Notes
to the Financial Statements
Years
Ended July 31, 2019 and 2018
(Expressed
in U.S. dollars)
1.
Nature of Operations and Continuance of Business
Green
Hygienics Holdings Inc. (the “Company”) was incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources,
Inc. On June 30, 2010, the name was changed to Takedown Entertainment Inc. On July 24, 2012, the Company changed its name to Green
Hygienics Holdings Inc.
The
Company is an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation
and processing of industrial hemp for cannabidiol (“CBD”). The Hemp Farming Act of 2018 removed hemp from Schedule
I controlled substances (defined as cannabis with less than 0.3% THC) making it an ordinary agricultural commodity.
The
Company’s business model includes generating revenues from the sale of hemp and premium-grade CBD products; creating trusted
global consumer brands; developing valuable IP; and growing the company rapidly through strategic acquisitions. With direct regard
to acquisitions, the Company acts as a business accelerator and a vertical integrator focusing to support rapid growth and development
of companies with extraordinary potential.
On
June 10, 2019, the company secured a multiyear purchase order for the sale of hemp to U.S. Tobacco De Mexico. Under the terms
of the contract, the Company is required to deliver a total $56.4 million worth of hemp flower over a five year period to US Tobacco
De Mexico for use in the production of CBD hemp cigarettes.
On
June 14, 2019, the Company secured from the County of San Diego Department of Agriculture, Weights and Measures, a grower registration
for industrial hemp cultivation.
On
July 22, 2019, the Company secured licenses for the processing of hemp in the state of North Carolina.
The
licenses were granted to the Company’s newly formed subsidiary, Coastal Labs North Carolina LLC, by the North Carolina Industrial
Hemp Commission. The Company’s second subsidiary in the state is Green Hygienics North Carolina LLC, which will be
partnering for cultivation this year with the intention of meeting the earnings qualification to be licensed on its own for next
year’s cultivation.
The
Company created Coastal labs and Green Hygienics near the end of July. There was no accounting activity prior to July 31, 2019.
The Company’s policy is to consolidate all entities which we control and or own more than 51% of the voting stock. These
entities are expected to have accounting activity during subsequent periods and will be consolidated accordingly.
On
August 26, 2019, the Company the completed the acquisition of the 824-acre Potrero Ranch Property near San Diego, California for
a total purchase price of $4 million. The Company will utilize the land and buildings for industrial hemp for CBD cultivation.
The property includes over 400,000 square feet of outbuildings which are currently being converted into greenhouses.
Going
Concern
These
financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets
and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception and is
unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent
upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to
continue operations, and the attainment of profitable operations. As at July 31, 2019, the Company has not generated any revenues,
has a working capital deficiency of $885,133 and has an accumulated deficit of $42,766,142 since inception. These factors raise
substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include
any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
2.
Significant Accounting Policies
(a)
Basis of Presentation
These
financial statements and related notes are presented in accordance with accounting principles generally accepted in the United
States and are expressed in U.S. dollars.
(b)
Use of Estimates
The
preparation of financial statements in accordance with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates
and assumptions related to deferred income tax asset valuation allowances. 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. 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.
(c)
Cash and Cash Equivalents
The
Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds
to be cash equivalents.
(d)
Inventory
Inventory
is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis.
The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary.
As of the date of this report, no reserve was deemed necessary.
(e)
Impairment of Long-Lived Assets
The
Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10-15, Impairment
or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds
their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future
cash flows or appraised values.
(f)
Related Party Transactions
The
Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related
party transactions. In accordance with ASC 850, the Company’s financial statements include disclosures of material related
party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of
business, as well as transactions that are eliminated in the preparation of financial statements.
(g)
Income Taxes
The
Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”.
The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax
credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will
be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets
to the amount that is believed more likely than not to be realized.
2.
Significant Accounting Policies (continued)
(h)
Foreign Currency Translation
The
Company’s functional and reporting currency is the U.S. dollar. Transactions in foreign currencies are translated into the
currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign
currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting exchange
gains and losses are recognized in the statement of operations.
(i)
Financial Instruments and Fair Value Measures
ASC
820, “Fair Value Measurements and Disclosures”, requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent,
objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the
fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes
the inputs into three levels that may be used to measure fair value:
Level
1
Level
1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
2
Level
2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability
such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant
inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
3
Level
3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to
the measurement of the fair value of the assets or liabilities.
The
Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and
amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on “Level 1” inputs,
which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments
approximate their current fair values because of their nature and respective maturity dates or durations.
(j)
Stock-based Compensation
The
Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” and
ASC 505, “Equity Based Payments to Non-Employees”, using the fair value method. All transactions in which goods or
services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
(k)
Loss Per Share
The
Company computes earnings (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation
of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by
dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury
stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price
for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at July 31, 2019 and 2018, the Company
does not have any potentially dilutive shares.
2.
Significant Accounting Policies (continued)
(l)
Comprehensive Loss
ASC
220, “Comprehensive Income”, establishes standards for the reporting and display of comprehensive loss and its components
in the financial statements.
(m)
Recent Accounting Pronouncements
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact
on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on its financial position or results of operations.
3.
Deposits
During
the year ended July 31, 2019, the Company advanced funds of $100,000 toward the acquisition of property known as the Potrero Ranch.
The Company completed the acquisition on August 24, 2019.
4.
Inventory
Inventory
consists of hemp seeds. Inventory is recorded at cost.
5.
