Note
1 - Organization and Basis of Presentation
Organization and Line of Business
On May 22, 2016 the Company completed the acquisition
of Greenlife Botanix ("Greenlife") as detailed in the First Amendment to the Shareholder Agreement dated February 8,
2016. The Company issued 10,000,000 restricted shares of its common stock to the shareholders of Greenlife in exchange for their
100% interest in Greenlife. The shares were valued at the market value on the date of issuance, $0.23, for a total consideration
of $2,300,000. The amount paid for Greenlife was recorded as Goodwill due to the start up nature of Greenlife and the minimal net
assets of Greenlife at the time of acquisition. Subsequent to the purchase of Greenlife the Company entered into a rescission agreement
with Freedom Seed and Feed, "FSF", which impaired the integration of Greenlife and FSF into a fully integrated cosmetic
company. Due to the rescission of FSF and the remarketing of the Greenlife product line the Company evaluated the book value of
the asset and elected to impair the Goodwill value of Greenlife and expensed the $2,300,000 book value in the year ended March
31, 2017. Greenlife started operations on September 18, 2014.
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 $2,438,801 and used cash for operations
of $255,662 for the three months ended June 30, 2017 and has an accumulated deficit of $8,777,600 and a working capital deficit
of $697,084 as of June 30, 2017. These conditions raise substantial doubt as to the Company’s ability to continue as a going
concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern. Management plans to continue to raise capital to fund the Company’s operations and believes that it can
continue to raise equity or debt financing to support its operations until the Company is able to generate positive cash flow from
operations.
Note 2 – Summary of Significant
Accounting Policies
Basis
of Presentation
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The
accompanying consolidated financial statements have been presented in United States Dollars ($ or “USD”). The fiscal
year end is March 31.
Principles of Consolidation
The accounts of the Company and its wholly–owned
subsidiary GreenLife Botanix are included in the accompanying consolidated financial statements. All intercompany balances and
transactions were eliminated on consolidation.
Use of Estimates
The preparation of financial statements in
conformity with US GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It
is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment
involved.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand
and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months
or less.
Revenue Recognition
In accordance with the Securities and Exchange
Commission’s (“SEC”) Staff Accounting Bulletin No. 104,
Revenue Recognition
, the Company will recognize
revenue when it is realized or realizable and earned. The Company must meet all of the following four criteria under SAB 104 to
recognize revenue:
-
Persuasive evidence of an arrangement exists
-
Delivery has occurred
-
The sales price is fixed or determinable
-
Collection is reasonably assured
Inventor
ies
Inventories
consisting of cosmetic products are stated at the lower of cost or market. Cost is determined using the first-in, first-out method
and are adjusted to actual cost quarterly based on a physical count. Net realizable value is the estimated selling price in the
ordinary course of business, less applicable variable selling expenses.
Intangible
Assets
The
Company accounts for intangibles in accordance with ASC 350, Intangible-Goodwill and Other. The Company evaluates intangibles,
at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be
recoverable. Impairment of intangibles is tested by comparing the carrying amount to the fair value. The fair values are estimated
using undiscounted projected net cash flows. If the carrying amount exceeds its fair value, intangibles are considered impaired
and a second step is performed to measure the amount of impairment loss, if any. The Company evaluates the impairment of intangibles
as of the end of each fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying
amount may not be recoverable. These circumstances include:
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•
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a
significant decrease in the market value of an asset;
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•
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a
significant adverse change in the extent or manner in which an asset is used; or
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•
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an
accumulation of costs significantly in excess of the amount originally expected for the
acquisition of an asset.
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Income
Taxes
The
Company accounts for income taxes in accordance with ASC Topic 740,
Income Taxes
. ASC 740 requires a company to use the
asset and liability method o
f 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 and 2017.
The Company
has no tax positions at June 30, 2017, or March 31, 2017, for which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such deductibility.
Basic and Diluted Loss Per Share
Earnings per share is calculated in accordance
with the ASC Topic 260,
Earnings Per Share
. Basic earnings per share is based upon the weighted average number of common
shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants
were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed
to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used
to purchase common stock at the average market price during the period. There were no warrants outstanding at June 30, 2017.
