|
ITEM 1.
|
CONSOLIDATED FINANCIAL STATEMENTS
|
INDEX
|
|
F-1
|
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Consolidated Balance Sheets as of December 31, 2018 (Unaudited) and March 31, 2018
|
|
F-2
|
|
Consolidated Statement of Operations for the Three Months Ended December 31, 2018 and December
31, 2017 and the Nine Months ended December 31, 2018 and December 31, 2017 (Unaudited)
|
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F-3
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|
Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2018 and December
31, 2017 (Unaudited)
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F-4
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Notes to the Consolidated Financial Statements (Unaudited)
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F-5
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MOUNTAIN
HIGH ACQUISITIONS CORP.
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
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|
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|
|
Audited
|
|
|
|
|
December
31,
|
|
|
|
March
31,
|
|
|
|
|
2018
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
30,461
|
|
|
$
|
109,464
|
|
Accounts receivable
|
|
|
14,168
|
|
|
|
150,000
|
|
Notes receivable
- current
|
|
|
25,011
|
|
|
|
—
|
|
Other receivables
|
|
|
—
|
|
|
|
22,294
|
|
TOTAL CURRENT ASSETS
|
|
|
69,640
|
|
|
|
281,758
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
1,200,000
|
|
|
|
—
|
|
Deferred revenue
|
|
|
13,750
|
|
|
|
—
|
|
Notes receivable - long
term
|
|
|
102,909
|
|
|
|
—
|
|
TOTAL OTHER ASSETS
|
|
|
1,316,659
|
|
|
|
—
|
|
FIXED ASSETS (NET)
|
|
|
329,416
|
|
|
|
170,000
|
|
TOTAL ASSETS
|
|
$
|
1,715,715
|
|
|
$
|
451,758
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
145,587
|
|
|
$
|
149,954
|
|
Accrued liabilities
|
|
|
12,500
|
|
|
|
12,500
|
|
Convertible notes payable, net Beneficial Conversion
Feature fully recognized
of $885,574
|
|
|
198,554
|
|
|
|
362,361
|
|
TOTAL CURRENT LIABILITIES
|
|
|
356,641
|
|
|
|
524,815
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
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STOCKHOLDERS' EQUITY (DEFICIT):
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 250,000,000 shares authorized,
100,000
and 100,000 shares issued and outstanding as of
December 31, 2018 and March 31, 2018 respectively
|
|
|
10
|
|
|
|
10
|
|
Common stock, $0.0001 par value; 500,000,000 shares authorized,
199,380,515
and 96,208,582 shares issued and outstanding as of
December 31, 2018 and March 31, 2018 respectively
|
|
|
19,938
|
|
|
|
9,621
|
|
Additional paid in capital
|
|
|
15,154,484
|
|
|
|
9,607,834
|
|
Accumulated (deficit)
|
|
|
(13,815,358
|
)
|
|
|
(9,690,522
|
)
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
1,359,074
|
|
|
|
(73,057
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
$
|
1,715,715
|
|
|
$
|
451,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
The accompanying notes are an integral part of these consolidated financial statements
|
MOUNTAIN HIGH ACQUISITIONS CORP.
