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 September 30, 2018

 

  TRANSITION REPORT PURSUANT TO SECTIO N 13 OR 15(d) OF THE SECURITIES EXCHAN GE 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 Parkway, #103-412

Scottsdale AZ 85254

 

 

 

(Address of principal executive offices)

 

(303) 358-3840

(Registrant’s Telephone Number)

 

 

 

Indicate by check mark whether the registrant (1) has 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 registrant 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, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 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  ☑
   
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. ☐

 

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

 

As of November 5, 2018 there were 108,955,476   shares of the registrant’s $0.001 par value common stock issued and outstanding.

 

     

 

MOUNTAIN HIGH ACQUISITIONS CORP.

QUARTERLY REPORT

PERIOD ENDED SEPTEMBER 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 11
       
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-Looking 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 September 30, 2018 (Unaudited) and March 31, 2018   F-2  
Consolidated Statement of Operations for the Three Months Ended September 30, 2018 and September 30, 2017 and the Six Months ended September 30, 2018 and September 30, 2016 (Unaudited)  

F-3

 
Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2018 and September 30, 2017 (Unaudited)   F-4  
Notes to the Consolidated Financial Statements (Unaudited)   F-5  

 

  F- 1  

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED BALANCE SHEETS
              Audited  
      September 30,       March 31,  
      2018       2018  
                 
ASSETS                
                 
CURRENT ASSETS                
Cash and cash equivalents   $ 7,972     $ 109,464  
Accounts receivable     —         150,000  
Deposits     70,652       —    
Notes receivable - current     25,011       —    
Other receivables     —         22,294  
TOTAL CURRENT ASSETS     103,635       281,758  
OTHER ASSETS                
Goodwill     1,290,000       —    
Deferred revenue     11,875       —    
Notes receivable - long term     113,040       —    
TOTAL OTHER ASSETS     1,414,915       —    
FIXED ASSETS  (NET)     181,500       170,000  
TOTAL ASSETS   $ 1,700,050     $ 451,758  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                
                 
CURRENT LIABILITIES                
Accounts payable   $ 151,480     $ 149,954  
Accrued liabilities     12,500       12,500  
Convertible notes payable, net Beneficial Conversion                
Feature fully recognized of $885,574     333,806       362,361  
TOTAL CURRENT LIABILITIES     497,786       524,815  
                 
COMMITMENTS AND CONTINGENCIES     —         —    
                 
STOCKHOLDERS' EQUITY (DEFICIT):                
Preferred stock, $0.0001 par value; 250,000,000 shares authorized, 100,000 and 100,000 shares issued and outstanding as of September 30, 2018 and March 31, 2018 respectively     10       10  
Common stock, $0.0001 par value; 500,000,000 shares authorized, 127,200,070 and 96,208,582 shares issued and outstanding as of September 30, 2018 and March 31, 2018 respectively     12,720       9,621  
Additional paid in capital     11,613,729       9,607,834  
Accumulated (deficit)     (10,424,195 )     (9,690,522 )
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)     1,202,264       (73,057 )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)   $ 1,700,050     $ 451,758  
                 
                 
The accompanying notes are an integral part of these consolidated financial statements

 

 

  F- 2  

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
         
    For the Three Months ended September 30,   For the Six Months ended September 30,
    2018   2017   2018   2017
                 
Revenue   $ 61,875     $ 30,000     $ 61,875     $ 30,000  
                                 
Depreciation     11,750       10,000       23,500       10,000  
Director fees     45,000       45,000       90,000       90,000  
Warrant expense     —         115,100       597,000       115,100  
Selling, general and administrative expenses     30,469       136,264       71,396       370,201  
Operating expenses     87,219       306,364       781,896       585,301  
(Loss) from operations     (25,344 )     (276,364 )     (720,021 )     (555,301 )
                                 
Interest Expense resulting from Beneficial Conversion Feature     —         (63,000 )     —         (136,500 )
Forbearance expense     —         (27,250 )     —         (27,250 )
Original issue discount     —         (34,000 )     —         (34,000 )
Loss on valuation of preferred stock     —         —         —         (2,084,300 )
Interest income     2,406       —         3,055       —    
Interest Expense     (8,413 )     (13,503 )     (16,707 )     (15,567 )
Other income (expense)     (6,007 )     (137,753 )     (13,652 )     (2,297,617 )
                                 
Net (loss)   $ (31,351 )   $ (414,117 )   $ (733,673 )   $ (2,852,918 )
                                 
Net (loss) per share - basic                                
Continuing operations     (0.00 )     (0.01 )     (0.01 )     (0.04 )
                                 
Net (loss) per share - diluted                                
Continuing operations     (0.00 )     (0.01 )     (0.01 )     (0.04 )
                                 
