Note
1 - Organization and Basis of Presentation
Organization and Line of Business
Mountain High Acquisitions Corp., formerly
known as Wireless Attachments, Inc., (the “Company”) was incorporated under the laws of the State of Colorado on September
22, 2010. The Company was originally incorporated for the purpose of developing solar cloth membranes for outdoor active wear that
covert sunlight into electrical power and that can be used for charging and/or operating mobile devices such as the iPod and the
iPhone.
The Company is currently engaged in the business
to hold, develop and manage real property.
On April 30, 2015, the Company entered into
a Sale and Purchase Agreement to sell Canna-Life Corporation (the "CL Agreement"), a wholly owned subsidiary, to Evolution
Equities Corporation and Alan Smith.("Purchasers") Under the terms of the CL Agreement the Company will sell 8,104,000
(100%) of its shares of Canna-Life and execute a note Payable for $80,000 to Evolutions Equities Corporation in exchange for the
extinguishment of $490,416 of debt due to the Purchasers at March 31, 2015 and $1.00 cash.
On May 22, 2015 the Company completed the
acquisition of Greenlife Botanix ("Greenlife") as detailed in the First Amendment to the Shareholder Agreement dated
February 8, 2015. The Company issued 10,000,000 restricted shares of its common stock to the shareholders of Greenlife in exchange
for their 100% interest in Greenlife. The shares of were valued at the market value on the date of issuance, $0.15, $1,500,000.
The amount paid for Greenlife was recorded as Goodwill due to the start up nature of Greenlife and the minimal net assets of
Greenlife
at the time of acquisition. Subsequent to the purchase of Greenlife the Company entered into a recession agreement with Freedom
Seed and Feed, "FSF", which impaired the integration of Greenlife and FSF into a fully integrated cosmetic company.
Due to the rescission of FSF and the remarketing of the Greenlife product line the Company evaluated the book value of the asset
and elected to impair the Goodwill value of Greenlife and expensed the $1,500,000 book value in the three months ended June 30,
2015.
Going Concern
The accompanying
consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, which contemplate continuation of the Company as a going concern. The Company has incurred a net loss of $163,483,
has an accumulated deficit of $5,560,198 and a working capital deficit of $426,018 as of June 30, 2016. These conditions raise
substantial doubt as to the Company’s ability to continue as a going concern. These consolidated financial statements do
not include any adjustments that might result from the outcome of this uncertainty. These consolidated financial statements do
not include any
adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management
plans to continue to raise capital to fund the Company’s operations and believes that it can continue to raise equity or
debt financing to support its operations until the Company is able to generate positive cash flow from operations.
Note 2 – Summary of Significant
Accounting Policies
Basis
of Presentation
The accompanying consolidated financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).
The accompanying consolidated financial statements have been presented in United States Dollars ($ or “USD”). The fiscal
year end is March 31.
Principles of Consolidation
The accounts of the Company and its wholly–owned
subsidiary Canna-Life and GreenLife Botanix are included in the accompanying consolidated financial statements. All intercompany
balances and transactions were eliminated in consolidation.
Use of Estimates
The preparation of financial statements in
conformity with US GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and
judgment involved.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand
and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months
or less.
Revenue Recognition
In accordance with the Securities and Exchange
Commission’s (“SEC”) Staff Accounting Bulletin No. 104,
Revenue Recog
nition
,
the Company will recognize revenue when it is realized or realizable and earned. The Company must meet all of the following four
criteria under SAB 104 to recognize revenue:
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Persuasive evidence of an arrangement
exists
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Delivery has occurred
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The sales price is fixed or
determinable
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Collection is reasonably assured
Inventories
Inventories
consisting of cosmetic products are stated at the lower of cost or market. Cost is determined using the first-in, first-out method
an
d are adjusted to actual cost quarterly based on a physical count. Net realizable value is the estimated selling price
in the ordinary course of business, less applicable variable selling expenses.
Intangible Assets
The Company accounts for intangibles in accordance
with ASC 350, Intangible-Goodwill and Other. The Company evaluates intangibles, at a minimum, on an annual basis and whenever
events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of intangibles is tested
by comparing the carrying amount to the fair value. The fair values are estimated using undiscounted projected net cash flows.