Fixed Assets
Fixed
assets recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized over the assets’ estimated
useful lives using the straight-line method. Estimated useful lives are periodically reviewed and, when appropriate, changes are
made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment
assessment may be performed on the recoverability of the carrying amounts. No depreciation has been recorded to date due to immateriality
as the assets were acquired near year end.
Fixed
assets consist of the following:
|
|
Useful Life
|
|
Balance at
July 31,
2018
|
|
|
Additions
|
|
|
Amortization
|
|
|
Balance at
July 31,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production equipment
|
|
5 years
|
|
$
|
-
|
|
|
$
|
46,379
|
|
|
$
|
-
|
|
|
$
|
46,379
|
|
Buildings and improvements
|
|
15 years
|
|
|
-
|
|
|
|
90,657
|
|
|
|
-
|
|
|
|
90,657
|
|
Furniture and office equipment
|
|
5 years
|
|
|
-
|
|
|
|
8,102
|
|
|
|
-
|
|
|
|
8,102
|
|
|
|
|
|
$
|
-
|
|
|
$
|
145,138
|
|
|
$
|
-
|
|
|
$
|
145,138
|
|
Fixed
asset costs are being depreciated using the straight-line method based on the useful life of the asset. No depreciation expense
has been recorded for the year ended July 31, 2019 due to the immateriality as the assets were acquired near year end.
6.
Loans Payable
(a)
As at July 31, 2019, the Company owes $155,250 (2018 - $nil) to a non-related party, which bears interest at the rate of 10% per
annum, is unsecured and due and payable on or before December 19, 2019.
(b)
As at July 31, 2019, the Company owes $nil (2018 - $18,750) to a non-related party, which is non-interest bearing, unsecured,
and due on demand. During the year ended July 31, 2018, the amount owing was transferred to a company controlled by the President
of the Company.
7. Related Party Transactions
(a) As at July 31, 2019, the Company owes $56,824 (2018 - $56,824)
to a company controlled by the CEO of the Company. The debt bears interest at 5% per annum, is unsecured, and is due on demand.
As at July 31, 2019, accrued interest of $14,825 (2018 - $11,961) has been included in accounts payable and accrued liabilities.
(b) As at July 31, 2019, the Company owes $696,074 (2018 - $116,137)
to a company controlled by the CEO of the Company. The debt includes funds advanced to the Company for business development purposes
is non-interest bearing, unsecured, and due on demand.
(c) As at July 31, 2019, the Company owes $27,500 (2018 - $nil)
to a director of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and due on demand and is
included in accounts payable.
(d) During the year ended July 31, 2019, the Company incurred
$30,000 (2018 - $30,000) in consulting fees to a company controlled by the CEO of the Company.
(e) During the year ended July 31, 2019, the Company incurred
$30,000 (2018 - $nil) in consulting fees to the CTO of the Company.
(f) During the year ended July 31, 2019, the Company incurred
$27,500 (2018 - $nil) in consulting fees to a VP and Director of the Company.
(g) During the year ended July 31, 2019, the Company incurred
$15,000 (2018 - $nil) in consulting fees to the President of a subsidiary of the Company.
(h) During the year ended July 31, 2019, the Company incurred
$15,000 (2018 - $nil) in consulting fees to the CEO of a subsidiary of the Company.
(i) Imputed interest of $22,009 was recorded for the above related
party debts.
8. Share Issuances
(a) During the year ended July 31, 2019, the Company issued
500,000 common shares to the Chief Development Officer of the Company in exchange for services rendered. The shares were valued
based on OTC’s closing trade price on the date of the agreement.
(b) During the year ended July 31, 2019, the Company issued
500,000 common shares to the Business Development Officer of the Company in exchange for services rendered. The shares were valued
based on OTC’s closing trade price on the date of the agreement.
(c) During the year ended July 31, 2019, the Company issued
500,000 common shares to the Chief Technology Officer of the Company in exchange for services rendered. The shares were valued
based on OTC’s closing trade price on the date of the agreement.
(d) During the year ended July 31, 2019, the Company issued
50,000 common shares to the Head of Research and Development of a subsidiary of the Company in exchange for services rendered.
The shares were valued based on OTC’s closing trade price on the date of the agreement.
(e) During the year ended July 31, 2019, the Company issued
200,000 common shares to the Chief Development Officer of the Company in exchange for services rendered. The shares were valued
based on OTC’s closing trade price on the date of the agreement.
(f) During the year ended July 31, 2019, the Company issued
200,000 common shares to the President of a subsidiary of the Company in exchange for services rendered. The shares were valued
based on OTC’s closing trade price on the date of the agreement.
9. Commitments
(a)On April 1, 2019, the Company entered into a consulting agreement
with the Chief Development Officer of the Company, Hamid Rowshan, whereby the Company agreed to pay a to be negotiated consulting
fee for an initial period of three months, which can be extended to five years upon mutual agreement.
9. Commitments (continued)
On April 1, 2019, the Company entered into a consulting agreement
with the Business Development Officer of the Company, Paymon Omidi, whereby the Company agreed to pay a to be negotiated consulting
fee for an initial period of three months, which can be extended to five years upon mutual agreement.
(b) On April 1, 2019, the Company entered into a consulting
agreement with the Head of Research and Development of a subsidiary of the Company, Kiarash Mirkia. Pursuant to the terms of the
agreement, the Company issued the consultant 50,000 common shares upon execution of the agreement.
(c) On June 1, 2019, the Company entered into a consulting agreement
with the CEO of a subsidiary of the Company, Kavan Thanasith, whereby the Company agreed to pay a consulting fee of $7,500 per
month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of
$1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the
Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000
per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.
