible asset on the balance sheet. A third-party IP evaluation is planned for Q3 2025 to further assess the full scope and value of this technology. This third-party evaluation, scheduled for Q3 2025, will follow the completion of the beta testing methodology phase. It will comprehensively assess the intellectual property, including code, technical documentation, and training materials. The evaluation will provide a detailed and objective assessment of the intangible asset's value, and the findings will be reflected in future financial reporting and disclosure. This independent assessment is crucial for accurately reflecting the value of this foundational technology within the company's financial statements.
2.Development Team: The employees who developed and implemented Groovy's blockchain software and associated systems are a critical asset. Their salaries and benefits, along with related overhead costs associated with these employees, are reflected in operating expenses as detailed in the consolidated statements of operations. While the majority of the development team are full-time employees, the company also utilizes external software developers, graphic designers, and front-end UI/UX personnel. The costs associated with these outsourced personnel are also included in operating expenses. The company's reliance on both internal and external expertise reflects its commitment to building a robust and functional technology platform for the cannabis industry.
3.Hardware: Our cloud base servers, computers, and other hardware used to support the blockchain network and associated software are physical assets and are reflected on our financials.
4.Software Licenses: The licenses for any software used in the development or operation of the system are recurring expenses, and also evident on our financials as business expenses.
5.Reduced Counterfeiting: The Groovy Platform is the foundation of the company and a significant, irreplaceable asset, primarily due to its robust capabilities in combating counterfeiting, reducing the prevalence of illicit grey and black markets, and assisting states in tracking cannabis sales for increased tax revenue. This platform accomplishes this through a meticulously tracked and verified product history, from cultivation to end-user sale. This detailed record-keeping, facilitated by the proprietary blockchain, significantly decreases the likelihood of counterfeit products entering the market, as each transaction and product attribute are immutably recorded. The platform's transparency, therefore, supports a more regulated market, empowering states to accurately track sales, improve tax collection, and reduce revenue losses from illicit activities. This improved transparency in the cannabis industry ultimately strengthens its long-term sustainability and responsible growth.
6.Increased Sales: The Groovy Platform enhances consumer traceability, trust and transparency. This leads to increased sales volume and higher revenue for the company’s clients.
7.Improved Brand Reputation: Traceability, trust and transparency build a stronger brand image. This improvement can lead to increased brand value and higher customer lifetime value, which is less directly measurable than revenue for our clients.
8.Cost Savings: The reduction in counterfeit issues, improved supply chain visibility, and optimized inventory management should lead to cost savings which can improve profitability for our customers.
9.Enhanced Customer Loyalty: The reward program, supported by the Groovy blockchain, builds customer loyalty, leading to repeat business and higher lifetime customer value. This is another less direct element that leads to a better return on investment, for our clients.
QUESTION-3
We note your previous disclosures. We further note that you user a centralized layer 1 blockchain. Please clarify the blockchain network on which the NFTs are, or will be minted. Alternatively, to the extent you intend to mint your NFTs on a proprietary blockchain, disclose that in your filing and the risks and challenges related to developing and maintaining the blockchain, and provide more details regarding the Inter-Blockchain Communication Protocol. In addition, we note that you offer, or intend to offer bespoke blockchain products as one of your product offerings. Please revise to clarify whether you have created any proprietary or unique blockchains and associated crypto assets, and whether you currently hold or intend to hold any crypto assets as a part of your business.
PAGE-4 & PAGE-62
Sub-Question 3(a)
The Groovy platform system leverages a private, centralized, permissioned, layer-1 blockchain network custom-built in the Hyperledger Fabric. This blockchain is specifically designed and controlled by the company. NFTs (QR-NFTs) are minted and managed on this dedicated private blockchain, not a public blockchain. Crucially, these QR-NFTs are not cryptocurrencies and do not have independent tradable or economic value. They exist solely within the confines of the company's controlled blockchain ecosystem, for the purpose of traceability, and authentication, and includes manufacture/brand information, state information, dispensary information, and laboratory information, to consumers.
Advantages of a Private Centralized Layer-1 Blockchain:
1.Control and Security: The central nature of the blockchain grants the manufacturer or consortium full control over the system, ensuring security, regulatory compliance, and data privacy. Access is rigorously controlled and permission-based.
2.Scalability (for limited participants): A private blockchain is tailored to the specific needs of the participating entities, optimizing throughput and responsiveness for a manageable number of transactions and users.
3.Customization: The architecture allows for fine-grained control over data structures, smart contracts, and access rights, enabling a highly customized solution that precisely meets the requirements of the cannabis industry.