|
CONSOLIDATED STATEMENT OF OPERATIONS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
For the Three Months ended December 31,
|
|
For the Nine Months ended December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
86,875
|
|
|
$
|
60,000
|
|
|
$
|
148,750
|
|
|
$
|
90,000
|
|
Cost of revenue
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Gross profit
|
|
|
86,875
|
|
|
|
60,000
|
|
|
|
148,750
|
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
11,750
|
|
|
|
10,000
|
|
|
|
35,250
|
|
|
|
20,000
|
|
Director fees
|
|
|
40,000
|
|
|
|
45,000
|
|
|
|
130,000
|
|
|
|
135,000
|
|
Warrant expense
|
|
|
—
|
|
|
|
—
|
|
|
|
597,000
|
|
|
|
115,100
|
|
Selling, general and administrative expenses
|
|
|
18,781
|
|
|
|
57,408
|
|
|
|
90,177
|
|
|
|
427,608
|
|
|
|
|
70,531
|
|
|
|
112,408
|
|
|
|
852,427
|
|
|
|
697,708
|
|
Income (Loss) from operations
|
|
|
16,344
|
|
|
|
(52,408
|
)
|
|
|
(703,677
|
)
|
|
|
(607,708
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense resulting from Beneficial Conversion Feature
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(136,500
|
)
|
Goodwill write-down
|
|
|
(3,405,134
|
)
|
|
|
—
|
|
|
|
(3,405,134
|
)
|
|
|
—
|
|
Forbearance expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(27,250
|
)
|
Original issue discount
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(34,000
|
)
|
Loss on valuation of preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,084,300
|
)
|
Other income (expense)
|
|
|
2,375
|
|
|
|
—
|
|
|
|
5,430
|
|
|
|
—
|
|
Interest Expense
|
|
|
(4,748
|
)
|
|
|
(13,789
|
)
|
|
|
(21,455
|
)
|
|
|
(29,356
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(3,391,163
|
)
|
|
$
|
(66,197
|
)
|
|
$
|
(4,124,836
|
)
|
|
$
|
(2,919,114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) per share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(0.03
|
)
|
|
|
(0.00
|
)
|
|
|
(0.04
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss) per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
(0.03
|
)
|
|
|
(0.00
|
)
|
|
|
(0.04
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
108,704,327
|
|
|
|
80,586,607
|
|
|
|
101,681,366
|
|
|
|
76,569,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
|
MOUNTAIN HIGH ACQUISITIONS CORP.
|
CONSOLIDATED STATEMENT OF CASH FLOWS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
For the nine months ended
December 31,
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(4,124,836
|
)
|
|
$
|
(2,919,114
|
)
|
Adjustment to reconcile net loss to net
|
|
|
|
|
|
|
|
|
Cash used in operating activities:
|
|
|
|
|
|
|
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Beneficial Conversion Feature on Note payable
|
|
|
—
|
|
|
|
136,500
|
|
Purchase of One Lab Co
|
|
|
4,605,134
|
|
|
|
|
|
Depreciation and amortization
|
|
|
35,250
|
|
|
|
20,000
|
|
Accounts payable
|
|
|
(4,367
|
)
|
|
|
(12,140
|
)
|
Change in other receivables
|
|
|
22,294
|
|
|
|
—
|
|
Interest expense
|
|
|
21,455
|
|
|
|
|
|
Warrants expense
|
|
|
597,000
|
|
|
|
115,100
|
|
Decrease (increase) in receivables
|
|
|
135,832
|
|
|
|
(112,294
|
)
|
Stock for services
|
|
|
9,905
|
|
|
|
308,433
|
|
Goodwill
|
|
|
(1,200,000
|
)
|
|
|
—
|
|
Forbearance
|
|
|
—
|
|
|
|
27,250
|
|
Other assets - deferred revenue
|
|
|
(13,750
|
)
|
|
|
—
|
|
Original issue discount
|
|
|
—
|
|
|
|
34,000
|
|
Loss on valuation Preferred Stock
|
|
|
—
|
|
|
|
2,084,300
|
|
Current accrued liabilities
|
|
|
—
|
|
|
|
35,000
|
|
Net cash provided (used) by operating activities
|
|
|
83,917
|
|
|
|
(282,965
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Fixed Assets
|
|
|
(35,000
|
)
|
|
|
(200,000
|
)
|
|
|
|
—
|
|
|
|
—
|
|
Net cash provided by investing activities
|
|
|
(35,000
|
)
|
|
|
(200,000
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from notes receivable
|
|
|
(127,920
|
)
|
|
|
—
|
|
Note conversions
|
|
|
—
|
|
|
|
(210,909
|
)
|
Proceeds from borrowings
|
|
|
—
|
|
|
|
688,764
|
|
Net cash (used) provided by financing activities
|
|
|
(127,920
|
)
|
|
|
477,855
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(79,003
|
)
|
|
|
(5,110
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
Beginning of the period
|
|
|
109,464
|
|
|
|
10,399
|
|
End of the period
|
|
$
|
30,461
|
|
|
|
5,289
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
|
Note
1 - Organization and Basis of Presentation
Organization and Line of Business
In May 2017, the Company formed MYHI-AZ to
acquire equipment to service the growing cannabis industry. In September 2017, the Company entered into a consulting agreement
with D9 Manufacturing, "D9," to provide D9 customers with infrastructure equipment. Also in September 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 right to extend the lease for an additional 2 years. The lease began August 15, 2017. The lease provided for a monthly
lease rate of $20,000 a month and required advance payment for operating supplies and expenses. The monthly lease rate was recorded
as Revenue and an Account Receivable while the advances were recorded as an Other Receivable. The monthly lease payments were to
commence on harvesting of the first crop. 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 this crop
resulted in a deferral of collection of the lease rental payments and the operating cost payments. The power failure highlighted
electrical issues with the facility where the containers are being used and improvements to the containers that could be made.