(d) On June 1, 2019, the Company entered into a consulting agreement
with the President of a subsidiary of the Company, whereby the Company agreed to pay a consulting fee of $7,500 per month for a
period of five years. The monthly fee will increase to: $10,000 per month if the Company generates gross revenue of $1,000,000
per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000 per month if the Company generates
gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue of $2,500,000 per month. The
consultant shall also be granted 200,000 common shares per year for a period of five years.
10. Income Taxes
The Company has net operating losses carried
forward of $5,237,753 available to offset taxable income in future years which commence expiring in fiscal 2028.
The Company is subject to United States
federal and state income taxes at an approximate rate of 26.42% (2018 – 26.42%). The reconciliation of the provision for
income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Income tax recovery at statutory rate
|
|
|
(387,218
|
)
|
|
|
(34,099
|
)
|
Change in enacted tax rates
|
|
|
-
|
|
|
|
6,993
|
|
Change in valuation allowance
|
|
|
387,218
|
|
|
|
27,106
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
–
|
|
|
|
–
|
|
The significant components of deferred
income tax assets and liabilities as at July 31, 2019 and 2018 are as follows:
|
|
2019
|
|
|
2018
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
Net operating losses carried forward
|
|
$
|
1,009,928
|
|
|
|
712,710
|
|
Valuation allowance
|
|
|
(1,009,928
|
)
|
|
|
(712,710
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset
|
|
|
–
|
|
|
|
–
|
|
10. Income Taxes (continued)
The 2017 Act reduces the corporate tax rate from 34% to 21%
for tax years beginning after December 31, 2017. For net operating losses arising after December 31, 2017, the 2017 Act limits
a taxpayer’s ability to utilize net operating losses carryforwards to 80% of taxable income. In addition, net operating losses
arising after 2017 can be carried forward indefinitely, but carryback is generally prohibited. Net operating losses generated in
tax years beginning before January 1, 2018 will not be subject to the taxable income limitation. The 2017 Act would generally eliminate
the carryback of all net operating losses arising in a tax year ending after 2017 and instead would permit all such net operating
losses to be carried forward indefinitely.
As at July 31, 2019, the Company is in arrears on filing its
statutory corporate income tax returns and the amounts presented above are based on estimates. The actual losses available could
differ from these estimates.
11. Subsequent Events
(a) On August 23, 2019, a company (Alita
Capital Inc.) owned by the President of the Company executed on a Purchase and Sale Agreement to acquire the 824-acre Potrero Ranch
Property near San Diego, California (the Agreement”). Alita in advance of the close immediately assigned the Agreement to
the Green Hygienics Holdings Inc.
The Property now owned fully by Green Hygienics
includes 824 acres of land and 400,000 square feet of outbuildings. The total purchase cost of the Property is $4,510,000. The
Vendor agreed to a take-back mortgage of $2,750,000 (the ‘Mortgage”) and the Company borrowed $1,760,000 (the “Loan”)
by way of a second mortgage to complete the acquisition. The terms of the Mortgage include interest at the rate of 6% per annum
with monthly payments of interest only.commencing September 23, 2019. The maturity date of the Mortgage is August 23, 2024. The
terms of the Loan include interest at 15% per annum with monthly payments of $22,000 commencing September 15, 2019. The maturity
date of the Loan is August 15, 2024.
(b) On August 1, 2019, the Company entered into a consulting
agreement with the CEO of the Company, whereby the Company agreed to pay a consulting fee of $7,500 per month for a period of three
years and whereby the Company granted the Consultant an option to acquire 250,000 common shares of the Company or 250,000 Options
at 10% below market value at the date of grant upon execution of the consulting agreement for an additional 2 years.
(c) On August 1, 2019, the Company entered into a consulting
agreement with the Chief Agricultural Operations Manager whereby the Company agreed to pay a signing bonus of $6,000 and a consulting
fee of $6,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the performance
with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire 25,000 common
shares of the Company or 25,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement.
(d) On August 1, 2019, the Company entered into a consulting
agreement with the Chief Project Manager whereby the Company agreed to pay a signing bonus of $15,000 and a consulting fee of $7,500
per month for a period of five years. The Company also granted the Consultant an option to acquire 100,000 common shares
of the Company or 100,000 Options priced at $0.50 per share upon execution of the consulting agreement and an additional 100,000
common shares or Options priced at 10% below market value at the date of grant six months after the execution of the agreement.
(e) On August 1, 2019, the Company entered into a consulting
agreement with the Assistant Agricultural Operations Manager whereby the Company agreed to pay a signing bonus of $4,000 and a
consulting fee of $2,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate the
performance with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire 25,000
common shares of the Company or Options at $0.50 per share upon execution of the consulting agreement and an additional 25,000
common shares or Options at 10% below market value at the date of grant six months after the execution of the agreement.
(f) On August 1, 2019, the Company granted an option to a non-related
party to acquire 50,000 common shares of the Company at 10% below market value at the date of grant for services rendered.
(g) On September 1, 2018, the Company entered into a consulting
agreement with a director of the Company, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of
two years, which can be extended to four years upon mutual agreement. Additionally, the Company will either grant the director
100,000 shares of common stock per year or 100,000 stock options per year to purchase shares of the Company’s common stock
priced at 10% below market value at the date of grant.
(h) On September 1, 2018, the Company entered into a consulting
agreement with the CTO, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two years commencing
August 1, 2018. The agreement can be extended to four years upon mutual agreement. Upon completion of a minimum $1,000,000 financing,
the Company will increase this payment to $5,000 per month. Upon completion of a minimum $5,000,000 financing or profitable operations,
the Company will increase this payment to an amount mutually agreed upon that reflects the market rate for services provided by
the CTO.
