Note
1 - Organization and Basis of Presentation
Organization
and Line of Business
On
May 22, 2016 the Company completed the acquisition of Greenlife Botanix ("Greenlife") as detailed in the First Amendment
to the Shareholder Agreement dated February 8, 2016. 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 were valued at the market value on the
date of issuance, $0.23, for a total consideration of $2,300,000. 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 executed a rescission agreement with Freedom Seed and Feed, "FSF", which prevented Greenlife
from becoming 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 $2,300,000
book value in the year ended March 31, 2017. Greenlife started operations on September 18, 2014. In May 2017, the Company formed
MYHI-AZ to acquire equipment to service the growing cannabis industry. In June 2017 the Company entered into a consulting agreement
with D9 Manufacturing, "D9", to provide D9 customers with infrastructure equipment. Also in June 2017, MYHI-AZ purchased
2 intermodal grow containers from D9 to be used in a grow operation in Arizona. MYHI-AZ leased the grow containers to D9 for 3
years with the ability to extend the lease for an additional 2 years. The lease began August 15, 2017. The lease provides for
a monthly lease rate of $20,000 a month and requires advance payment for operating supplies and expenses. The monthly lease rate
is recorded as revenue and an Account Receivable while the advances are recorded as an Other Receivable. Both amounts are due
when the crop is harvested. The containers were planted in October 2017 with an expected harvest in January 2018. The initial
grow operation encountered a power failure which ultimately resulted in the loss of the crop. The loss of the crop has resulted
in a deferral of collection of the lease rental payments and the operating cost payments. The power failure highlighted additional
issues with the containers and the facility where the containers are being used. The container issues and facility power requirement
issue took a few months to resolve. However all issues have been corrected and a new crop is being planted in late June 2018 with
an anticipated harvest in September 2018. Due to the Company's continued operations with D9 and potential future opportunities
with D9, the Company believes the current and future receivable amounts will be collected in full. See Note 9: Subsequent Events
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 $3,351,723 and used cash for operations of $1,024,236 for the year ended March 31, 2018 and has an accumulated deficit
of $9,690,522 and a working capital deficit of $243,057 as of March 31, 2018. These conditions raise substantial doubt as to the
Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. These consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern. Management plans to continue to raise capital
to fund the Company’s operations and believes that it can continue to raise equity or debt financing to support its operations
until the Company is able to generate positive cash flow from operations.
Note
2 – Summary of Significant Accounting Policies
Basis
of Presentation
The
accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted
in the United States of America (“US GAAP”). The accompanying consolidated financial statements have been presented
in United States Dollars ($ or “USD”). The fiscal year end is March 31.
Principles
of Consolidation
The
accounts of the Company and its wholly–owned subsidiary GreenLife Botanix and MYHI-AZ are included in the accompanying consolidated
financial statements. All intercompany balances and transactions were eliminated on 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
Recognition
, 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:
-
Persuasive
evidence of an arrangement exists
-
Delivery
has occurred
-
The
sales price is fixed or determinable
-
Collection
is reasonably assured
Revenue
for FY 2018 represents lease revenue for the grow containers pursuant to the Company's lease with D9.
Fixed Assets
Fixed Assets are stated at cost. Depreciation
is provided on fixed assets using the straight-line method over an estimated service life of five years for equipment.
The cost of normal maintenance and repairs
is charged to operating expenses as incurred. Material expenditures which increase the life of an asset are capitalized and depreciated
over the estimated remaining useful life of the asset.
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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•
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a
significant decrease in the market value of an asset;
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•
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a
significant adverse change in the extent or manner in which an asset is used; or
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•
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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 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. 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, 2015, 2016, 2017 and 2018.
The
Company has no tax positions at March 31, 2018 or March 31, 2017, 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.
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 Related Parties
At
March 31, 2018 and March 31, 2017, $138,945 due to Brent McMahon, former President of GreenLife Botanix, was reclassified from
Current Liabilities to Advances from Related Parties. Mr. McMahon is considered a related party due to his common stock position
at March 31, 2017, however his ownership position as of March 31, 2018 is undeterminable.
Note
4 – Equity
Common
Stock
Effective
June 12, 2017, the Company increased its authorized shares of common stock to 500,000,000 shares with a par value of $0.0001 per
share. The Company has 250,000,000 shares of preferred stock with a par value of $0.0001 per share.