Recent Accounting Pronouncements
Recent authoritative guidance issued by the
FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified Public
Accountants, and the SEC, did not, or are not expected to have a material effect on the Company’s consolidated financial
statements.
Note 3 – Advances from Related
Parties
At June 30, 2017 and March 31, 2017, $138,945
due to Brent McMahon, former President of GreenLife Botanix, was reclassified from Current Liabilities to Advances from Related
Parties. Mr. McMahon is considered a related party due to his common stock position at June 30, 2017.
Note 4 – Equity
Common Stock
Effective June 12, 2017, the Company increased
its authorized shares of common stock to 500,000,000 shares with a par value of $0.0001 per share. The Company has 250,000,000
shares of preferred stock with a par value of $0.0001 per share.
During the year ended March 31, 2017 the Company
issued 503,334 restricted shares through a private placement at $0.15 per share.
On May 22, 2016, The Company issued 10,000,000
restricted shares to the shareholders of Greenlife Botanix pursuant to closing the Share Exchange Agreement dated February 8, 2016.
The shares were valued at the fair market trading value, $0.23, on the closing date.
The Company issued 353,600 restricted shares
to a vendor in lieu of payment of $35,360 that was owed to the vendor at March 31, 2016. The shares were recorded at the fair market
value of $0.25 per share or $88,400. The difference in value, $53,040, was written off as a loss on extinguishment of debt in the
year ended March 31, 2017.
Pursuant to agreements with potential investors,
on May 12, 2015 Alan Smith, CEO and a Director, retired 2,000,000 shares he received from the reverse merger referenced above.
The share retirement was valued at par $0.0001 per share.
On November 1, 2016, the Board of Directors
reviewed the share position of the officers and Directors of the Company and granted Richard Stifel, CFO and a Director, 2,500,000
restricted shares of MYHI stock at $.0001 per share. The value of the shares was $164,500 and the Company recorded an expense of
$162,000 for shares in lieu of compensation in year ended March 31, 2017.
On February 23, 2017, the Company issued 3,000,000
shares of restricted common stock valued at $71,700, the fair value of the stock, pursuant to a consulting contract dated October
11, 2016 with Clearview Consulting for services rendered.
During the year ended March 31, 2017, the Company
converted $506,587 of Convertible Notes Payable into 33,772,455 shares of restricted common stock at $0.015 per share per the
conversion agreements. Included in this conversion were $192,667 of Convertible Notes Payable for notes held by the Officers and
Directors of the Company. which were converted into 12,844,440 shares of restricted common stock, 4,888,958 shares to Richard G.
Stifel, CFO and Director and 7,955,482 shares to Alan Smith, CEO and Director.
On June 12, 2017, the Company issued 100,000
shares of Series B Convertible Preferred stock to an outside consulting firm for consulting services, valued at $109,700, which
was recorded as consulting fees in the three months ended June 30, 2017. Due to the super voting provision of the Series B Convertible
Preferred stock the Company recorded a loss on valuation of the shares of $2,084,300, the equivalent to 20,000,000 less the associated
consulting expense of $109,700.
On June 30, 2017 the Company issued 600,000
pursuant to consulting agreements with outside consultants for services rendered during the three months ended June 30, 2017. The
services were valued at $79,920 based on the closing bid on the date of issue. There were no shares issued for consulting services
for the three months ended June 30, 2016
.
Warrants
There were no warrants issued and outstanding
as of June 30, 2017,
Note 5 – Income Taxes
The Company accounts for income taxes using
the asset and liability approach in accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized
based on anticipated future tax consequences, using currently enacted tax laws, attributable to temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.
The Company has federal net operating loss
carryforwards of approximately $4,204,894 expiring in various years through 2037. The tax benefit of these net operating losses
has been offset by a full allowance for realization. The use of the net operating loss carryfowards may be limited due to a change
in control.