The container improvements and facility power requirement issue took a few months to resolve.
Effective September 11, 2018, MYHI-AZ and D9
agreed to convert the current amount due under the operating lease, representing $150,000 in lease payments and $22,294 in 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 was due October 3, 2018. 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 per month beginning November 1, 2018.
Effective August 18, 2018 (the “Effective
Date”), the Company, on the one hand, and One Lab Co (“Labco”) and Alchemy Capital, LLC (“Alchemy”),
on the other hand, entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which Alchemy, the sole
shareholder of Labco, agreed to exchange 100% of the capital stock of Labco for 88,000,000 restricted shares of the Company (the
“MYHI Shares”) in accordance with the following schedule: 20,000,000 MYHI shares at Closing and 68,000,000 MYHI Shares
after certain equipment under order by Labco at the time (the “Equipment”) was delivered to the lessee under a lease
agreement between Labco and the lessee (the “Lease”). Additionally, Alchemy agreed to pay monthly lease payments of
$25,000 to Labco beginning ten days after the Effective Date and until the Equipment was delivered. The Equipment consists of a
state-of-the-art intermodal extraction laboratory engineered and designed specifically for processing cannabis.
MYHI
issued the 88,000,000 shares of restricted common stock in accordance with the terms of the Exchange Agreement and recorded the
acquisition of fixed assets valued at $159,667 and Goodwill of $4,445,467. The Goodwill valuation was subsequently reviewed and
written down to $1,200,000.
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 $4,124,836 for the nine months ended December
31, 2018 and has an accumulated deficit of $13,815,358 and a working capital deficit of $287,001 as of December 31, 2018. These
conditions raise substantial doubt as to the Company’s ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management
plans to continue to raise capital to fund the Company’s operations and believes that it can continue to raise equity or
debt financing to support its operations until the Company is able to generate positive cash flow from operations.
Note 2 – Summary of Significant
Accounting Policies
Basis
of Presentation
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The
accompanying consolidated financial statements have been presented in United States Dollars ($ or “USD”). The fiscal
year end is March 31.
Principles of Consolidation
The accounts of the Company and its wholly–owned
subsidiaries GreenLife Botanix, MYHI-AZ and One Lab Co 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
As of January 1, 2018, we adopted ASU No. 2014-09,
“Revenue from Contracts with Customers” (ASU 2014-09). Leasing revenue recognition is specifically excluded
and therefore the new standard is only applicable to service fee and consulting revenue. A five-step model has been introduced
for an entity to apply when recognizing revenue. The new guidance also includes enhanced disclosure requirements. The
guidance was effective January 1, 2018. The adoption did not have an impact on our financial statements.
Revenue represents lease revenue for the grow
containers pursuant to the Company's lease with D9 and extraction equipment lease pursuant to the Labco share exchange agreement.
For the nine months ended December 31, 2018 the Company recorded revenue of $148,750 from both leases.
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:
|
·
|
a significant decrease
in the market value of an asset;
|
|
·
|
a significant adverse
change in the extent or manner in which an asset is used; or
|
|
·
|
an accumulation of costs
significantly in excess of the amount originally expected for the acquisition of an asset.
|
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 December 31, 2018 or December 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 – 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.
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 of 20,000,000 shares 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.