If the carrying amount exceeds its
fair value, intangibles are considered
impaired and a second step is performed to measure the amount of impairment loss, if any. The Company evaluates the impairment
of intangibles as of the end of each fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s
carrying amount may not be recoverable. These circumstances include:
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a
significant decrease in the market value of an asset;
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a
significant adverse change in the extent or manner in which an asset is used; or
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an
accumulation of costs significantly in excess of the amount originally expected for the
acquisition of an asset.
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Income
Taxes
The
Company accounts for income taxes in accordan
ce 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. 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 portion of the benefits associated with tax positions taken that exceeds the amount measured as described above
is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties
that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized
tax benefits are classified as additional income taxes in the statements of operations. The open tax years are 2011, 2012, 2013,
2014, and 2015.
The Company
has no tax positions at June 30, 2016, or March 31, 2016, for which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such deductibility.
Basic and Diluted Loss Per Share
Earnings per share is calculated in accordance
with the ASC Topic 260,
Earnings Per Share
. Basic earnings per share is based upon the weighted average number of common
shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants
were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed
to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used
to purchase common stock at the average market price during the period. There were 604,000 warrants outstanding at June 30, 2016,
which were excluded from the diluted loss per share calculation as their inclusion would be anti-dilutive.
Recent Accounting Pronouncements
Recent authoritative guidance issued by the
FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified Public
Accountants, and the SEC, did not, or are not expected to have a material effect on the Company’s consolidated financial
statements.
Note 3 – Advances from Stockholder
Alan Smith, the Company’s Chief Executive
officer and a director, has advanced money to fund the Company’s operations. The amount due to this stockholder at June 30,
2016 and March 31, 2016 was a 5% convertible note payable of $15,181 and $15,001, respectively. The $16,100 Advances from related
parties refers to an unsecured advance by the President of GreenLife Botanix, Brent McMahon. Mr. McMahon is not an officer or Director
of the Company. Mr. McMahon is a shareholder of MYHI stock.
Note 4 – Equity
Common Stock
The Company has authorized 250,000,000 shares
of common stock with a par value of $0.0001 per share and 250,000,000 shares of preferred stock with a par value of $0.0001 per
share.
The Company issued 7,500,000 shares of common
stock to its founder for $7,500 upon incorporation.
In connection with a private placement offering,
in March 2014 the Company sold 604,000 units, each unit consisting of one share of the Company’s common stock and a warrant
to purchase one share of the Company’s common stock. The warrants have an exercise price of $4.75 and expire on March 6,
2017.
In connection with reverse merger transaction,
the original stockholders of the Company retained 15,788,000 shares of common stock of which 6,500,000 of those shares were purchased
by Mr. Smith concurrent with the closing of the transaction between the Company and Canna-Life (see Note 1).
On December 8, 2014, the Company issued 250,000
restricted shares of restricted common stock to Richard G. Stifel, the Company's CFO and a Director, for serving as a Director
of the Company. The Company recorded an expense of $25,000 for the fair market value of these shares.
During March 2015, the Company sold 420,000
restricted shares of common stock through a private placement at $0.15 per share. These shares were issued on April 14,2015
During the three months ended June 30, 2016
the Company issued 336,667 restricted shares through a private placement at $0.15 per share.
On May 22,2015, The Company issued 10,000,000
restricted shares to the shareholders of Greenlife Botanix pursuant to closing the Share Exchange Agreement dated February 8, 2015.
The shares were valued at the fair market trading value, $0.15, on the closing date.
The Company issued 353,600 restricted shares
to a vendor in lieu of payment of $35,360 that was owed to the vendor at March 31, 2015.
Pursuant to agreements with potential investors;
Alan Smith, CEO and a Director, retired 2,000,000 shares he received from the reverse merger referenced above. The share retirement
was valued at par $0.0001 per share.
During the three months ended July 30, 2016,
the Company converted $127,597 of Notes Payable into 8,506,465 shares of restricted common stock at $0.015 per share per the conversion
agreements.
Warrants
On April 3, 2014, the Company’s entered
into a consulting agreement with Dr. Bob Melamede. Pursuant to the consulting agreement, Dr. Melamede will serve as a member of
the Company’s newly formed Advisory Board and act as the Scientific Advisor of the Advisory Board for a term of 12 months.