4.Compliance: The system can be meticulously tailored to meet regulatory requirements concerning product traceability, handling, and origin verification in various jurisdictions.
Sub-Question 3(b)
Groovy's QR-NFTs are not cryptocurrencies, nor are the tradable. They are unique digital identifiers tied to specific cannabis products, with their associated information stored immutably on our Private Centralized Layer-1 Blockchain. The key difference from cryptocurrencies is that QR-NFTs have no independent value beyond their representational function within Groovy's system. They are not tradable, and this prevents the unauthorized transfer of product ownership information.
The "Howey" test, a legal framework for determining investment contracts, is not directly applicable to Groovy's QR-NFTs. The Howey test's criteria—fungibility, scarcity, utility, and investment—relate to the characteristics of cryptocurrencies and digital assets operating within independent marketplaces. Groovy's QR-NFTs are not cryptocurrencies, and therefore do not possess independent fungibility, scarcity, or a market-driven exchange value. Instead, they function as unique identifiers within a controlled system designed to authenticate products. Furthermore, Groovy's QR-NFTs do not trigger the conditions of the Howey test because they are not offered or marketed as an investment product. They are solely utilized as a verifiable record of product attributes. The application of the Howey test criteria is inappropriate in this context.
Groovy's private, centralized, permissioned layer-1 blockchain, coupled with QR-NFTs, provides a secure and transparent system for authenticating cannabis products. The same fundamental principles of
provenance and verification could be easily adapted to the health and beauty industry, the over-the-counter medications and other regulated pharmaceuticals, offering an enhanced level of safety and traceability. This framework safeguards data integrity and facilitates compliance by recording and verifying product provenance, handling, and testing throughout the supply chain. The design enables a robust consumer reward program, yet crucially, QR-NFTs are not intended for trading or speculative investment, avoiding complexities associated with cryptocurrency markets. This structure simplifies regulatory considerations across multiple sectors, while preventing potential misuse or speculation.
Sub-Question 3(c)
Groovy's Proprietary Centralize Hyperledger Layer-1 Blockchain, while primarily a private, centralized ledger for product authentication and reward programs, will leverage the Inter-Blockchain Communication (IBC) protocol to seamlessly communicate with legacy decentralized blockchains. This will enable access to detailed product information held on those decentralized networks, from clients.
Groovy's IBC-enabled integration will function as follows:
1.Data Aggregation: When a user scans the QR-NFT tag associated with a specific cannabis product on Groovy's platform, the system initiates a request to the relevant legacy blockchain. This query targets specific smart contracts or data repositories on the legacy blockchain containing comprehensive product details.
2.IBC Communication: The IBC protocol facilitates the secure and efficient communication between Groovy's blockchain and the legacy blockchain. Encrypted messages containing the product's unique identifier are sent via IBC channels.
3.Data Retrieval: The legacy blockchain, upon receiving the request, verifies the origin and validity of the message using predefined IBC security measures and returns the requested product information. This process is validated within the security confines of the respective blockchain.
4.Data Validation and Consolidation: Groovy's system validates the received data against established internal data sets and protocols, ensuring consistency and accuracy. This includes checking the integrity of the data received from the legacy blockchain, confirming the source and ensuring the data is compatible with the Groovy system.
5.Data Presentation: The consolidated product data, presented on Groovy's platform in a user-friendly format, is applicable not only to the cannabis industry but also to the health and beauty care industry, over-the-counter (OTC) medication, and the regulated pharmaceutical industry. This detailed information, encompassing product specifics like origin, manufacturing processes, and certifications, becomes a crucial tool for consumers and regulators in any regulated industry. For example, in the health and beauty care industry, consumers can verify the source of ingredients and manufacturing standards, fostering transparency and trust. In the OTC medication sector, access to verifiable manufacturing details, batch numbers, and expiration dates enhances consumer safety and helps track products throughout the supply chain, improving product quality and preventing counterfeiting. The pharmaceutical industry, with its stringent regulatory requirements, will benefit from this type of comprehensive traceability, offering improved verification of authenticity and quality control in the manufacturing process, all critical to consumer protection. This standardized data format, implemented consistently across various sectors, facilitates regulatory compliance and bolsters consumer confidence.
6.Simplified User Experience: The consumer can then access this comprehensive product information without needing to interact with different blockchains or decentralized applications (dApps). Groovy's platform acts as a unified entry point, providing a streamlined and user-friendly experience.
7.Interoperability: This method fosters interoperability between the private, centralized Groovy system and the broader, decentralized ecosystem of cannabis product information. This provides a broader view of product origins and certifications for the consumer and strengthens the overall value proposition of Groovy's platform.