During the Nine months ended December 31, 2018,
the Company converted $185,262 of convertible notes into 5,516,933 shares of common stock, issued 155,000 shares of common stock
valued at $9,905 pursuant to consulting agreements, issued 9,500,000 shares of common stock relating to cashless warrants issued
in conjunction with convertible notes issued to St. George Investments LLC valued at $597,000, and issued 88,000,000 shares of
common stock valued at $4,605,134 pursuant to the share exchange agreement for Labco.
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. Pursuant to ASC 470-20-25-2 the company fair valued the warrants at $115,100 to be debited to warrant expense for
the year ended March 31, 2018. 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, however subsequent issues to St. George on conversion of their convertible notes are subject to the ratcheting calculation.
Pursuant to a Warrant Settlement Agreement
executed June 27, 2018, the Company agreed to issue 8,141,005 additional warrants to settle the ratchet provision of the original
warrant. The Company recorded additional warrant expense of $491,850 pursuant to ASC 470-20-25-2 as the fair value of the warrants.
Effective April 19, 2018, the Company, pursuant to the Warrant to Purchase Shares of Company Stock which was issued in conjunction
with the St George Investments LLC Securities Purchase Agreement dated June 30, 2017, issued 3,500,000 shares of Company stock
at $.0826 per share, valued at $289,100. On June 27, 2018, the Company agreed to issue an additional 6,000,000 shares of Company
common stock to fully settle the warrant at a value of $433,200 or $0.0705 per share. The Company recorded additional warrant expense
of $105,150 to value the warrants exercised at market price.
A summary of the status of the Company’s outstanding
stock warrants and changes during the periods is presented below:
|
|
Shares available to purchase with warrants
|
|
Weighted
Average
Price
|
|
Weighted
Average
Fair Value
|
|
|
|
|
|
|
|
Outstanding, March 31, 2017
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
1,358,995
|
|
|
$
|
.1273
|
|
|
$
|
.1273
|
|
Exercised
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Forfeited
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Expired
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Outstanding, March 31, 2018
|
|
|
1,358,995
|
|
|
$
|
.1273
|
|
|
$
|
.1273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2018
|
|
|
1,358,995
|
|
|
$
|
.1273
|
|
|
$
|
.1273
|
|
Issued pursuant to agreement
|
|
|
8,141,005
|
|
|
$
|
.0604
|
|
|
$
|
.0604
|
|
Exercised April 19, 2018
|
|
|
(3,500,000
|
)
|
|
$
|
.0826
|
|
|
$
|
.0826
|
|
Exercised June 27, 2018
|
|
|
(6,000,000
|
)
|
|
$
|
.0705
|
|
|
$
|
.0705
|
|
Outstanding, December 31, 2018
|
|
|
0
|
|
|
$
|
.0
|
|
|
$
|
.0
|
|
Range of Exercise Prices
|
Number Outstanding 6/30/2018
|
Weighted Average Remaining Contractual Life
|
|
Weighted Average Exercise Price
|
$0.0327-$0.1273
|
0
|
0.00 years
|
$
|
0
|
Note 4 - Notes Payable
At December 31, 2018, the Company had outstanding
convertible notes payable to third parties in the amount of $198,554. The notes had interest rates of 3%-12% and had a conversion
provision allowing the holder to convert each 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.:
Note Holder
|
|
Amount
|
|
Conversion Terms
|
Andrew Cervasio
|
|
$
|
11,010
|
|
|
Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
|
St. George Financial
|
|
$
|
187,544
|
|
|
180 days from closing at lower of 65% of avg. 2 lowest closing bid 15 days prior to conversion
|
|
|
$
|
198,554
|
|
|
|
Note 5 - Related Party Transactions
Effective April 1, 2017, Alan Smith and Richard
Stifel assigned their consulting agreements and all future amounts due under the agreements 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 was paid $67,500 and RGS $62,500 for the nine months ended December
31, 2018.
Note 6 – Commitments and Contingencies
None.
Note 7 – Subsequent Events
None.
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
|
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”)
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements
are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,”
“expect,” “intend,” “plan,” “believe,” “foresee,” “estimate”
and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees
of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read
this report completely and with the understanding that actual future results may be materially different from what we expect. The
forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration
of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation
may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information,
future events or otherwise.