Weighted average shares outstanding - basic and diluted     108,704,327       76,380,665       101,681,366       74,549,386  
                                 
 
The accompanying notes are an integral part of these consolidated financial statements

 

 

  F- 3  

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
         
   

For the Six Months ended

September 30,

    2018     2017  
                 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net (loss)   $ (733,673 )   $ (2,852,918 )
Adjustment to reconcile net loss to net Cash used in operating activities:                
Changes in:                
Beneficial Conversion Feature on Note payable     —         136,500  
Depreciation and amortization     23,500       10,000  
Accounts payable     1,526       (14,304 )
Deposits     (70,652 )     —    
Warrants expense     597,000       115,100  
Decrease (increase) in receivables     34,241       (40,000 )
Fixed Assets     (35,000 )     (200,000 )
Goodwill     (1,290,000 )     —    
Forbearance     —         27,250  
Other assets - deferred revenue     (11,875 )     —    
Original issue discount     —         34,000  
Loss on valuation Preferred Stock     —         2,084,300  
Current accrued liabilities     —         15,000  
Net cash provided (used) by operating activities     (1,484,933 )     (685,072 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of One Lab Co     1,360,652       —    
      1,360,652       —    
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from shares for services     6,080       263,540  
Note conversions     (45,262 )     (109,615 )
Proceeds from borrowings     61,971       573,682  
Net cash provided by financing activities     22,789       727,607  
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (101,492 )     42,535  
                 
CASH AND CASH EQUIVALENTS                
Beginning of the period     109,464       10,399  
End of the period   $ 7,972       52,934  
                 
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

 

In May 2017, the Company formed MYHI-AZ to acquire equipment to service the growing cannabis industry. In September 2017, the Company entered into a consulting agreement with D9 Manufacturing, "D9", to provide D9 customers with infrastructure equipment. Also in September 2017, MYHI-AZ purchased 2 intermodal grow containers from D9 to be used in a grow operation in Arizona. MYHI-AZ leased the grow containers to D9 for 3 years with the ability to extend the lease for an additional 2 years. The lease began August 15, 2017. The lease provides for a monthly lease rate of $20,000 a month and requires advance payment for operating supplies and expenses. The monthly lease rate is recorded as revenue and an Account Receivable while the advances are recorded as an Other Receivable. Both amounts were due when the crop is harvested. The containers were planted in October 2017 with an expected harvest in January 2018. The initial grow operation encountered a power failure which ultimately resulted in the loss of the crop. The loss of the crop has resulted in a deferral of collection of the lease rental payments and the operating cost payments. The power failure highlighted additional issues with the containers and the facility where the containers are being used. The container issues and facility power requirement issue took a few months to resolve.

 

Effective September 11, 2018, MYHI-AZ and D9 Manufacturing Corp., (the "Parties"), agreed to convert the current amount due under the operating lease, representing $150,000 lease payments and $22,294 operating expenses, into a $135,000 note payable, (the "Note"), with a term of 3 years and interest rate of 7% per annum, and to capitalize $35,000 for improvements to the containers. The first payment on the Note is due October 3, 2018. The Parties also agreed to terminate the current lease effective March 31, 2018 and replace it with a new lease beginning July 1, 2018 with lease payments of $5,000.00 per month beginning November 1, 2018.

 

Effective August 18, 2018 (the “Effective Date”), Mountain High Acquisitions Corp, (“MYHI”), on the one hand, and One Lab Co (“Labco”) and Alchemy Capital, LLC (the “Alchemy”), on the other hand, entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which Alchemy, the sole shareholder of Labco, agreed to exchange 100% of the capital stock of Labco for 88,000,000 restricted shares of MYHI (the “MYHI Shares”) in accordance with the following schedule: 20,000,000 MYHI shares at Closing and 68,000,000 MYHI Shares after certain equipment currently under order by Labco (the “Equipment”) is delivered to the lessee under a lease agreement between Labco and the lessee (the “Lease”). Additionally, Alchemy agreed to pay monthly lease payments of $25,000 to Labco beginning ten days after the Effective Date and until the Equipment is delivered. The Equipment consists of a state-of-the-art intermodal extraction laboratory engineered and designed specifically for processing cannabis. MYHI issued the 20,000,000 shares of restricted common stock on August 20, 2018 and recorded Goodwill of $1,290,000.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which contemplate continuation of the Company as a going concern. The Company has incurred a net loss of $733,673 and used cash for operations of $1,484,933 for the six months ended September 30, 2018, and has an accumulated deficit of $(10,424,195) and a working capital deficit of $(394,151) as of September 30, 2018. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management plans to continue to raise capital to fund the Company’s operations and believes that it can continue to raise equity or debt financing to support its operations until the Company is able to generate positive cash flow from operations.