This IBC-enabled data transfer not only enhances Groovy's value proposition but also exemplifies a best-practice approach for interoperability in a multi-blockchain environment.
Sub-Question 3(d)
Groovy's proprietary, private, permissioned layer-1 blockchain, designed for the cannabis industry, employs a modular architecture adaptable to other regulated sectors. Its core strength lies in its secure, immutable ledger, enabling verifiable product provenance and supply chain tracking. This technology, using cryptographic hashing and secure consensus mechanisms, ensures the integrity of data from cultivation to consumer. This feature is crucial for mitigating risks in various sectors, including:
·Cannabis: Combating counterfeiting, enhancing transparency, enabling accurate sales tracking, and facilitating compliance with state regulations.
·Health and Beauty: Verifying ingredient authenticity and manufacturing processes, strengthening supply chain management, and addressing product safety concerns.
·OTC Medications: Ensuring product integrity, validating expiration dates, and tracking product movement through the supply chain for enhanced safety and accountability.
·Pharmaceuticals: Verifying drug authenticity,
Show Raw Text
CORRESP 1 filename1.htm Comment Response Letter SANTO MINING CORP. 300 Peachtree St. NE, Ste #1775 Atlanta, GA 30308-3565 December 30, 2024 Division of Corporation Finance Securities and Exchange Commission Re: SANTO MINING CORP. Registration Statement on Form 10-12G Filed October 31, 2024 File No. 000-54938 Dear Sir/Madam: In response to your letter dated November 27, 2024, the following information is hereby submitted on behalf of Santo Mining Corp (the "Company"). Amendment No. 1 to the Registration Statement on S-1 was filed on December 27, 2024. For your convenience, we have reproduced the Staff's comments below in blue italicized text immediately before our response. QUESTION-1 We note that you have three subsidiaries. Please revise to provide a materially complete discussion of the operations of each subsidiary and the corporate history of Groove, f/k/a Santo Mining, including when each entity was formed, when they became subsidiaries of the Company, and any consideration paid for each entity or other corporate transactions completed. PAGE-3 BlackFlamingo Ventures, LLC FEI/EIN: 92-3281193 Date of Incorporated: 04/11/2023 State of Incorporation: Florida Director: Franjose Yglesias Title: MRG Consideration Paid: NONE Formed and incorporated by the Company Santo Blockchain Labs, Corp FEI/EIN: 86-2642129 Date of Incorporated: 03/15/2021 State of Incorporation: Wyoming Director: Franjose Yglesias Title: MRG Consideration Paid: NONE Formed and incorporated by the Company Santo Blockchain Labs of Colombia S.A.S NIT: 901-614-506-9 Date of Incorporated: 02/065/2022 State of Incorporation: Medellin, Republic of Colombia Representante Legal: Franjose Yglesias Title: CEO Consideration Paid: NONE Formed and incorporated by the Company QUESTION-2 We note your discussion centers around your ideas for your business, but does not address your efforts to date. Please expand your discussion to address how your assets and technology have contributed to your business and operations. Reconcile those assets and technologies to your financial statements. PAGE-9 & PAGE-67 1.Intellectual Property (IP): Groovy proprietary centralized Hyperledger Fabric layer-1 blockchain software, along with its QR-NFT system design and associated algorithms, are in the final stages of application for a utility patent with the USPTO. This intellectual property represents significant value, encompassing hundreds of thousands of lines of logical code, and is foundational to Groovy Goods' operations and future growth. The utility patent application reflects the significant development effort invested in this core technology and will be reflected as an intangible asset on the balance sheet. A third-party IP evaluation is planned for Q3 2025 to further assess the full scope and value of this technology. This third-party evaluation, scheduled for Q3 2025, will follow the completion of the beta testing methodology phase. It will comprehensively assess the intellectual property, including code, technical documentation, and training materials. The evaluation will provide a detailed and objective assessment of the intangible asset's value, and the findings will be reflected in future financial reporting and disclosure. This independent assessment is crucial for accurately reflecting the value of this foundational technology within the company's financial statements. 2.Development Team: The employees who developed and implemented Groovy's blockchain software and associated systems are a critical asset. Their salaries and benefits, along with related overhead costs associated with these employees, are reflected in operating expenses as detailed in the consolidated statements of operations. While the majority of the development team are full-time employees, the company also utilizes external software developers, graphic designers, and front-end UI/UX personnel. The costs associated with these outsourced personnel are also included in operating expenses. The company's reliance on both internal and external expertise reflects its commitment to building a robust and functional technology platform for the cannabis industry. 3.Hardware: Our cloud base servers, computers, and other hardware used to support the blockchain network and associated software are physical assets and are reflected on our financials. 4.Software Licenses: The licenses for any software used in the development or operation of the system are recurring expenses, and also evident on our financials as business expenses. 