GREEN HYGIENICS HOLDINGS INC.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
|
|
October 31,
2019
$
|
|
|
July 31,
2019
$
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
|
46,218
|
|
|
|
767
|
|
Prepaid expense
|
|
|
5,000
|
|
|
|
-
|
|
Trust funds
|
|
|
-
|
|
|
|
2,486
|
|
Inventory
|
|
|
306,450
|
|
|
|
306,450
|
|
Total Current Assets
|
|
|
357,668
|
|
|
|
309,703
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
-
|
|
|
|
100,000
|
|
Fixed Assets (Note 5)
|
|
|
4,745,767
|
|
|
|
145,138
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
5,103,435
|
|
|
|
554,841
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
259,436
|
|
|
|
201,178
|
|
Accounts payable – related parties
|
|
|
117,833
|
|
|
|
57,500
|
|
Accrued interest payable
|
|
|
25,872
|
|
|
|
510
|
|
Loan payable (Note 4)
|
|
|
155,250
|
|
|
|
155,250
|
|
Due to related parties (Note 8)
|
|
|
1,447,100
|
|
|
|
780,398
|
|
Total Current Liabilities
|
|
|
2,005,491
|
|
|
|
1,194,836
|
|
|
|
|
|
|
|
|
|
|
Long Term Liabilities
|
|
|
|
|
|
|
|
|
Agreement payable (Note 5)
|
|
|
183,031
|
|
|
|
-
|
|
Mortgage payable (Note 6)
|
|
|
2,750,000
|
|
|
|
-
|
|
Note payable (Note 7)
|
|
|
1,760,000
|
|
|
|
-
|
|
Total Long-Term Liabilities
|
|
|
4,693,031
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total Current and Long-Term Liabilities
|
|
|
6,698,522
|
|
|
|
1,194,836
|
|
|
|
|
|
|
|
|
|
|
Nature of operations and continuance of business (Note 1 and 2)
|
|
|
|
|
|
|
|
|
Commitments (Note 10)
|
|
|
|
|
|
|
|
|
Subsequent events (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s Deficit
|
|
|
|
|
|
|
|
|
Common stock, 375,000,000 shares authorized, $0.001 par value 37,482,835
and 36,657,835 shares issued and outstanding
|
|
|
37,483
|
|
|
|
36,658
|
|
Additional paid-in capital
|
|
|
43,328,297
|
|
|
|
42,089,489
|
|
Deficit
|
|
|
(44,960,867
|
)
|
|
|
(42,766,142
|
)
|
Total Stockholder’s Deficit
|
|
|
(1,595,087
|
)
|
|
|
(639,995
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholder’s Deficit
|
|
|
5,103,435
|
|
|
|
554,841
|
|
(The accompanying notes are an integral
part of these Consolidated financial statements)
GREEN HYGIENICS HOLDINGS INC.
Consolidated Statements of Operations and
Comprehensive Loss
(Expressed in U.S. dollars)
(unaudited)
|
|
Three Months
Ended
October 31, 2019
$
|
|
|
Three Months
Ended
October 31, 2018
$
|
|
Expenses
|
|
|
|
|
|
|
Consulting fees (Note 4)
|
|
|
164,396
|
|
|
|
27,500
|
|
Business development costs
|
|
|
1,227,592
|
|
|
|
-
|
|
Supplies
|
|
|
392,516
|
|
|
|
-
|
|
Sub contracts
|
|
|
68,289
|
|
|
|
-
|
|
Payroll expenses
|
|
|
158,731
|
|
|
|
-
|
|
General and administrative
|
|
|
54,400
|
|
|
|
1,909
|
|
|
|
|
|
|
|
|
|
|
Loss Before Other Expense
|
|
|
(2,065,934
|
)
|
|
|
(29,409
|
)
|
|
|
|
|
|
|
|
|
|
Other Expense
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(115,451
|
)
|
|
|
(716
|
)
|
Depreciation
|
|
|
(13,350
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Loss and Comprehensive Loss
|
|
|
(2,194,725
|
)
|
|
|
(30,125
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss Per Share, Basic and Diluted
|
|
|
(.06
|
)
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding
|
|
|
37,473,868
|
|
|
|
34,707,835
|
|
(The accompanying notes are an integral
part of these Consolidated financial statements)
GREEN HYGIENICS HOLDINGS INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(unaudited)
|
|
Three Months
Ended
October 31, 2019
$
|
|
|
Three Months
Ended
October 31, 2018
$
|
|
Operating Activities
|
|
|
|
|
|
|
Net loss
|
|
|
(2,194,725
|
)
|
|
|
(30,125
|
)
|
Imputed interest
|
|
|
18,633
|
|
|
|
-
|
|
Depreciation expense
|
|
|
13,350
|
|
|
|
-
|
|
Share based compensation
|
|
|
1,221,000
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(5,000
|
)
|
|
|
-
|
|
Accrued interest payable
|
|
|
25,362
|
|
|
|
|
|
Inventory
|
|
|
-
|
|
|
|
-
|
|
Accounts payable and accrued liabilities
|
|
|
56,258
|
|
|
|
5,216
|
|
Accounts payable - related party
|
|
|
60,336
|
|
|
|
-
|
|
Due to related parties
|
|
|
-
|
|
|
|
25,000
|
|
Net Cash Provided By (Used In) Operating Activities
|
|
|
(802,789
|
)
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Cash paid for purchase of FA
|
|
|
(118,586
|
)
|
|
|
-
|
|
Net Cash Provided by (Used In) Investing Activities
|
|
|
(118,586
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from note payable
|
|
|
297,638
|
|
|
|
|
|
Advances from related parties
|
|
|
666,702
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
964,340
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Increase in cash
|
|
|
42,965
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash and trust funds, Beginning of Period
|
|
|
3,253
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
|
Cash and trust funds, End of Period
|
|
|
46,218
|
|
|
|
223
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
–
|
|
|
|
–
|
|
Income taxes paid
|
|
|
–
|
|
|
|
–
|
|
Non Cash Transactions
|
|
|
|
|
|
|
|
|
Equipment financed through debt
|
|
|
183,031
|
|
|
|
|
|
Land acquired through debt
|
|
|
2,750,000
|
|
|
|
|
|
Deposit on acquisition of property
|
|
|
100,000
|
|
|
|
-
|
|
(The accompanying notes are an integral
part of these Consolidated financial statements)
GREEN HYGIENICS HOLDINGS INC.