In exchange for Dr. Melamede’s services, he shall receive: (1) $10,000 per year, due and payable in advance; and (2) 300,000
common stock purchase warrants at an exercise price of $4.00 per share, that vest immediately and shall expire on April 3, 2016.
The fair value of the 300,000 warrants was
determined to be $1,257,000, which was recorded as “Selling, general an
d
admi
nistrative expenses” on the accompanying consolidated statement of operations. The fair
value was determined using the Black-Scholes model with the following assumptions:
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Expected
volatility of 215%
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Risk-free
interest rate of 0.24%
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Expected
life of 2.0 years
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The
following table sum
marizes the warrant activity:
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Weighted
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Weighted
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Average
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Average
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Remaining
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Aggregate
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Number of
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Exercise
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Contractual
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Intrinsic
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Warrants
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Price $
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Life (in years)
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Value $
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Outstanding, March 31, 2015
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904,000
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$
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4.50
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Exercised
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—
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Forfeited/Canceled
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(300,000
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)
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Outstanding, June 30 2016
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604,000
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$
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4.75
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.68
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Exercisable, June 30, 2016
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604,000
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$
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4.75
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.68
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$
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—
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The number and weighted average exercise prices
of all warrants outstanding as of June 30, 2016, are as follows:
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Warrants Outstanding and Exercisable
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Weighted
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Weighted
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Average
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Average
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Exercise
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Number
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Exercise
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Remaining
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Price $
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of Warrants
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Price $
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Life (Years)
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4.75
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604,000
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4.75
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.68
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904,000
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Note 5 – Income Taxes
The Company accounts for income taxes using the asset and liability
approach in accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated
future tax consequences, using currently enacted tax laws, attributable to temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
The Company has federal net operating loss
carryforwards of approximately $3,515,805, expiring in various years through 2037. The tax benefit of these net operating losses
has been offset by a full allowance for realization. The use of the net operating loss carryfowards may be limited due to the
change in control.
Income tax expense (benefit) consists of the following for the three
months ended June 30, 2016:
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Current taxes
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$
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—
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Deferred taxes
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1,146,424
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Less: valuation allowance
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(1,146,424
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Net income tax provision
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$
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—
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The Company’s effective tax rate differs from the high statutory
rate for the period ended June 30, 2016, due to the following (expressed as a percentage of pre-tax income):
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Federal taxes at statutory rate
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$
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34.0
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%
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State taxes, net of federal tax benefit
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5.0
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%
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Valuation allowance
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(39.0
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)%
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Effective inco
me tax rate
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$
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0.0
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%
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As
of June 30, 2016, the components of these temporary differences and the deferred tax asset were as follows:
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Deferred Tax assets:
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Net operating loss carryforward
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$
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2,207,676
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Less: valuation allowance
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(2,207,676
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Net deferred tax assets
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$
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—
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Note 6 – Commitments and Contingencies
None.
Note 7 - Notes Payable
During the Quarter ended June 30, 2016 the
Company issued notes payable to private parties and converted some some of these Notes Payable in to restricted common stock. Each
note had interest rates of 3%-5% and had a conversion provision allowing the holder to convert the note into shares of the Company
at a discount. The discount varied from 70% of the trading value at the conversion date to the lower of 80% of the share value
on the conversion date or $0.015, this is referred to as the Beneficial Conversion Feature, "BCF". Due to the fact that
the notes could be converted immediately or any time thereafter, there is no amortization of expense, so the Company has elected
to record an expense in the current year for the difference between the "BCF” and the share value on the date the note was
executed. This resulted in an expense of $56,500 for the three months ended June 30, 2016 and an aggregate expense of $230,298
to date through June 30, 2016. During the Quarter ended June 30, 2016, the Company converted $42,096 of existing Notes Payable
into 5,806,465 of restricted common stock. During the three months ended June 30, 2016, the Company also, issued and converted
$40,500 of Notes Payable into 2,700,000 shares of restricted common stock and issued $20,000 of additional convertible Notes Payable.
Note 8 – Subsequent Events
The Company has determined that there are no
subsequent events to report pertaining to the three months ended June 30, 2016.