5.Reduced Counterfeiting: The Groovy Platform is the foundation of the company and a significant, irreplaceable asset, primarily due to its robust capabilities in combating counterfeiting, reducing the prevalence of illicit grey and black markets, and assisting states in tracking cannabis sales for increased tax revenue. This platform accomplishes this through a meticulously tracked and verified product history, from cultivation to end-user sale. This detailed record-keeping, facilitated by the proprietary blockchain, significantly decreases the likelihood of counterfeit products entering the market, as each transaction and product attribute are immutably recorded. The platform's transparency, therefore, supports a more regulated market, empowering states to accurately track sales, improve tax collection, and reduce revenue losses from illicit activities. This improved transparency in the cannabis industry ultimately strengthens its long-term sustainability and responsible growth. 6.Increased Sales: The Groovy Platform enhances consumer traceability, trust and transparency. This leads to increased sales volume and higher revenue for the company’s clients. 7.Improved Brand Reputation: Traceability, trust and transparency build a stronger brand image. This improvement can lead to increased brand value and higher customer lifetime value, which is less directly measurable than revenue for our clients. 8.Cost Savings: The reduction in counterfeit issues, improved supply chain visibility, and optimized inventory management should lead to cost savings which can improve profitability for our customers. 9.Enhanced Customer Loyalty: The reward program, supported by the Groovy blockchain, builds customer loyalty, leading to repeat business and higher lifetime customer value. This is another less direct element that leads to a better return on investment, for our clients. QUESTION-3 We note your previous disclosures. We further note that you user a centralized layer 1 blockchain. Please clarify the blockchain network on which the NFTs are, or will be minted. Alternatively, to the extent you intend to mint your NFTs on a proprietary blockchain, disclose that in your filing and the risks and challenges related to developing and maintaining the blockchain, and provide more details regarding the Inter-Blockchain Communication Protocol. In addition, we note that you offer, or intend to offer bespoke blockchain products as one of your product offerings. Please revise to clarify whether you have created any proprietary or unique blockchains and associated crypto assets, and whether you currently hold or intend to hold any crypto assets as a part of your business. PAGE-4 & PAGE-62 Sub-Question 3(a) The Groovy platform system leverages a private, centralized, permissioned, layer-1 blockchain network custom-built in the Hyperledger Fabric. This blockchain is specifically designed and controlled by the company. NFTs (QR-NFTs) are minted and managed on this dedicated private blockchain, not a public blockchain. Crucially, these QR-NFTs are not cryptocurrencies and do not have independent tradable or economic value. They exist solely within the confines of the company's controlled blockchain ecosystem, for the purpose of traceability, and authentication, and includes manufacture/brand information, state information, dispensary information, and laboratory information, to consumers. Advantages of a Private Centralized Layer-1 Blockchain: 1.Control and Security: The central nature of the blockchain grants the manufacturer or consortium full control over the system, ensuring security, regulatory compliance, and data privacy. Access is rigorously controlled and permission-based. 2.Scalability (for limited participants): A private blockchain is tailored to the specific needs of the participating entities, optimizing throughput and responsiveness for a manageable number of transactions and users. 3.Customization: The architecture allows for fine-grained control over data structures, smart contracts, and access rights, enabling a highly customized solution that precisely meets the requirements of the cannabis industry. 4.Compliance: The system can be meticulously tailored to meet regulatory requirements concerning product traceability, handling, and origin verification in various jurisdictions. Sub-Question 3(b) Groovy's QR-NFTs are not cryptocurrencies, nor are the tradable. They are unique digital identifiers tied to specific cannabis products, with their associated information stored immutably on our Private Centralized Layer-1 Blockchain. The key difference from cryptocurrencies is that QR-NFTs have no independent value beyond their representational function within Groovy's system. They are not tradable, and this prevents the unauthorized transfer of product ownership information. The "Howey" test, a legal framework for determining investment contracts, is not directly applicable to Groovy's QR-NFTs. The Howey test's criteria—fungibility, scarcity, utility, and investment—relate to the characteristics of cryptocurrencies and digital assets operating within independent marketplaces. Groovy's QR-NFTs are not cryptocurrencies, and therefore do not possess independent fungibility, scarcity, or a market-driven exchange value. Instead, they function as unique identifiers within a controlled system designed to authenticate products. Furthermore, Groovy's QR-NFTs do not trigger the conditions of the Howey test because they are not offered or marketed as an investment product. They are solely utilized as a verifiable record of product attributes. The application of the Howey test criteria is inappropriate