Consolidated Statements of Stockholders’ Deficit
(Expressed in U.S. dollars)
(unaudited)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
shares
|
|
|
Amount
$
|
|
|
Additional
paid-in
capital
$
|
|
|
Deficit
$
|
|
|
Total
stockholders’
deficit
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 31, 2018
|
|
|
34,707,835
|
|
|
|
34,708
|
|
|
|
40,546,930
|
|
|
|
(40,922,248
|
)
|
|
|
(340,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed interest
|
|
|
-
|
|
|
|
-
|
|
|
|
22,009
|
|
|
|
-
|
|
|
|
22,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
1,950,000
|
|
|
|
1,950
|
|
|
|
1,522,500
|
|
|
|
-
|
|
|
|
1,522,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,843,894
|
)
|
|
|
(1,843,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, July 31, 2019
|
|
|
36,657,835
|
|
|
|
36,658
|
|
|
|
42,089,489
|
|
|
|
(42,766,142
|
)
|
|
|
(639,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed interest
|
|
|
-
|
|
|
|
-
|
|
|
|
18,633
|
|
|
|
-
|
|
|
|
18,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services
|
|
|
825,000
|
|
|
|
825
|
|
|
|
1,220,175
|
|
|
|
-
|
|
|
|
1,221,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,194,725
|
)
|
|
|
(2,194,725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2019
|
|
|
37,482,835
|
|
|
|
37,483
|
|
|
|
43,328,297
|
|
|
|
(44,960,867
|
)
|
|
|
(1,595,087
|
)
|
(The accompanying notes are an integral
part of these Consolidated financial statements)
GREEN HYGIENICS HOLDINGS INC.
Notes to the Consolidated Financial Statements
October 31, 2019
(Expressed in U.S. dollars)
(Unaudited)
1. Nature of Operations
and Continuance of Business
Green Hygienics Holdings Inc. (the “Company”) was
incorporated in the State of Nevada on June 12, 2008 as Silver Bay Resources, Inc. On June 30, 2010, the name was changed to Takedown
Entertainment Inc. On July 24, 2012, the Company changed its name to Green Hygienics Holdings Inc.
The Company is an innovative, full-scope, science-driven, premium
hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol (“CBD”).
The Hemp Farming Act of 2018 removed hemp from Schedule I controlled substances (defined as cannabis with less than 0.3% THC)
making it an ordinary agricultural commodity.
The Company’s business model includes generating revenues
from the sale of hemp and premium-grade CBD products; creating trusted global consumer brands; developing valuable IP; and growing
the company rapidly through strategic acquisitions. With direct regard to acquisitions, the Company acts as a business accelerator
and a vertical integrator focusing to support rapid growth and development of companies with extraordinary potential.
On June 10, 2019, the company secured a multiyear purchase order
for the sale of hemp to U.S. Tobacco De Mexico. Under the terms of the contract, the Company is required to deliver a total $56.4
million worth of hemp flower over a five-year period to US Tobacco De Mexico for use in the production of CBD hemp cigarettes.
On June 14, 2019, the Company secured from the County of San
Diego Department of Agriculture, Weights and Measures, a grower registration for industrial hemp cultivation.
On July 22, 2019, the Company secured licenses for the processing
of hemp in the state of North Carolina.
The licenses were granted to the Company’s newly formed
subsidiary, Coastal Labs North Carolina LLC, by the North Carolina Industrial Hemp Commission. The Company’s second
subsidiary in the state is Green Hygienics North Carolina LLC, which will be partnering for cultivation this year with the intention
of meeting the earnings qualification to be licensed on its own for next year’s cultivation.
The Company created Coastal labs and Green Hygienics near the
end of July. There was no accounting activity prior to October 31, 2019. The Company’s policy is to consolidate all entities
which we control and or own more than 51% of the voting stock. These entities are expected to have accounting activity during subsequent
periods and will be consolidated accordingly.
On August 26, 2019, the Company the completed the acquisition
of the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,510,000. The Company will utilize
the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings
which are currently being converted into greenhouses.
Going Concern
These consolidated financial statements have been prepared on
a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal
course of business. The Company has not generated revenues since inception and is unlikely to generate earnings in the immediate
future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders,
the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations.
As at October 31, 2019, the Company has not generated any revenues, has a working capital deficiency of $1,647,823 and has an accumulated
deficit of $44,960,867 since inception. These factors raise substantial doubt regarding the Company’s ability to continue
as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. Significant Accounting Policies
(a) Basis of Presentation
These financial statements and related notes are presented in
accordance with accounting principles generally accepted in the United States and are expressed in U.S. dollars.
(b) Principles of Consolidation
These financial statements include the accounts of the Company
and its subsidiaries. Subsidiaries are all entities (including structured entities) which the Company controls. For accounting
purposes, control is established by an investor when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. All inter-company balances and transactions
are eliminated.