BUSINESS OPERATIONS
In May 2017, the Company formed MYHI-AZ to
acquire equipment to service the growing cannabis industry. In September 2017, the Company entered into a consulting agreement
with D9 Manufacturing, "D9," to provide D9 customers with infrastructure equipment. Also in September 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 right to extend the lease for an additional 2 years. The lease began August 15, 2017. The lease provided for a monthly
lease rate of $20,000 a month and required advance payment for operating supplies and expenses. The monthly lease rate was recorded
as Revenue and an Account Receivable while the advances were recorded as an Other Receivable. The monthly lease payments were to
commence on harvesting of the first crop. 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 this crop
resulted in a deferral of collection of the lease rental payments and the operating cost payments. The power failure highlighted
electrical issues with the facility where the containers are being used and and improvements to the containers that could be made.
The container improvements and facility power requirement issue took a few months to resolve.
Effective June 11, 2018, MYHI-AZ and D9 agreed
to convert the current amount due under the operating lease, representing $150,000 in lease payments and $22,294 in operating expenses,
into a $135,000 note payable, (the "Note"), with a term of 3 years and an interest rate of 7% per annum, and to capitalize
$35,000 for improvements to the containers. The first payment on the Note was due October 3, 2018. 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 August 18, 2018 (the “Effective
Date”), the Company, on the one hand, and One Lab Co (“Labco”) and Alchemy Capital, LLC (“Alchemy”),
on the other hand, entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which Alchemy, the sole
shareholder of Labco, agreed to exchange 100% of the capital stock of Labco for 88,000,000 restricted shares of MYHI (the “MYHI
Shares”) in accordance with the following schedule: 20,000,000 MYHI shares at Closing and 68,000,000 MYHI Shares after certain
equipment currently under order by Labco (the “Equipment”) was delivered to the lessee under a lease agreement between
Labco and the lessee (the “Lease”). Additionally, Alchemy agreed to pay monthly lease payments of $25,000 to Labco
beginning ten days after the Effective Date until the Equipment was delivered. The Equipment consists of a state-of-the-art intermodal
extraction laboratory engineered and designed specifically for processing cannabis.
The Company
issued the 88,000,000 shares of restricted common stock in accordance with the terms of the Exchange Agreement and recorded the
acquisition of fixed assets valued at $159,667 and Goodwill of $4,445,467. The Goodwill valuation was subsequently reviewed and
written down to $1,200,000.
RESULTS OF O
PERATIONS
Working
Capital
|
|
As of December 31, 2018
|
Total Current Assets
|
|
$
|
69,640
|
|
Total Current Liabilities
|
|
|
(356,641
|
)
|
Working Capital (Deficit)
|
|
$
|
(287,001
|
)
|
Cash
Flows
|
|
Three months Ended December 31, 2018
|
Cash Flows from (used in) Operating Activities
|
|
$
|
59,284
|
|
Cash Flows from (used in) Investing Activities
|
|
|
(35,000
|
)
|
Cash Flows from (used in) Financing Activities
|
|
|
(103,287
|
)
|
Net Increase (decrease) in Cash during period
|
|
$
|
(79,003
|
)
|
Operating
Revenues
Three
Months Ended December 31, 2018 Compared to Three Months Ended December 31, 2017
During
the three months ended December 31, 2018, the Company recorded revenues of $86,875 compared to $60,000 revenue for the three months
ended December 31, 2017. The revenue in the t
hree months ended December 31, 2018 and 2017 was for lease revenue. The lease
revenue is earned pursuant to lease agreements and is due and payable when invoiced.
Nine Months Ended December 31, 2018 Compared
to Nine Months Ended December 31, 2017
During the nine months
ended December 31, 2018, the Company recorded revenues of $148,750 compared to $90,000 revenue for the nine months ended December
31, 2017. The revenue in the nine months ended December 31, 2018 and 2017 was for lease revenue. The lease revenue is earned pursuant
to lease agreements and is due and payable when invoiced.
