HEMP NATURALS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
|
For the Six Months
Ended
May 31,
2018
|
For the Six
Months
Ended
May 31,2017
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
Net
loss
|
$
(3,181,960
)
|
$
(84,961
)
|
Adjustment
to reconcile net loss to net cash used in operating
activities:
|
|
|
Expenses
contributed to capital
|
35,941
|
41,685
|
Stock
based compensation
|
2,967,937
|
-
|
Loss
on Change of Fair Value of Derivative Liability
|
40,419
|
-
|
Non-Cash
Interest Expense
|
72,117
|
-
|
Changes
in current assets and liabilities:
|
|
|
Inventory
|
-
|
999
|
Accrued
expenses
|
(1,871
)
|
(2,000
)
|
Net
cash used in operating activities
|
(67,417
)
|
(44,277
)
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
Proceeds from Convertible Note Payable
|
78,750
|
-
|
Contributed capital from
shareholder
|
5,100
|
-
|
Net
cash provided by financing activities
|
83,850
|
-
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
16,433
|
(44,277
)
|
Cash
and cash equivalents at beginning of period
|
11
|
46,017
|
Cash
and cash equivalents at end of period
|
16,444
|
1,740
|
|
|
|
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
|
$
11,600,000
|
$
-
|
The
accompanying notes are an integral part of these unaudited interim
financial statements.
Hemp Naturals, Inc.
Notes to the financial statements
(Unaudited)
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 unaudited interim 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 unaudited
interim financial statements. While the information presented in
the accompanying interim financial statements for the six months
ended May 31, 2018 is unaudited, it includes all adjustments which
are, in the opinion of management, necessary to present fairly the
financial position, results of operations and cash flows for the
interim period presented in accordance with the accounting
principles generally accepted in the United States of America. In
the opinion of management, all adjustments considered necessary for
a fair presentation of the results of operations and financial
position have been included and all such adjustments are of a
normal recurring nature. The accompanying unaudited interim
financial statements should be read in conjunction with the
Company’s audited financial statements (and notes thereto)
for the fiscal year ended November 30, 2017 included elsewhere in
the Company’s Form 10K filed with the SEC on August 8, 2018.
Operating results for the six months ended May 31, 2018 are not
necessarily indicative of the results that can be expected for the
year ending November 30, 2018. Notes to the financial statements
which would substantially duplicate the disclosures contained in
the audited financial statements for the most recent fiscal period,
as reported in the Form 10-K for the most recent fiscal year, as
filed with the Securities and Exchange Commission on August 8,
2018, have been omitted.
Use of Estimates
The
preparation of unaudited interim 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.
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
May 31, 2018. 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.
Note 3 – Going Concern
The
Company’s unaudited interim 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
Company demonstrates adverse conditions that raise substantial
doubt about the Company's ability to continue as a going concern
for one year following the issuance of these unaudited interim
financial statements. These adverse conditions are negative
financial trends, specifically operating loss, working capital
deficiency, and other adverse key financial ratios.
The
Company has not established any source of revenue to cover its
operating costs. Management plans to fund operating expenses with
related party contributions to capital until such time as revenue
is sufficient to cover expenses. There is no assurance that
management's plan will be successful.
The
unaudited interim financial statements do not include any
adjustments relating to the recoverability and classification of
recorded assets, or the amounts and classification of liabilities
that might be necessary in the event that the Company cannot
continue as a going concern.
Note 4 – 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.
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 5 – Prepaid Expenses
During the six months ended May 31, 2018, the Company issued
58,000,000 shares of common stock as compensation for consulting
services.
The fair value of the shares issued as
compensation was $0.20 per share.
Note 6 – Convertible Note Payable
On
February 28, 2018, the Company entered into a share purchase
agreement with third party Adar Bays LLC (“Adar”) in
which the Company sold a promissory note to Adar at 8% annual
interest and convertible to discounted shares at 55% discount. The
one year promissory note was purchased March 6, 2018. As of May 31,
2018, the convertible note payable, derivative liability and
accumulated interest totaled $192,861.
Fair Value Measurements
The
Company adopted the provisions of ASC Topic 820, “Fair Value
Measurements and Disclosures”, which defines fair value as
used in numerous accounting pronouncements, establishes a framework
for measuring fair value and expands disclosure of fair value
measurements.