(c) Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the
reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances.
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. 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.
(d) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity
of three months or less at the time of issuance and trust funds to be cash equivalents.
(e) Inventory
Inventory is carried at the lower of cost or net realizable
value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory
and will record a reserve for excess and/or obsolete inventory if necessary. As of the date of this report, no reserve was deemed
necessary.
(f) Impairment of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets
and other assets in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived
assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written
down to fair value, which is determined based on discounted future cash flows or appraised values.
(g) Related Party Transactions
The Company follows ASC 850, Related Party Disclosures,
for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company’s
financial statements include disclosures of material related party transactions, other than compensation arrangements, expense
allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation
of financial statements.
(h) Income Taxes
The Company accounts for income taxes using the asset and liability
method in accordance with ASC 740, “Income Taxes”. The asset and liability method provides that deferred tax assets
and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting
and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities
are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to
be realized.
2. Significant Accounting Policies (continued)
(i) Foreign Currency Translation
The Company’s functional and reporting currency is the
U.S. dollar. Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect
on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange
rates in effect at the balance sheet date. The resulting exchange gains and losses are recognized in the statement of operations.
(j) Financial Instruments and Fair Value Measures
ASC 820, “Fair Value Measurements and Disclosures”,
requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to
measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level
of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to
measure fair value:
Level 1
Level 1 applies to assets or liabilities for which
there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which
there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets
or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally
from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which
there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets
or liabilities.
The Company’s financial instruments consist principally
of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the
fair value of cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical
assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and
respective maturity dates or durations.
(k) Stock-based Compensation
The Company records stock-based compensation in accordance with
ASC 718, “Compensation – Stock Compensation” and ASC 505, “Equity Based Payments to Non-Employees”,
using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity
instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measurable.
(l) Loss Per Share
The Company computes earnings (loss) per share in accordance
with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”)
on the face of the income statement. Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the
if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their
effect is anti-dilutive. As at October 31, 2019 the Company does not have any potentially dilutive shares.
2. Significant Accounting Policies (continued)
(m) Comprehensive Loss
ASC 220, “Comprehensive Income”, establishes standards
for the reporting and display of comprehensive loss and its components in the financial statements.
(n) Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements
that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed,
and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.
3. Fixed Assets
Fixed assets are recorded at cost reduced by accumulated depreciation.
Depreciation expense is recognized over the assets’ estimated useful lives using the straight-line method. Estimated useful
lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating
conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying
amounts.
Fixed assets consist of the following:
|
|
Useful Life
|
|
Balance at
July 31,
2019
$
|
|
|
Additions
$
|
|
|
Amortization
$
|
|
|
Balance at
October 31,
2019
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production equipment
|
|
5 years
|
|
|
46,379
|
|
|
|
305,531
|
|
|
|
(10,541
|
)
|
|
|
341,369
|
|
Furniture and office equipment
|
|
5 years
|
|
|
8,102
|
|
|
|
-
|
|
|
|
(408
|
)
|
|
|
7,694
|
|
Buildings and improvements
|
|
15 years
|
|
|
90,657
|
|
|
|
96,086
|
|
|
|
(2,401
|
)
|
|
|
184,342
|
|
Land
|
|
|
|
|
-
|
|
|
|
4,212,362
|
|
|
|
-
|
|
|
|
4,212,362
|
|
|
|
|
|
|
145,138
|
|
|
|
4,613,979
|
|
|
|
(13,350
|
)
|
|
|
4,745,767
|
|
Fixed asset costs are being depreciated using the straight-line
method based on the useful life of the asset.
On August 26, 2019, the Company completed the acquisition of
the 824-acre Potrero Ranch Property near San Diego, California for a total purchase price of $4,510,000. The Company will utilize
the land and buildings for industrial hemp for CBD cultivation. The property includes over 400,000 square feet of outbuildings
which are currently being converted into greenhouses. On August 23, 2019, the Company entered into an agreement payable with the
Vendor of the Property for $2,750,000 for a portion of the purchase price. The terms of the agreement are monthly payments of interest
only at the rate of 6% per annum. The debt is secured by a Promissory Note secured by a Deed of Trust on real property commonly
known as Round Potrero Road, Potrero, California. The maturity date of the debt is August 23, 2024. On August 23, 2019 the Company
entered into an agreement payable for $1,760,000 with monthly payments of interest only at the rate of 15% per annum. The debt
is secured by a Promissory Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero
Road, Potrero, California. The maturity date of the debt is August 15, 2024. To date we have spent $184,342 in property and building
improvements and have acquired over $300,000 worth of production equipment.
4. Loan Payable
As at October 31, 2019, the Company owes $155,250 (2018 - $nil)
plus accrued interest of $4,423 (2018 - $nil) to a non-related party, which bears interest at the rate of 10% per annum, is unsecured
and due and payable on or before December 19, 2019.
5. Agreement Payable
As at October 31, 2019, the Company owes $183,031 (2018 - $nil)
to a non-related party and requires monthly payments of $4290.40 including interest at the rate of 5.66% per annum for a period
of 48 months commencing November 1, 2019. The loan is secured by a collateral charge on production equipment.
6. Mortgage Payable
As at October 31, 2019, the Company owes $2,750,000 (2018 -
$nil) to a non-related party, with monthly payments of interest only at the rate of 6% per annum. The debt is secured by a Promissory
Note secured by a Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California. The maturity date of
the debt is August 23, 2024.
