HEMP NATURALS, INC.
STATEMENTS OF CASH FLOWS
|
For the
Year
Ended
November
30,
2017
|
For the Year
Ended
November 30,
2016
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net
loss
|
$
(3,973,404
)
|
$
(36,379
)
|
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
|
|
Expenses
contributed to capital
|
-
|
28,449
|
Stock
based compensation
|
3,800,275
|
-
|
Changes
in current assets and liabilities:
|
|
|
Deposits
|
1,530
|
(1,530
)
|
Inventory
|
999
|
(999
)
|
Accrued
expenses
|
6,308
|
(334
)
|
Net
cash used in operating activities
|
(164,292
)
|
(10,793
)
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
Proceeds
from sale of common stock
|
42,500
|
55,030
|
Contributed capital from
shareholder
|
75,786
|
1,680
|
Net
cash provided by financing activities
|
118,286
|
56,710
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
(46,006
)
|
45,917
|
Cash
and cash equivalents at beginning of year
|
46,017
|
100
|
Cash
and cash equivalents at end of year
|
11
|
46,017
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
Cash
paid for:
|
|
|
Interest
|
$
-
|
$
-
|
Income
taxes
|
$
-
|
$
-
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH FINANCIING ACTIVITIES:
|
|
|
Common
stock issued recorded as prepaid expense
|
$
3,900,000
|
$
-
|
The accompanying notes are an integral part of these financial
statements.
Hemp Naturals, Inc.
Notes to the financial statements
Note 1 – Organization and Description of
Business
Hemp Naturals, Inc. (the Company) was incorporated under the laws
of the State of Delaware on November 13, 2015. The Company intends
to offer consumer goods that are made of industrial hemp and/or the
non-psychoactive ingredients of the cannabis plant.
The Company has elected November 30th as its year end.
Note 2 – Summary of Significant Accounting
Policies
Basis of Presentation
This summary of significant accounting policies is presented to
assist in understanding the Company's financial statements. These
accounting policies conform to accounting principles, generally
accepted in the United States of America, and have been
consistently applied in the preparation of the financial
statements.
Reclassification of Prior Year Presentation
Certain
prior year amounts have been reclassified for consistency with the
current year presentation. These reclassifications had no effect on
the reported results of operations. An adjustment has been made to
the Statement of Operations for fiscal year ended November 30,
2016, to consolidate professional fees with general and
administrative expense. This change in classification does not
affect previously reported net loss.
Inventories
Inventories, consisting of products available for sale, are
primarily accounted for using the first-in, first-out ("FIFO")
method, and are valued at the lower of cost or market value. This
valuation requires Hemp Naturals, Inc. to make judgments, based on
currently-available information, about the likely method of
disposition, such as through sales to individual customers, returns
to product vendors, or liquidations, and expected recoverable
values of each disposition category.
Use of
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that 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. In the opinion of management, all adjustments necessary in
order to make the financial statements not misleading have been
included. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less when purchased to be cash
equivalents. Cash and cash equivalents at November 30, 2017 and
November 30, 2016 were $11 and $46,017, respectively.
Income Taxes
The Company accounts for income taxes under ASC 740,
“
Income
Taxes
.” Under the
asset and liability method of ASC 740, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period the enactment occurs. A valuation
allowance is provided for certain deferred tax assets if it is more
likely than not that the Company will not realize tax assets
through future operations. No deferred tax assets or
liabilities were recognized at November 30,
2017.
Basic Earnings (Loss) Per Share
The Company computes basic and diluted earnings (loss) per share in
accordance with ASC Topic 260,
Earnings per
Share
. Basic earnings (loss)
per share is computed by dividing net income (loss) by the weighted
average number of common shares outstanding during the reporting
period. Diluted earnings (loss) per share reflects the potential
dilution that could occur if stock options and other commitments to
issue common stock were exercised or equity awards vest resulting
in the issuance of common stock that could share in the earnings of
the Company.
The Company does not have any potentially dilutive instruments as
of November 30, 2017 or 2016 and, thus, anti-dilution issues are
not applicable.
Fair Value of Financial Instruments
The Company’s balance sheet includes certain financial
instruments. The carrying amounts of current assets and current
liabilities approximate their fair value because of the relatively
short period of time between the origination of these instruments
and their expected realization.
ASC 820,
Fair Value Measurements and
Disclosures
, defines fair value
as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date.
ASC 820 also establishes a fair value hierarchy that distinguishes
between (1) market participant assumptions developed based on
market data obtained from independent sources (observable inputs)
and (2) an entity’s own assumptions about market
participant assumptions developed based on the best information
available in the circumstances (unobservable inputs). The fair
value hierarchy consists of three broad levels, which gives the
highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). The three levels of the fair
value hierarchy are described below:
●
Level
1 - Unadjusted quoted prices in active markets that are accessible
at the measurement date for identical, unrestricted assets or
liabilities.