During
the year ended March 31, 2017 the Company issued 503,334 restricted shares through a private placement at $0.15 per share.
On
May 22, 2016, The Company issued 10,000,000 restricted shares to the shareholders of Greenlife Botanix pursuant to closing the
Share Exchange Agreement dated February 8, 2016. The shares were valued at the fair market trading value, $0.23, 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, 2016.
The shares were recorded at the fair market value of $0.25 per share or $88,400. The difference in value, $53,040, was written
off as a loss on extinguishment of debt in the year ended March 31, 2017.
Pursuant
to agreements with potential investors, on May 12, 2015 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.
On
November 1, 2016, the Board of Directors reviewed the share position of the officers and Directors of the Company and granted
Richard Stifel, CFO and a Director, 2,500,000 restricted shares of MYHI stock at $.0001 per share. The value of the shares was
$164,500 and the Company recorded an expense of $162,000 for shares in lieu of compensation in year ended March 31, 2017.
On
February 23, 2017, the Company issued 3,000,000 shares of restricted common stock valued at $71,700, the fair value of the stock,
pursuant to a consulting contract dated October 11, 2016 with Clearview Consulting for services rendered.
During
the year ended March 31, 2017, the Company converted $506,587 of Convertible Notes Payable into 33,772,455 shares of restricted
common stock at $0.015 per share per the conversion agreements. Included in this conversion were $192,667 of Convertible Notes
Payable for notes held by the Officers and Directors of the Company. which were converted into 12,844,440 shares of restricted
common stock, 4,888,958 shares to Richard G. Stifel, CFO and Director and 7,955,482 shares to Alan Smith, CEO and Director.
On
June 12, 2017, the Company issued 100,000 shares of Series B Convertible Preferred stock to an outside consulting firm for consulting
services, valued at $109,700, which was recorded as consulting fees in the three months ended June 30, 2017. Due to the super
voting provision of the Series B Convertible Preferred stock the Company recorded a loss on valuation of the shares of $2,084,300,
the equivalent to 20,000,000 less the associated consulting expense of $109,700.
During
the year ended March 31, 2018 the Company converted $684,285 of convertible notes payable into 20,947,193 shares of free trading
common stock of the Company.
During
the year ended March 31, 2018 the Company issued 2,570,000 shares of restricted Common Stock, pursuant to consulting agreements
valued at $329,184.
Warrants
Pursuant
to the Warrant to Purchase Shares of Common Stock Agreement, dated June 30, 2017, the Company granted the right to St. George
Investments LLC, to purchase at any time on or after the Issue Date of June 30, 2017 until the date which is the last calendar
day of the month in which the fifth anniversary of the Issue Date occurs a number of fully paid and non-assessable shares of Company's
common stock, par value $0.0001 per share, equal to $173,000 divided by the Market Price as of the Issue Date. The closing stock
price on June 30, 2017 was $0.1273, equating to 1,358,995 shares of common stock. The warrant was issued in connection with the
Securities Purchase Agreement, dated June 30, 2017, for $346,000. Pursuant to ASC 470-20-25-2 the company fair valued the warrants
at $115,100 to be debited to debt discount and amortized over the term of the note. The Warrants contain a ratcheting feature
for future share issuances. The Company issued shares in July 2017 for conversion of notes payable and in September 2017 for consulting
agreements. These share issuances were for convertible notes and contracts that were in existence prior to the execution of the
St. George agreement and were exempt from any ratcheting calculation.
A
summary of the status of the Company’s outstanding stock warrants and changes during the periods is presented below:
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Shares available to purchase with warrants
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Weighted
Average
Price
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Weighted
Average
Fair Value
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Outstanding, March 31, 2017
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—
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$
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—
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$
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—
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Issued
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1,358,995
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$
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.1273
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$
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.1273
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Exercised
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—
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$
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—
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$
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—
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Forfeited
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—
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$
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—
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$
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—
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Expired
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—
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$
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—
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$
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—
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Outstanding, March 31, 2018
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1,358,995
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$
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.1273
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$
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.1273
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Exercisable, March 31, 2018
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1,358,995
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$
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.1273
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$
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.1273
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Range
of Exercise Prices
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Number
Outstanding 3/31/2018
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Weighted
Average Remaining Contractual Life
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Weighted
Average Exercise Price
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$0.0327-$0.1273
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1,358,995
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4.43
years
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$
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0.08
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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 $4,500,931 expiring in various years through 2037. The tax
benefit of these net operating losses has been offset by a full allowance for realization. The use of the net operating loss carryfowards
may be limited due to a change in control.