 

 

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with 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 and MYHI-AZ 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.

 

  F- 5  

 

Deposits

 

The Company has recorded as deposits amounts paid by Labco for equipment orders.

 

Notes Receivable-Current and Long Term

 

The Company has recorded a Note Receivable from D9 in an aggregate amount of $135,000. Amounts due with the next 12 months have been classified as Current Assets Note Receivable Current and the balance recorded as Other Asset-Note Receivable Long Term. Interest accrued on the note is added to the long term balance.

 

Revenue Recognition

 

As of January 1, 2018, we adopted ASU No. 2014-09, “Revenue from Contracts with Customers” (ASU 2014-09).   Leasing revenue recognition is specifically excluded and therefore the new standard is only applicable to service fee and consulting revenue.  A five-step model has been introduced for an entity to apply when recognizing revenue.  The new guidance also includes enhanced disclosure requirements.  The guidance was effective January 1, 2018.  The adoption did not have an impact on our financial statements.  

 

Revenue represents lease revenue for the grow containers pursuant to the Company's lease with D9 and extraction equipment lease pursuant to the Labco share exchange agreement. For the six months ended September 30, 2018, the Company recorded revenue of $50,000 and $11,875 from the Labco lease and D9 lease, respectively. Revenue from D9 is recognized over the life of the lease as Deferred Revenue on the Balance Sheet.

 

Fixed Assets

Fixed assets are stated at cost. Depreciation is calculated on fixed assets using the straight-line method over an estimated service life of five years for equipment.

The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures which increase the life of an ass et are capitalized and depreciated over the estimated remaining useful life of the asset.

Intangible Assets

 

The Company accounts for intangibles in accordance with ASC 350, Intangible-Goodwill and Other. The Company evaluates intangibles, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of intangibles is tested by comparing the carrying amount to the fair value. The fair values are estimated using undiscounted projected net cash flows. If the carrying amount exceeds its fair value, intangibles are considered impaired and a second step is performed to measure the amount of impairment loss, if any. The Company evaluates the impairment of intangibles as of the end of each fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. These circumstances include:

 

a significant decrease in the market value of an asset;
a significant adverse change in the extent or manner in which an asset is used; or
the Company has record as Other Assets-Goodwill an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset

 

The Company has recorded $1,290,000 as Other Assets-Goodwill which represents the market value of the initial shares issued pursuant to the Share Agreement, 20,000,000 shares of restricted common stock at $0.0645 per share.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes . ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations. The open tax years are 2011, 2012, 2013, 2014, 2015, 2016, 2017 and 2018.

 

The Company has no tax positions at September 30, 2018 or September 30, 2017, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

 

Basic and Diluted Loss Per Share

 

Earnings per share is calculated in accordance with the ASC Topic 260, Earnings Per Share . Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

 

Recent Accounting Pronouncements

 

Recent authoritative guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified Public Accountants, and the SEC, did not, or are not expected to have a material effect on the Company’s consolidated financial statements.

  F- 6  

 

Note 3 – Equity

Common Stock

 

Effective June 12, 2017, the Company increased its authorized shares of common stock to 500,000,000 shares with a par value of $0.0001 per share. The Company has 250,000,000 shares of preferred stock with a par value of $0.0001 per share.

 

On June 12, 2017, the Company issued 100,000 shares of Series B Convertible Preferred stock to an outside consulting firm for consulting services, valued at $109,700, which was recorded as consulting fees in the three months ended June 30, 2017. Due to the super voting provision of the Series B Convertible Preferred stock the Company recorded a loss on valuation of the shares of $2,084,300, the equivalent to 20,000,000 less the associated consulting expense of $109,700.

 

During the year ended March 31, 2018 the Company converted $684,285 of convertible notes payable into 20,947,193 shares of free trading common stock of the Company.

 

During the year ended March 31, 2018 the Company issued 2,570,000 shares of restricted Common Stock, pursuant to consulting agreements valued at $329,184.

 

During the Six months ended September 30, 2018, the Company converted $45,262 of convertible notes into 1,411,488 shares of common stock, issued 80,000 shares of common stock valued at $6,080 pursuant to consulting agreements, issued 9,500,000 shares of common stock relating to a cashless warrants issued in conjunction with convertible notes issued to St. George Investments LLC, and issued 20,000,000 shares of common stock valued at $1,290,000 pursuant to the share exchange agreement for Labco.