●
Level
2 - Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets or
liabilities in active markets; quoted prices for identical or
similar assets or liabilities in markets that are not active;
inputs other than quoted prices that are observable for the asset
or liability (e.g., interest rates); and inputs that are derived
principally from or corroborated by observable market data by
correlation or other means.
●
Level
3 - Inputs that are both significant to the fair value measurement
and unobservable.
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
November 30, 2017. The respective carrying value of certain
on-balance-sheet financial instruments approximated their fair
values due to the short-term nature of these instruments. These
financial instruments include accrued expenses.
Related Parties
The Company follows ASC 850,
Related Party
Disclosures,
for the
identification of related parties and disclosure of related party
transactions.
Share-Based Compensation
ASC 718, “
Compensation – Stock
Compensation
”, prescribes
accounting and reporting standards for all share-based payment
transactions in which employee services are acquired. Transactions
include incurring liabilities, or issuing or offering to issue
shares, options, and other equity instruments such as employee
stock ownership plans and stock appreciation rights. Share-based
payments to employees, including grants of employee stock options,
are recognized as compensation expense in the financial statements
based on their fair values. That expense is recognized over the
period during which an employee is required to provide services in
exchange for the award, known as the requisite service period
(usually the vesting period).
The Company accounts for stock-based compensation issued to
non-employees and consultants in accordance with the provisions of
ASC 505-50, “
Equity – Based Payments
to Non-Employees.”
Measurement of share-based payment
transactions with non-employees is based on the fair value of
whichever is more reliably measurable: (a) the goods or
services received; or (b) the equity instruments issued. The
fair value of the share-based payment transaction is determined at
the earlier of performance commitment date or performance
completion date.
The Company’s stock based compensation for years ended
November 30, 2017 and November 30, 2016 was $3,600,000 and $0,
respectively.
Note 3 – Going Concern
The Company’s financial statements are prepared in accordance
with generally accepted accounting principles applicable to a going
concern that contemplates the realization of assets and liquidation
of liabilities in the normal course of business.
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Company has not generated any revenues since inception. For
the year ended November 30, 2017, the Company has a
net loss of $3,720,404 and an accumulated deficit of
$4,024,102 at November 30, 2017. These factors among others raise
substantial doubt about the ability of the Company to continue as a
going concern for a reasonable period of time.
. At the date
of this filing, management has spent several months focused on
marketing, both online and at the retail level. The Company’s
website has been developed and our rolling papers are available at
a promotional rate at twenty-five retail operations, with no
revenues realized by the Company to date. Our expectation is that
the promotional phase of rolling paper sales will transition to
profitable operations during the third or fourth quarter of the
2018 fiscal year, however there is no certainty regarding this.
The
accompanying financial statements do not include any adjustments
that might result from the outcome of this
uncertainty.
Note 4 – Income Taxes
Potential benefits of income tax losses are not recognized in the
accounts until realization is more likely than not.
In
assessing the realization of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. The ultimate
realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those
temporary differences become deductible.
The Company has incurred a net operating loss
carryforward of $4,024,102 which begins expiring in 2034. The
Company has adopted ASC 740, “Accounting for Income
Taxes”, as of its inception. Pursuant to ASC 740 the Company
is required to compute tax asset benefits for non-capital losses
carried forward. The potential benefit of the net operating loss
has not been recognized in these financial statements because the
Company cannot be assured it is more likely than not it will
utilize the loss carried forward in future
years.
Significant components of the Company’s deferred tax assets
are as follows:
|
|
|
|
|
Deferred tax asset,
generated from net operating loss
|
$
1,368,195
|
$
17,237
|
Valuation
allowance
|
(1,368,195
)
|
(17,237
)
|
|
$
—
|
$
—
|
The
reconciliation of the effective income tax rate to the federal
statutory rate is as follows:
Federal income tax
rate
|
34.0
%
|
34.0
%
|
Increase in
valuation allowance
|
(34.0
%)
|
(34.0
%)
|
Effective income
tax rate
|
0.0
%
|
0.0
%
|
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed
into law. This legislation reduced the federal corporate tax rate
from the previous 35% to 21%. Tax filings for the Company for the
years 2015 and 2016 are available for examination by tax
authorities.
Due to the change in ownership provisions of the Tax Reform Act of
1986, net operating loss carryforwards for Federal income tax
reporting purposes are subject to annual limitations. Should a
change in ownership occur, net operating loss carryforwards may be
limited as to use in future years.
Note 5 – Commitments and Contingencies
The Company follows ASC 450-20,
Los
s
Contingencies,
to
report accounting for contingencies. Liabilities for loss
contingencies arising from claims, assessments, litigation, fines
and penalties and other sources are recorded when it is probable
that a liability has been incurred and the amount of the assessment
can be reasonably estimated. There were no commitments or
contingencies as of November 30, 2017 and 2016 other than the
below:
Office Space
The Company contracted the use of 3,000 square feet of space owned
by our Secretary, Maryna Bleier, who has been and will be
contributing the space, valued at $5,000 per month, to the Company
as additional paid-in capital July 1, 2016 until July 1, 2028.