7. Note Payable
As at October 31, 2019, the Company owes $1,760,000 (2018 -
$nil) to a non-related party, with monthly payments of interest only at the rate of 15% per annum. The debt is secured by a Promissory
Note secured by a second charge on the Deed of Trust on real property commonly known as Round Potrero Road, Potrero, California.
The maturity date of the debt is August 15, 2024.
8. Related Party Transactions
(a) As at October 31, 2019, the Company owes $56,824
(July 31, 2019 - $56,824) to a company controlled by the CEO of the Company. The debt bears interest at 5% per annum, is unsecured,
and is due on demand. As at October 31, 2019, accrued interest of $15,541 (July 31, 2019 - $14,825) has been included in amounts
due to related parties.
(b) As at October 31, 2019, the Company owes $1,390,275
(July 31, 2019 - $696,074) to a company controlled by the CEO of the Company. The debt includes funds advanced to the Company for
business development purposes, is non-interest bearing, unsecured, and due on demand.
(c) As at October 31, 2019, the Company owes $22,500
(July 31, 2019 - $nil) to the CEO of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured, and
due on demand and is included in accounts payable.
(d) As at October 31, 2019, the Company owes $35,000
(July 31, 2019 - $27,500) to a director of the Company for accrued consulting fees. The debt is non-interest bearing, unsecured,
and due on demand and is included in accounts payable.
(e) As at October 31, 2019, the Company owes $22,500
(July 31, 2019 - $15,000) to the CEO of a subsidiary of the Company for consulting fees. The debt is non-interest bearing, unsecured,
and due on demand and is included in accounts payable.
(f) As at October 31, 2019, the Company owes $22,500
(July 31, 2019 - $15,000) to the President of a subsidiary of the Company for consulting fees. The debt is non-interest bearing,
unsecured, and due on demand and is included in accounts payable.
(g) As at October 31, 2019, the Company owes $7,500
(July 31, 2019 - $nil) to the CTO of the Company for consulting fees. The debt is non-interest bearing, unsecured, and due on demand
and is included in accounts payable.
(h) As at October 31, 2019, the Company owes $7,833
(July 31, 2019 - $nil) to the Chief Agricultural Operations Manager of the Company for consulting fees. The debt is non-interest
bearing, unsecured, and due on demand and is included in accounts payable.
(i) During the quarter ended October 31, 2019, the
Company incurred $nil (2018 - $7,500) in consulting fees to a company controlled by the CEO of the Company.
8. Related Party
Transactions (continued)
(j) During the quarter ended October 31, 2019, the
Company incurred $22,500 (2018 - $nil) in consulting fees to the CEO of the Company.
(k) During the quarter ended October 31, 2019, the
Company incurred $7,500 (2018 - $7,500) in consulting fees to the CTO of the Company.
(l) During the quarter ended October 31, 2019, the
Company incurred $7,500 (2018 - $7,500) in consulting fees to a VP and Director of the Company.
(m) During the quarter ended October 31, 2019, the
Company incurred $22,500 (2018 - $nil) in consulting fees to the President of a subsidiary of the Company.
(n) During the quarter ended October 31, 2019, the
Company incurred $22,500 (2018 - $nil) in consulting fees to the CEO of a subsidiary of the Company.
(o) Imputed interest of $18,633 for the three months
ended October 31, 2019 and $22,009 for the year ended July 31, 2019 has been recorded for the above related party debts.
9. Share Issuances
(a) During the quarter ended October 31, 2019, the
Company issued 250,000 common shares to the CEO of the Company in exchange for consulting services. The shares were valued based
on OTC’s closing trade price on the date of the agreement.
(b) During the quarter ended October 31, 2019, the
Company issued 50,000 common shares to the Chief Agricultural Operations Manager of the Company in exchange for consulting services.
The shares were valued based on OTC’s closing trade price on the date of the agreement.
(c) During the quarter ended October 31, 2019, the
Company issued 200,000 common shares to the Chief Project Manager of the Company in exchange for consulting services. The shares
were valued based on OTC’s closing trade price on the date of the agreement.
(d) During the quarter ended October 31, 2019, the
Company issued 25,000 common shares to the Assistant Agricultural Operations Manager of the Company in exchange for consulting
services. The shares were valued based on OTC’s closing trade price on the date of the agreement.
(e) During the quarter ended October 31, 2019, the
Company issued 300,000 common shares to non-related parties in exchange for consulting services. The shares were valued based on
OTC’s closing trade price on the date of the agreement.
10. Commitments/Contingencies
(a) On September 1, 2018, the Company entered into a consulting
agreement with a director of the Company, Matthew Dole, whereby the Company agreed to pay a consulting fee of $2,500 per month
for a period of two years, which can be extended to four years upon mutual agreement. Additionally, the Company will either grant
the director 100,000 shares of common stock per year or 100,000 stock options per year to purchase shares of the Company’s
common stock priced at 10% below market value at the date of grant.
(b) On September 1, 2018, the Company entered into a consulting
agreement with the CTO, Jeff Palumbo, whereby the Company agreed to pay a consulting fee of $2,500 per month for a period of two
years commencing August 1, 2018. The agreement can be extended to four years upon mutual agreement. Upon completion of a minimum
$1,000,000 financing, the Company will increase this payment to $5,000 per month. Upon completion of a minimum $5,000,000 financing
or profitable operations, the Company will increase this payment to an amount mutually agreed upon that reflects the market rate
for services provided by the CTO.
(c) On April 1, 2019, the Company entered into a consulting
agreement with the Chief Development Officer of the Company, Hamid Rowshan, whereby the Company agreed to pay a to be negotiated
consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.