Income tax expense (benefit) consists of the following for the three
months ended June 30, 2017:
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Current taxes
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$
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—
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Deferred taxes
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124,075
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Less: valuation allowance
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(124,075
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)
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Net income tax provision
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$
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—
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The Company’s effective tax rate differs from the high statutory
rate for the three months ended June 30, 2017, due to the following (expressed as a percentage of pre-tax income):
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Federal taxes at statutory rate
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$
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34.0
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%
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State taxes, net of federal tax benefit
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5.0
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%
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Valuation allowance
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(39.0
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%)
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Effective income tax rate
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$
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0.0
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%
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As of June 30, 2017, the components of these temporary
differences and the deferred tax asset were as follows:
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Deferred Tax assets:
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Net operating loss carryforward
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$
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935,279
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Less: valuation allowance
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(935,279
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)
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Net deferred tax assets
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$
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—
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Note 6 - Notes Payable
At June 30, 2017 the Company had
outstanding convertible notes payable to third parties in the amount of $236,843. Each note had interest rates of 3%-5% and
had a conversion provision allowing the holder to convert the note into shares of the Company at a discount. The discount
varied from 70% of the trading value at the conversion date to the lower of 80% of the share value on the conversion date or
$0.015 or $0.03. This is referred to as the Beneficial Conversion Feature, "BCF". Due to the fact that the notes
could be converted immediately or any time thereafter, there is no amortization of expense, so the Company has elected to
record an expense in the current year for the difference between the "BCF and the share value on the date the note was
executed. This resulted in an expense of $73,500 and $56,550 for the three months ended June 30, 2017 and 2016 respectively.
The following details outstanding convertible notes as of June 30, 2017:
Mountain High Acquisition Corp.
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Convertible Notes Payable
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June 30, 2017
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Note Holder
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Amount
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Conversion terms
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Axiom Financial, Inc.
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5,112.95
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Broad Wind LLC
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25,564.76
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Andrew Ceravasio
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10,217.58
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Conner Preston
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10,217.58
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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EROP Capital
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10,224.52
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Fourth Street Fund
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10,260.71
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Lesser of $0.015 or 70% lowest closing bid
15 days prior to conversion
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Fourth Street Fund
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3,490.52
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Lesser of $0.015 or 70% lowest closing bid
15 days prior to conversion
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Laurence Gershman
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10,217.58
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Jo Ann Davidson
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12,862.75
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Lesser of $0.015 or 70% lowest closing bid
15 days prior to conversion
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Loma Mgmt. Partners LLC
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10,221.74
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Micaddan Mrkt. Consultants
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10,224.52
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Millennial Investments LLC
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5,112.95
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Paul Mannion
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10,302.71
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Lesser of $0.015 or 70% lowest closing bid
15 days prior to conversion
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Power Up
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73,546.04
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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Rob Davidson
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8,817.51
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Lesser of $0.015 or 70% lowest closing bid
15 days prior to conversion
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Saeb Jannoun Revocable Trust
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20,449.03
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Lesser of $0.03 or 80% lowest closing bid 15
days prior to conversion
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236,843.45
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Note 7 - Related Party Transactions
On April 1, 2016, the Company executed consulting
agreements with Alan Smith, CEO, and Richard Stifel, CFO for administrative services for the Company. Mr. Stifel and Mr. Smith
were each paid $7,500.00 and $0.00 during the three months ended June 30, 2017 and 2016 respectively pursuant to the agreements.
Note 8 – Commitments and Contingencies
On June 30, 2017 the Company executed a
secured convertible note for $346,000, payable in 3 tranches, over 30 day increments. The first tranche in the amount of
$181,000 less an $21,000 Original Issue Discount for a net amount of $160,000, was received on July 6, 2017. The two
subsequent tranches will be received 30 and 60 days from this date.
On June 30, 2017, the Company, through
its wholly owned subsidiary MYHI-AZ, entered into an equipment purchase agreement and a lease agreement with D9 Manufacturing
Inc. The purchase agreement is for the acquisition of 2 intermodal steel cultivation containers to be used in D9’s
Arizona operations. The lease agreement has a 3 year term and provides for base rent payments plus reimbursement for
operating costs associated with operations. The Company also entered into an Memorandum Agreement with D9 on June 22, 2017
that provides for additional shares to be issued relative to crop harvests and sales. The Memorandum Agreement called for an
initial issue of 250,00 shares, however due to delays in the installation of the equipment the parties verbally agreed to
postpone the initial issue until the containers were installed and operation begun. The containers are projected to be
operational by the middle of August 2017.
Note 9 – Subsequent Events
On July 25, 2017, the Company executed a Convertible
Promissory Note in the amount of $63,000. The proceeds will be used for working capital requirements for the current fiscal quarter.