Beginning July 1, 2028, the Company is obligated to pay $5,000
monthly for the use of their office space per the terms of the
rental contract.
Note 6 – Prepaid Expenses
The Company issued 130,000,000 shares of common stock as
compensation for office rent and consulting services. The
$3,720,725 in prepaid expenses consists of approximately $2,617,500
in prepaid consulting services and $1,103,225 in prepaid office
rent.
Note 7 – Shareholder Equity
Preferred Stock
The authorized preferred stock of the Company consists of
20,000,000 shares with a par value of $0.0001. The Company has no
shares of preferred stock issued and outstanding as of November 30,
2017 and 2016.
Common Stock
The authorized common stock of the Company consists of 500,000,000
shares with a par value of $0.0001. There were 266,125,983 and
14,005,983 shares of common stock issued and outstanding as of
November 30, 2017 and 2016, respectively.
In March 2016, a total of 1,803,983 shares of common stock at par
value of $.0001 were sold to 37 investors for cash of
$55,030.
On
October 11, 2017 170,000 shares of common stock were sold to 1
purchaser at a purchase price of $0.03 per share for gross proceeds
of $5,000.
On
October 18, 2017 1,250,000 shares of common stock were sold to 1
purchaser at a purchase price of $.03 per share for gross proceeds
of $37,500, with $10,905 in cash received and $26,595 recorded as
additional paid-in capital.
In the year ended November 30, 2017, 250,700,000 shares of common
stock were issued to ten shareholders as compensation for office
rent and various professional services, primarily business
development.
The Company does not have any potentially dilutive instruments as
of November 30, 2017 and 2016 and, thus, anti-dilution issues are
not applicable.
Pertinent Rights and Privileges
Holders of shares of Common Stock are entitled to one vote for each
share held to be used at all stockholders’ meetings and for
all purposes including the election of directors. Common Stock does
not have cumulative voting rights. Nor does it have preemptive or
preferential rights to acquire or subscribe for any unissued shares
of any class of stock.
Holders of shares of Preferred Stock are entitled to voting rights
where every one share of Preferred Stock has voting rights equal to
one hundred shares of Common Stock.
Additional Paid In Capital
During the year ended November 30, 2016, our CEO contributed cash
of $1,680 to the Company to pay for expenses and paid $2,599 in
operating expenses on behalf of the Company which is recorded as
additional paid in capital. Two shareholders also paid operating
expenses on behalf of the Company totaling $850 which are recorded
as additional paid in capital. Our Secretary provided rental space
to the company totaling $25,000 for the 2016 fiscal year, which is
recorded as additional paid in capital.
During the year ended November 30, 2017, our CEO contributed cash
of $6,976 to the Company to pay for expenses and paid $8,810 in
operating expenses on behalf of the Company which is recorded as
additional paid in capital. Our Secretary provided rental space to
the company totaling $60,000 for the 2017 fiscal year, which is
recorded as additional paid in capital.
Note 8 – Related-Party Transactions
Equity
On November 17, 2017, the Company issued 120,000,000 shares to our
CEO as compensation for development of the business
plan.
On November 17, 2017, the Company issued 45,000,000 shares to Blue
Car Enterprise as compensation for a 2 year agreement to provide
consulting to the Company. Blue Car Enterprise is an entity solely
owned by our CEO.
Contributed Capital
As of November 30, 2017, our CEO has provided the Company
contributed capital in the form of cash and payment of expenses on
behalf of the Company totaling $15,786 and our Secretary has
provided the Company contributed office space valued at
$60,000.
As of November 30, 2016, our CEO has provided the Company
contributed capital in the form of cash and payment of expenses on
behalf of the Company totaling $4,279, our Secretary has provided
the Company contributed office space valued at $25,000 and two
shareholders have provided the Company contributed capital totaling
$850.
Office Space
At this time our main office space is provided to us rent free by
our Secretary Maryna Bleier which is accounted for as contribution
of $5,000 monthly. Our main office space is located at 16950 North
Bay Road, Suite 1803 Sunny Isles Beach, Florida 33160. After July
1, 2028, the Company is obligated to pay $5,000
monthly.
Note 9 – Subsequent Events
On January 10, 2018, the Company issued 29,000,000 shares of
restricted common stock to a related party in exchange for
consulting services for two years.
On January 14, 2018, the Company issued 29,000,000 shares of
restricted common stock to a related party for services rendered to
the Company.
On February 28, 2018, the Company issued a convertible redeemable
note, payable in full in one year, to Adar Bays, LLC in the amount
of $78,750 at 8% annual interest.