in this context. Groovy's private, centralized, permissioned layer-1 blockchain, coupled with QR-NFTs, provides a secure and transparent system for authenticating cannabis products. The same fundamental principles of provenance and verification could be easily adapted to the health and beauty industry, the over-the-counter medications and other regulated pharmaceuticals, offering an enhanced level of safety and traceability. This framework safeguards data integrity and facilitates compliance by recording and verifying product provenance, handling, and testing throughout the supply chain. The design enables a robust consumer reward program, yet crucially, QR-NFTs are not intended for trading or speculative investment, avoiding complexities associated with cryptocurrency markets. This structure simplifies regulatory considerations across multiple sectors, while preventing potential misuse or speculation. Sub-Question 3(c) Groovy's Proprietary Centralize Hyperledger Layer-1 Blockchain, while primarily a private, centralized ledger for product authentication and reward programs, will leverage the Inter-Blockchain Communication (IBC) protocol to seamlessly communicate with legacy decentralized blockchains. This will enable access to detailed product information held on those decentralized networks, from clients. Groovy's IBC-enabled integration will function as follows: 1.Data Aggregation: When a user scans the QR-NFT tag associated with a specific cannabis product on Groovy's platform, the system initiates a request to the relevant legacy blockchain. This query targets specific smart contracts or data repositories on the legacy blockchain containing comprehensive product details. 2.IBC Communication: The IBC protocol facilitates the secure and efficient communication between Groovy's blockchain and the legacy blockchain. Encrypted messages containing the product's unique identifier are sent via IBC channels. 3.Data Retrieval: The legacy blockchain, upon receiving the request, verifies the origin and validity of the message using predefined IBC security measures and returns the requested product information. This process is validated within the security confines of the respective blockchain. 4.Data Validation and Consolidation: Groovy's system validates the received data against established internal data sets and protocols, ensuring consistency and accuracy. This includes checking the integrity of the data received from the legacy blockchain, confirming the source and ensuring the data is compatible with the Groovy system. 5.Data Presentation: The consolidated product data, presented on Groovy's platform in a user-friendly format, is applicable not only to the cannabis industry but also to the health and beauty care industry, over-the-counter (OTC) medication, and the regulated pharmaceutical industry. This detailed information, encompassing product specifics like origin, manufacturing processes, and certifications, becomes a crucial tool for consumers and regulators in any regulated industry. For example, in the health and beauty care industry, consumers can verify the source of ingredients and manufacturing standards, fostering transparency and trust. In the OTC medication sector, access to verifiable manufacturing details, batch numbers, and expiration dates enhances consumer safety and helps track products throughout the supply chain, improving product quality and preventing counterfeiting. The pharmaceutical industry, with its stringent regulatory requirements, will benefit from this type of comprehensive traceability, offering improved verification of authenticity and quality control in the manufacturing process, all critical to consumer protection. This standardized data format, implemented consistently across various sectors, facilitates regulatory compliance and bolsters consumer confidence. 6.Simplified User Experience: The consumer can then access this comprehensive product information without needing to interact with different blockchains or decentralized applications (dApps). Groovy's platform acts as a unified entry point, providing a streamlined and user-friendly experience. 7.Interoperability: This method fosters interoperability between the private, centralized Groovy system and the broader, decentralized ecosystem of cannabis product information. This provides a broader view of product origins and certifications for the consumer and strengthens the overall value proposition of Groovy's platform. This IBC-enabled data transfer not only enhances Groovy's value proposition but also exemplifies a best-practice approach for interoperability in a multi-blockchain environment. Sub-Question 3(d) Groovy's proprietary, private, permissioned layer-1 blockchain, designed for the cannabis industry, employs a modular architecture adaptable to other regulated sectors. Its core strength lies in its secure, immutable ledger, enabling verifiable product provenance and supply chain tracking. This technology, using cryptographic hashing and secure consensus mechanisms, ensures the integrity of data from cultivation to consumer. This feature is crucial for mitigating risks in various sectors, including: ·Cannabis: Combating counterfeiting, enhancing transparency, enabling accurate sales tracking, and facilitating compliance with state regulations. ·Health and Beauty: Verifying ingredient authenticity and manufacturing processes, strengthening supply chain management, and addressing product safety concerns. ·OTC Medications: Ensuring product integrity, validating expiration dates, and tracking product movement through the supply chain for enhanced safety and accountability. ·Pharmaceuticals: Verifying drug authenticity,