Income
tax expense (benefit) consists of the following for the year ended March 31, 2018:
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Current
Taxes
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$
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—
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Deferred
taxes
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278,573
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Less:
valuation allowance
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(278,573
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)
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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 year ended March 31, 2018, 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 income tax rate
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$
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0.0
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%
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As
of March 31, 2018, 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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1,073,055
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Less: valuation allowance
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(1,073,055
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)
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Net deferred tax assets
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$
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—
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Note
6 - Notes Payable
At
March 31, 2018 the Company had outstanding convertible notes payable to third parties in the amount of $362,361. The notes had
interest rates of 3%-12% and had conversion provision allowing the holder to convert the note into shares of the Company at a
discount. 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 amount cannot exceed
the value of the note. This resulted in an expense of $471,500 and $240,276 for the year ended March 31, 2018 and 2017 respectively.
The following details outstanding convertible notes as of March 31, 2018:
Mountain High Acquisitions Corp.
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Convertible Notes Payable
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March 31, 2018
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Note Holder
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Amount
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Conversion Terms
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Andrew Cervasio
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10,605.91
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Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
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Conner Preston
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10,605.91
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Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
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St. George Financial
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341,149.31
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180 days from closing at Lower of 65% of avg. 2 lowest closing bid 15 days prior to conversion
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362,361.13
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During
the year ended March 31, 2018, the Company borrowed $63,000 from Power Up Lending Group, which caused an event of default on the
convertible notes due to St. George Investments, "St. George". The Company cured the event of default by executing a
Forbearance Agreement with St. George in which the Company agreed to increase its obligation to St. George by $27,500, which was
recorded as Forbearance Expense in the current period and to not pursue additional funding without prior approval from St. George.
St. George agreed to not accelerate the due date of the note or to increase the interest rate of the note as a result of executing
the Forbearance Agreement.
Note
7 - Related Party Transactions
On
April 1, 2016, the Company executed consulting agreements with Alan Smith, CEO, and Richard Stifel, CFO for administrative services
for the Company.. For the year ended March 31, 2017 Mr. Smith and Mr. Stifel were paid $42,500 each. For the year ended March
31, 2017 accruals for Mr. Smith and Mr. Stifel were $82,500 each.
Effective
April 1, 2017, Mr. Smith and Mr. Stifel assigned their consulting agreements and all future amounts due under the agreement to
Evolution Equities Corp, "Evolution" and RGS Resources LLC, "RGS" respectively. Evolution and RGS are related
parties due to Mr. Smith's and Mr. Stifel's ownership interest and positions in those companies. Evolution and RGS were each paid
$130,000 for the year ended March 31, 2018. For the year ended March 31, 2018 accruals for Evolution and RGS were $90,000 each.
Note
8 – Commitments and Contingencies
None.
Note
9 – Subsequent Events
Effective June 11, 2018, MYHI-AZ Corp., the
wholly owned subsidiary of MYHI, and D9 Manufacturing Corp., (the "parties"), agreed to convert the current amount due
under the operating lease, representing $150,000 lease payments and $22,294 operating expenses, into a $135,000 note payable,
(the "Note"), with a term of 3 years and interest rate of 7% per annum, and to capitalize $35,000 for improvements
to the containers. The first payment on the Note is due 120 days from the date of the Note. The Parties also agreed to terminate
the current lease effective March 31, 2018 and replace it with a new lease beginning July 1, 2018 with lease payments of $5,000.00
per month beginning November 1, 2018.
Effective April 19, 2018, the
Company, pursuant to the Warrant to Purchase Shares of Company Stock which was
i
ssued in conjunction with the St George
Investments LLC Securities Purchase Agreement dated June 30, 2017, issued 3,500,000 shares of Company stock at a fully diluted
price of $0.03274, valued at $114,590.00. On June 27, 2018, the Company agreed to issue an additional 6,000,000 shares of Company
common stock to fully settle the warrant. See
Note 4 – Equity-Warrants.