The
estimated fair value of certain financial instruments, payables to
related parties, and accounts payable and accrued expenses are
carried at historical cost basis, which approximates their fair
values because of the short-term nature of these
instruments.
ASC 820
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,
which requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair
value. ASC 820 describes three levels of inputs that may be used to
measure fair value:
Level 1
— quoted prices in active markets for identical assets or
liabilities
Level 2
— quoted prices for similar assets and liabilities in active
markets or inputs that are observable
Level 3
— inputs that are unobservable (for example cash flow
modeling inputs based on assumptions)
The
Company used Level 3 inputs for its valuation methodology for the
conversion option liability in determining the fair value using a
Black-Scholes option-pricing model with the following assumption
inputs:
|
|
|
Annual dividend
yield
|
-
|
-
|
Expected life
(years)
|
1
|
.75
|
Risk-free interest
rate
|
2.00
%
|
2.16
%
|
Expected
volatility
|
219.0
%
|
243.0
%
|
|
Fair Value
Measurements at
|
|
|
|
Using Fair Value
Hierarchy
|
|
|
|
|
Liabilities
|
|
|
|
Embedded derivative
liabilities
|
|
|
171,598
|
Total
|
|
|
$
171,598
|
Derivative Liabilities
The
embedded conversion features of the above convertible notes payable
and warrants contain discounted conversion prices and should be
recognized as derivative instruments. Such embedded conversion
features should be bifurcated and accounted for at fair value. As
of the year ended November 30, 2017 and the period ended May 31,
2018, the Company had a derivative liability balance of $0 and
$171,598, respectively. The Company uses the Black-Scholes
option-pricing model to calculate derivate liability.
Fair
Value of Embedded Derivative Liabilities:
|
|
|
November 30,
2017
|
$
-
|
Addition
|
131,179
|
Converted
|
-
|
Change in Fair
Market Value
|
-
|
Changes in fair
value of derivative liabilities
|
40,419
|
As of May 31,
2018
|
$
171,598
|
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 May 31, 2018 and
November 30, 2017.
Common Stock
The
authorized common stock of the Company consists of 500,000,000
shares with a par value of $0.0001. There were 324,125,983 and
266,125,983 shares of common stock issued and outstanding as of May
31, 2018 and November 30, 2017, respectively.
On
January 14, 2018 29,000,000 common shares were issued to an entity
controlled by our CEO as compensation for a two year agreement to
provide consulting to the Company.
On
January 10, 2018 29,000,000 common shares were issued to a
shareholder as compensation for a two year agreement to provide
consulting to the Company.
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 six months ended May 31, 2018, our CEO paid a combined $4,541
in operating expenses which is recorded as additional paid in
capital. Our secretary provided rental space to the company
totaling $30,000, which is recorded as additional paid in capital.
A shareholder paid operating expenses of $1,500 and another
shareholder advanced $5,000 to the Company. These contributions
from the two shareholders are posted as additional paid in capital
as there is no expectation of repayment.
Note 8 – Related-Party Transactions
Contributed Capital
During
the six months ended May 31, 2018, our CEO paid a combined $4,541
in operating expenses which is recorded as additional paid in
capital. Our secretary provided rental space to the company
totaling $30,000, which is recorded as additional paid in capital.
A shareholder paid operating expenses of $1,500 and another
shareholder advanced $5,000 to the Company. These contributions
from the two shareholders are posted as additional paid in capital
as there is no expectation of repayment.
Equity
On
January 14, 2018 29,000,000 common shares were issued to Blue Car
Enterprise, an entity controlled by our CEO, as compensation for a
two year agreement to provide consulting to the
Company.
On
January 10, 2018 29,000,000 common shares were issued to the Elad
National Properties, a shareholder, as compensation for a two year
agreement to provide consulting to the Company.
Office Space
At this
time our office space is provided to us rent free by our Secretary
Maryna Bleier which is accounted for as contribution of $5,000
monthly. Our 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
After May 31, 2018, our CEO paid expenses on behalf of the Company
totaling $1,300.
On July 6, 2018, the Board of Directors resolved to increase the
total number of authorized shares.
The total number of
shares of capital stock which the Corporation shall have authority
to issue is: one billion two hundred twenty million
(1,220,000,000). These shares shall be divided into two classes
with one billion two hundred million (1,200,000,000) shares
designated as common stock at $.0001 par value and twenty million
(20,000,000) shares designated as preferred stock at $.0001 par
value.