Operating Expenses and Net Loss
Three Months Ended December 31, 2018 Compared to Three Months
Ended December 31, 2017
The net loss for the three
months ended December 31, 2018 was $3,391,163, compared to a net loss of $66,197 for the three months ended December 31, 2017.
The loss for the three
months ended December 31, 2018 consists of director fee of $40,000, other SG&A of $18,781, depreciation of $11,750, goodwill
write-off of $3,405,134 and interest expense of $4,748 offset by $2,375 of other income. The goodwill write-off records the difference
between the value of the shares given and the assets received at the time of the Exchange Agreement between the Company and Labco.
The net loss for the three
months ended December 31, 2017 consisted of depreciation of $10,000, consulting expense of $45,000, other SG&A of $57,408 and
interest expense of $13,789.
Nine Months Ended December 31, 2018 Compared
to Nine Months Ended December 31, 2017
The net loss for the nine
months ended December 31, 2018 was $4,124,836 compared to a loss of $2,919,114 for the nine months ended December 31, 2017.
The loss for the nine months
ended December 31, 2018 consists of warrant expense of $597,000, director fee of $130,000, other SG&A of $90,177, depreciation
of $35,250, goodwill write-down of $3,405,134 and interest expense of $21,455 offset by other income of $5,430.
The net loss for the nine
months ended December 31, 2017 consisted of depreciation of $20,000, warrant expense of $115,100, director fees of $135,000, other
SG&A of $427,608, beneficial interest expense of $136,500, loss on preferred stock $2,084,300, forbearance expense of $27,250
and original issue discount of $34,000 and interest expense of $29,356.
Liquidity and Capital Resources
At December 31, 2018, the
Company’s cash balance and total assets were $30,461 and $1,556,050, respectively.
At December 31, 2018, the
Company had total liabilities of $356,641, consisting of $145,587 in accounts payable, $12,500 in accrued liabilities and $198,554
in convertible notes payable.
As at December 31, 2018,
the Company had a working capital deficit of $287,001.
Cashflow used in Operating Activities
During the nine month period
ended December 31, 2018, the Company obtained $83,917 of cash for Operating Activities compared to cash used for operating activities
of $282,965 for the nine months ended December 31, 2017.
Cash used for operations
for the nine month period ended December 31, 2018 were our loss of $4,124,836 offset by an increase in the issuance of shares of
$4,605,134, depreciation of $35,250, a decrease in account payable of $4,367, an increase in other receivables of $22,294, a warrant
expense of $597,000, a decrease in receivables of $135,832, an increase by share issuance for services of $9,905, goodwill of $1,200,000,
and a decrease of deferred revenue of $13,750.
Cash used for operations
for the nine month period ended December 31, 2017 consisted of our loss of $2,919,114 offset by $136,500 for a benefi
cial
interest on Notes Payable, a loss on issuance of Preferred stock of $2,084,300 , warrant expense of $115,100, an increase in Current
Liabilities of $35,000 offset by an increase in receivables of $112,294, depreciation expense of $20,000, stock issued for services
of $308,433, forbearance of $27,250, and a discount of $34,000.
Cashflow
used in Investing Activities
Cash
provided by investing activities was $35,000 compared to $200,000 for the nine months ended December 31, 2017.
Cashflow
from Financing Activities
During
the nine month period ended December 31, 2018, the Company used $127,920 of cash in financing activities compared to cash provided
by financing activities of $477,855 for the nine months ended December 31, 2017.
Going
Concern
We
have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities.
No assurance can be given as to the availability of financing or on the terms thereof. For these reasons, our auditors stated
in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going
concern.
Off-Balance
Sheet Arrangements
We
have no sig
nificant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect
on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources that are material to stockholders.
Future Financings
We will continue to rely
on equity sales of our common shares and advances from our majority stockholders in order to continue to fund our business operations.
Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any
additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Critical Accounting Policies
Our financial statements
and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on
a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods.
We regularly evaluate the
accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included
in the notes to our financial statements. In general, management's estimates are based on historical experience, on information
from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.
Actual results could differ from those estimates made by management.
Contractual Obligations
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this
item.
Recently Issued 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.