10. Commitments/Contingencies (continued)
(d) On April 1, 2019, the Company entered into a consulting
agreement with the Business Development Officer of the Company, Paymon Omidi, whereby the Company agreed to pay a to be negotiated
consulting fee for an initial period of three months, which can be extended to five years upon mutual agreement.
(e) On April 1, 2019, the Company entered into a
consulting agreement with the Head of Research and Development of a subsidiary of the Company, Kiarash Mirkia. Pursuant to the
terms of the agreement, the Company issued the consultant 50,000 common shares upon execution of the agreement.
(f) On June 1, 2019, the Company entered into a
consulting agreement with the CEO of a subsidiary of the Company, Kavan Thanasith, whereby the Company agreed to pay a consulting
fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates
gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000
per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue
of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.
(g) On June 1, 2019, the Company entered into a
consulting agreement with the President of a subsidiary of the Company, Travis Chrisman, whereby the Company agreed to pay a consulting
fee of $7,500 per month for a period of five years. The monthly fee will increase to: $10,000 per month if the Company generates
gross revenue of $1,000,000 per month; $12,500 per month if the Company generates gross revenue of $1,500,000 per month; $15,000
per month if the Company generates gross revenue of $2,000,000 per month and $20,000 per month if the Company generates gross revenue
of $2,500,000 per month. The consultant shall also be granted 200,000 common shares per year for a period of five years.
(h) On August 1, 2019, the Company entered into a consulting
agreement with the CEO of the Company, Ron Loudoun, whereby the Company agreed to pay a consulting fee of $7,500 per month for
a period of three years and whereby the Company granted the Consultant an option to acquire 250,000 common shares of the Company
or 250,000 Options at 10% below market value at the date of grant upon execution of the consulting agreement for an additional
2 years.
(i) On August 1, 2019, the Company entered into a consulting
agreement with the Chief Agricultural Operations Manager, Anthony Curci, whereby the Company agreed to pay a signing bonus of $6,000
and a consulting fee of $6,000 per month for a period of six months. At the end of the six-month period, the Company may evaluate
the performance with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire
25,000 common shares of the Company or 25,000 Options at 10% below market value at the date of grant upon execution of the consulting
agreement.
(j) On August 1, 2019, the Company entered into a consulting
agreement with the Chief Project Manager, Greg Stinson, whereby the Company agreed to pay a signing bonus of $15,000 and a consulting
fee of $7,500 per month for a period of five years. The Company also granted the Consultant an option to acquire 100,000
common shares of the Company or 100,000 Options priced at $0.50 per share upon execution of the consulting agreement and an additional
100,000 common shares or Options priced at 10% below market value at the date of grant six months after the execution of the agreement.
(k) On August 1, 2019, the Company entered into a consulting
agreement with the Assistant Agricultural Operations Manager, Carol Snyder, whereby the Company agreed to pay a signing bonus of
$4,000 and a consulting fee of $2,000 per month for a period of six months. At the end of the six-month period, the Company may
evaluate the performance with regards to an extension of the agreement. The Company also granted the Consultant an option to acquire
25,000 common shares of the Company or Options at $0.50 per share upon execution of the consulting agreement and an additional
25,000 common shares or Options at 10% below market value at the date of grant six months after the execution of the agreement.
(l) On August 1, 2019, the Company granted an option to a non-related
party to acquire 50,000 common shares of the Company at 10% below market value at the date of grant for services rendered.
There is currently no pending or threatened litigation.
11. Subsequent Events
None
Effective December
19, 2019, the Company entered into a securities purchase agreement dated as of December 19, 2019 (the “SPA”) with an
accredited investor (the “Buyer”), pursuant to which the Company issued and sold to the Buyer (i) a convertible promissory
note (the “Note”) in the aggregate principal amount of up to $750,000, due June 30, 2020, bearing interest at a rate
of ten percent (10%) per annum and convertible into shares of the Company’s common stock at a conversion price of $2.50 per
share and (ii) a common stock purchase warrant (the “Warrant”), exercisable for two (2) years, to purchase up to 250,000
shares of the Company’s common stock at an exercise price of $3.00 per share, for an aggregate purchase price of $600,000.
On December 31, 2019,
the Buyer paid an initial purchase price of $100,000 at the initial closing. The purchase price balance of $500,000 will be paid
upon a registration statement for the registration of the secondary offering and resale of the shares issuable upon conversion
of the Note and exercise of the Warrant being declared effective by the Securities & Exchange Commission (the “SEC”).
The Note is currently vested only as to an aggregate principal amount of $125,000, and the Warrant is currently vested only as
to the right to purchase 41,667 shares. The remainder of the Note (as to an aggregate principal amount of $625,000) and the remainder
of the Warrant (as to the right to purchase up to 203,333 shares) shall vest if, and only if, the Buyer pays the purchase price
balance of $500,000. The original issue discount on the Note for the initial purchase price is $25,000, and the original issue
discount for the Note, fully vested, is $150,000.
The Note can be prepaid
at any time by paying 110% of the then outstanding principal, interest, default interest (if any), and any other amounts then due
under the Note. The Note is initially convertible at a price per share equal to $2.50 (the “Fixed Conversion Price”);
provided, however, that during the continuance of an event of default under the Note, the conversion price shall be equal to 75%
of the lowest trading price of the Company’s common stock during the 30 trading days prior to conversion.
Concurrently therewith,
the Company entered into a registration rights agreement with the Buyer, pursuant to which the Company agreed to file a registration
statement with the SEC for the registration of the secondary offering and resale of the shares issuable upon conversion of the
Note and exercise of the Warrant and to have the registration statement declared effective by the SEC at the earliest possible
date.