 

Warrants

 

Pursuant to the Warrant to Purchase Shares of Common Stock Agreement, dated June 30, 2017, the Company granted the right to St. George Investments LLC, to purchase at any time on or after the Issue Date of June 30, 2017 until the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs a number of fully paid and non-assessable shares of Company's common stock, par value $0.0001 per share, equal to $173,000 divided by the Market Price as of the Issue Date. The closing stock price on June 30, 2017 was $0.1273, equating to 1,358,995 shares of common stock. The warrant was issued in connection with the Securities Purchase Agreement, dated June 30, 2017. Pursuant to ASC 470-20-25-2 the company fair valued the warrants at $115,100 to be debited to warrant expense for the year ended March 31, 2018. The Warrants contain a ratcheting feature for future share issuances. The Company issued shares in July 2017 for conversion of notes payable and in September 2017 for consulting agreements. These share issuances were for convertible notes and contracts that were in existence prior to the execution of the St. George agreement and were exempt from any ratcheting calculation, however subsequent issues to St. George on conversion of their convertible notes are subject to the ratcheting calculation.

 

Pursuant to a Warrant Settlement Agreement executed June 27, 2018, the Company agreed to issue 8,141,005 additional warrants to settle the ratchet provision of the original warrant. The Company recorded additional warrant expense of $491,850 pursuant to ASC 470-20-25-2 for the fair value of the warrants. Effective April 19, 2018, the Company, pursuant to the Warrant to Purchase Shares of Company Stock which was i ssued in conjunction with the St George Investments LLC Securities Purchase Agreement dated June 30, 2017, issued 3,500,000 shares of Company stock at $0.0826 per share, valued at $289,100. On June 27, 2018, the Company agreed to issue an additional 6,000,000 shares of the Company’s common stock to fully settle the warrants at a value of $433,200 or $0.0705 per share. The Company recorded additional warrant expense of $105,150 to value the warrants exercised at market price.

 

A summary of the status of the Company’s outstanding stock warrants and changes during the periods is presented below:

 

    Shares available to purchase with warrants   Weighted
Average
Price
  Weighted
Average
Fair Value
             
Outstanding, March 31, 2017     —       $ —       $ —    
                         
Issued     1,358,995     $ 0.1273     $ 0.1273  
Exercised     —       $ —       $ —    
Forfeited     —       $ —       $ —    
Expired     —       $ —       $ —    
Outstanding, March 31, 2018     1,358,995     $ 0.1273     $ 0.1273  
                         
Outstanding, March 31, 2018     1,358,995     $ 0.1273     $ 0.1273  
Issued pursuant to agreement     8,141,005     $ 0.0604     $ 0.0604  
Exercised April 19, 2018     (3,500,000 )   $ 0.0826     $ 0.0826  
Exercised June 27, 2018     (6,000,000 )   $ 0.0705     $ 0.0705  
Outstanding, September 30, 2018     0     $ 0.0     $ 0.0  

  

 

Range of

Exercise Prices

Number Outstanding 6/30/2018 Weighted Average Remaining Contractual Life   Weighted Average Exercise Price
$0.0327 - $0.1273 0 0.00 years $ 0

 

  F- 7  

 

Note 4 – 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 $4,637,604 expiring in various years through 2038. The tax benefit o f 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 September 30, 2018: 

     
Current taxes   $ —    
Deferred taxes     33,233  
Less: valuation allowance     (33,233 )
Net income tax provision   $ —    

 

The Company’s effective tax rate differs from the high statutory rate for three months ended September 30, 2018, due to the following (expressed as a percentage of pre-tax income):

     
Federal taxes at statutory rate   $ 21.0 %
State taxes, net of federal tax benefit     5.0 %
Valuation allowance     (26.0 )%
Effective income tax rate   $ 0.0 %

As of September 30, 2018, the components of these temporary differences and the deferred tax assets were as follows: 

     
Deferred Tax assets:    
Net operating loss carryforward   $ 832,347  
Less: valuation allowance     (832,347 )
Net deferred tax assets   $ —    

 

 

Note 5 - Notes Payable

 

At September 30, 2018, the Company had outstanding convertible notes payable to third parties in the amount of $333,806. The notes had interest rates of 3% - 12% and had a conversion provision allowing the holder to convert each note into shares of the Company at a discount. This is referred to a s the Beneficial Conversion Feature, "BCF". Due to the fact that the notes could be converted immediately or any time thereafter, there is no amortization of expense, so the Company has elected to record an expense in the current year for the difference between the BCF and the share value on the date the note was executed.

 

Note Holder   Amount   Conversion Terms
Andrew Cervasio         10,873   Lesser of $0.03 or 80% lowest closing bid 15 days prior to conversion
St. George Financial       322,933   180 days from closing at lower of 65% of avg. 2 lowest closing bid 15 days prior to conversion
        333,806    

 

 

Note 6 - Related Party Transactions

 

Effective April 1, 2017, Alan Smith and Richard Stifel assigned their consulting agreements and all future amounts due under the agreement to Evolution Equities Corp, "Evolution" and RGS Resources LLC, "RGS" respectively. