UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-Q

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

MOUNTAIN HIGH ACQUISITIONS CORP.

 

(Exact name of registrant as specified in its charter)

 

     
Colorado 333-175825 27-3515499
(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation)   Identification Number)

 

 

 

6501 E. Greenway Pkwy., Suite 103-412

Scottsdale, AZ 85254

 

 

 

(Address of principal executive offices)

 

(303) 358-3840
(Registrant’s Telephone Number)

 

Indicate by check mark whether the issue r (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑    No ☐

 

Indicate by check mark whether the re gistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑    No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐ Accelerated filer  ☐
   
Non-accelerated filer  ☐
(Do not check if a smaller reporting company)
Smaller reporting company  ☑

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☑

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)

Emerging growth company ☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

As of August 14, 2017, there were 79,879,968   shares of the registrant’s $0.0001 par value common stock issued and outstandi ng.

 

     

 

MOUNTAIN HIGH ACQUISITIONS CORP.

QUARTERLY REPORT

PERIOD ENDED JUNE 30, 2017

 

TABLE OF CONTENTS

 

      Page No.
    PART I - FINANCIAL INFORMATION  
Item 1.   Financial Statements 3
       
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations 12
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 15
       
Item 4T.   Controls and Procedures 15
       
    PART II - OTHER INFORMATION  
Item 1.   Legal Proceedings 16
       
Item1A.   Risk Factors 16
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 16
       
Item 3.   Defaults Upon Senior Securities 16
       
Item 4.   Mine Safety Disclosures 16
       
Item 5.   Other Information 16
       
Item 6.   Exhibits 16
       
    Signatures 17

 

Special Note Regarding Forward-L ooking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mountain High Acquisitions Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

* Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "MYHI" refers to Mountain High Acquisitions Corp.

 

     

 

PART I - FINANCIAL INFORMATION

        

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

 

INDEX   F-1  
Consolidated Balance Sheets as of June 30, 2017 (Unaudited) and March 31, 2017  

F-2

 
Consolidated Statement of Operations for the Three Months Ended June 30, 2017 and June 30, 2016 (Unaudited)   F-3  
Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2017 and June 30, 2016 (Unaudited)   F-4  
Notes to the Consolidated Financial Statements (Unaudited)   F-5  

 

 

 

  F- 1  

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED BALANCE SHEETS
 
      Unaudited       Audited  
      June 30,       March 31,  
      2017       2017  
                 
ASSETS                
                 
CURRENT ASSETS                
Cash and cash equivalents   $ 17,857     $ 10,399  
TOTAL CURRENT ASSETS     17,857       10,399  
FIXED ASSETS  (NET)     200,000       —    
TOTAL ASSETS   $ 217,857     $ 10,399  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
                 
CURRENT LIABILITIES                
Accounts payable   $ 16,652     $ 23,378  
Accrued liabilities     322,500       92,500  
Convertible notes payable, net Beneficial Conversion Feature fully recognized of $487,574     236,844       161,279  
Advances from Related Parties     138,945       138,945  
TOTAL CURRENT LIABILITIES     714,941       416,102  
                 
COMMITMENTS AND CONTINGENCIES     —         —    
                 
STOCKHOLDERS' EQUITY (DEFICIT):                
Preferred stock, $0.0001 par value; 250,000,000 shares authorized, 100,000 and nil shares issued and outstanding as of June 30, 2017 and March 31, 2017 respectively     10       —    
Common stock, $0.0001 par value; 500,000,000 shares authorized, 73,291,389 and 72,691,389 shares issued and outstanding as of June 30, 2017 and March 31, 2017 respectively     7,329       7,269  
Additional paid in capital     8,273,177       5,925,827  
Accumulated (deficit)     (8,777,600 )     (6,338,799 )
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)     (497,084 )     (405,703 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)   $ 217,857     $ 10,399  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements

 

  F- 2  

 

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
     
    Three months ended June 30,
    2017   2016
         
Revenue   $ —       $ 4,272  
Cost of revenue     —         1,495  
Gross profit     —         2,777  
                 
Selling, general and administrative expenses     278,936       105,675  
      278,936       105,675  
(Loss) from operations     (278,936 )     (102,898 )
                 
Interest Expense resulting from Beneficial Conversion Feature     (73,500 )     (56,550 )
Loss on valuation of preferred stock     (2,084,300 )     —    
Interest Expense     (2,065 )     (4,035 )
                 
Net income (loss)   $ (2,438,801 )   $ (163,483 )
                 
Net Income (loss) per share-basic                
Continuing operations     (0.03 )     (0.00 )
                 
Net Income (loss) per share-diluted                
Continuing operations     (0.03 )     (0.00 )
                 
Weighted average shares outstanding - basic and diluted     72,697,982       36,891,762  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements

 

 

  F- 3  

 

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
         
    Three Months Ended June 30,  
    2017     2016  
                 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net (loss)   $ (2,438,801 )   $ (163,483 )
Adjustment to reconcile net loss to net Cash used in operating activities:                
Changes in:                
Beneficial Conversion Feature on Note payable     73,500       56,550  
Accounts payable     (6,726 )     619  
Increase in Prepaid     —         (2,500 )
Fixed Assets     (200,000 )     —    
Loss on valuation Preferred Stock     2,084,300       —    
Inventory     —         1,496  
Current liabilities     232,065       29,267  
Net cash provided (used) by operating activities     (255,662 )     (78,051 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES     —         —    
Net cash provided by investing activities     —         —    
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from sale of shares     189,620       29,436  
Proceeds from notes payable     73,500       20,000  
Net cash provided by financing activities     263,120       49,436  
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     7,458       (28,615 )
                 
CASH AND CASH EQUIVALENTS                
Beginning of the period     10,399       34,988  
End of the period   $ 17,857       6,373  
                 
Supplemental disclosures of cash flow information                
Taxes paid   $ —       $ —    
Interest paid   $ —       $ —    
                 
 
The accompanying notes are an integral part of these consolidated financial statements

 

 

  F- 4  

 

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
  F- 5  

 

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:

 

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 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.

  F- 6  

 

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,

 

  F- 7  

 

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: 

     
Current taxes   $ —    
Deferred taxes     124,075  
Less: valuation allowance     (124,075 )
Net income tax provision   $ —    

 

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):

     
Federal taxes at statutory rate   $ 34.0 %
State taxes, net of federal tax benefit     5.0 %
Valuation allowance     (39.0 %)
Effective income tax rate   $ 0.0 %

As of June 30, 2017, the components of these temporary differences and the deferred tax asset were as follows: 

     
Deferred Tax assets:    
     Net operating loss carryforward   $ 935,279  
     Less: valuation allowance     (935,279 )
Net deferred tax assets   $ —    

 

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.      
Convertible Notes Payable      
June 30, 2017      
       
Note Holder Amount   Conversion terms
Axiom Financial, Inc.         5,112.95   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Broad Wind LLC       25,564.76   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Andrew Ceravasio       10,217.58   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Conner Preston       10,217.58   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
EROP Capital       10,224.52   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Fourth Street Fund       10,260.71   Lesser of $0.015 or 70% lowest closing bid 15 days prior to conversion
Fourth Street Fund         3,490.52   Lesser of $0.015 or 70% lowest closing bid 15 days prior to conversion
Laurence Gershman       10,217.58   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Jo Ann Davidson       12,862.75   Lesser of $0.015 or 70% lowest closing bid 15 days prior to conversion
Loma Mgmt. Partners LLC       10,221.74   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Micaddan Mrkt. Consultants       10,224.52   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Millennial Investments LLC         5,112.95   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Paul Mannion       10,302.71   Lesser of $0.015 or 70% lowest closing bid 15 days prior to conversion
Power Up       73,546.04   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
Rob Davidson         8,817.51   Lesser of $0.015 or 70% lowest closing bid 15 days prior to conversion
Saeb Jannoun Revocable Trust       20,449.03   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
      236,843.45    

 

  F- 8  

 

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.

 

  F- 9  

 

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

 

During the 2017 fiscal year, the Company concentrated its efforts on refining the product linesand improving the distribution and marketing operations of its wholly owned subsidiary, GreenLife Botanix. In addition, the Company evaluated numerous opportunities with the intent of supplementing the GreenLife operation, However, the Company has been unable to finalize any additional operations for GreenLife.

 

On May 30, 2017, the Company announced it had entered into an agreement with D9 Manufacturing Inc. to assist the Company in the development of turnkey infrastructure assets for the cannabis market. Subsequent to that agreement, the Company, through its wholly owned subsidiary MYHI-AZ, entered into a purchase agreement and lease agreement with D9 Manufacturing Inc. f or two intermodal steel cultivation containers to be used in a pilot project in a Phoenix AZ operation. The containers are scheduled to be in operation in August 2017.

 

RESULTS OF OPERATIONS

 

Working Capital

 

    As of June 30, 2017
Total Current Assets   $ 17,857  
Total Current Liabilities     (714,941 )
Working Capital (Deficit)   $ (697,084 )

 

Cash Flows

 

   

Three months

Ended June 30, 2017

Cash Flows from (used in) Operating Activities   $ (255,662 )
Cash Flows from (used in) Investing Activities     —    
Cash Flows from (used in) Financing Activities     263,120  
Net Increase (decrease) in Cash during period   $ 7,458  

 

Operating Revenues

 

During the three months e nding June 30, 2017, the Company recorded no sales compared to $4,272 revenue for the three months ended June 30, 2016. The sales were for cosmetics and were sold on net 30 day terms or cash. Cost of Goods Sold are at the lower of cost or market.

 

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Operating Expenses and Net Loss

 

The net loss for the three month period ended June 30, 2017 was $2,438,801, compared to a loss of $163,483 for the three months ended June 30, 2016. The loss for the three months ended June 30, 2017 consists of $234,620 for consulting fees, $29,793 for legal and accounting fees and $4,823 for travel. Other Income (Expense) was an expense for the beneficial interest on Notes Payable of $73,500, a loss on the issuance of Preferred stock of $2,084,300 and interest expense of $2,065.

 

The loss for the three months ended June 30, 2016 consisted of $40,000 for accrued consulting fees, $15,000 for website design, $16,000 for legal and accounting fees. Other income and (expense) consists of $56,550 for the beneficial interest on Notes Payable and $4,035 for interest expense..

 

Liquidity and Capital Resources

 

At June 30, 2017, the Company’s cash balance and total assets were $17,857 and $17,857, respectively.

 

At June 30, 2017, the Company had total liabilities of $714,941, consisting of $16,652 in accounts payable, $236,844 in notes payable, accrued liabilities of $322,500 and $138,945 in advances from a related party.  

 

As at June 30, 2017, the Company had a working capital deficit of $697,084.    

 

Cashflow used in Operating Activities

 

During the three month period ended June 30, 2017, the Company used $255,662 of cash for Operating Activities compared to cash used for operating activities of $78,051 for the three months ended June 30, 2016. Cash used for operations for the three months ended June 30, 2017. consisted of our loss of $2,438,801 offset by $73,500. for beneficial interest on Notes Payable, loss on issuance of Preferred stock of $2,084,300 and an increase in Current Liabilities of $232,065.,

 

The loss for the three months ended June 30, 2016 consisted of our loss of $163,483 offset by $56,550 for beneficial interest on Notes Payable and an increase in Current Liabilities of $29,267

 

Cashflow used in Investing Activities

 

There were no investing activities for the three months ended June 30, 2017 or 2016

 

Cashflow from Financing Activities

 

During the three months ended June 30, 2017, the Company received $73,500 from the issue of Notes Payable and $189,620 from the conversion of debt to stock .

 

During the three months ended June 30, 2016, the Company received $20,000 from the issue of Notes Payable and $29,436 from the conversion of debt to stock

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. 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 without further financing.

 

Off-Balance Sheet Arrangements

 

We have no significant 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.

 

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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.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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.

 

ITEM 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Based on an evaluation as of the date of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2017 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2017. In making this assessment management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) (COSO) . Our management has concluded that, as of June 30, 2017, our internal control over financial reporting is effective based on these criteria.

 

Changes in Internal Control and Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of June 30, 2017, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

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PART II—OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Quarterly Issuances:

 

None

 

Subsequent Issuances:

 

None

 

ITEM 3. Defaults Upon Senior Securities

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

Exhibit

Number

  Description of Exhibit   Filing
3.01   Amendment to Articles of Incorporation dated June 13, 2017   Filed with the SEC on June 13,2017 as part of our Current Report on Form 8-K.
3.02   3.01Certificate of Designation for Series B Convertible Preferred Stock   Filed with the SEC on June 13,2017 as part of our Current Report on Form 8-K.
3.03   Amendment to Bylaws dated June 13, 2017   Filed with the SEC on June 13,2017 as part of our Current Report on Form 8-K.
31.01   Certification of Principal Executive Officer Pursuant to Rule 13a-14   Filed herewith.
31.02   Certification of Principal Financial Officer Pursuant to Rule 13a-14   Filed herewith.
32.01   CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act   Filed herewith.
101.INS*   XBRL Instance Document   Filed herewith.
101.SCH*   XBRL Taxonomy Extension Schema Document   Filed herewith.
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document   Filed herewith.
101.LAB*   XBRL Taxonomy Extension Labels Linkbase Document   Filed herewith.
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document   Filed herewith.
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document   Filed herewith.

 

(i) *Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

  16  

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  MOUNTAIN HIGH ACQUISITIONS CORP.
   
   
Dated:  August 14, 2017 /s/ Alan Smith          
  By: Alan Smith
  Its: President, CEO, Treasurer and Director

 

 

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

 

 

 

Dated:  August 14, 2017 /s/ Alan Smith          
  Alan Smith
  Its: President, CEO, Treasurer and Director
   
Dated:  August 14, 2017 /s/ Richard G. Stifel          
  Richard G. Stifel
  Its: CFO, Secretary and Director

 

 

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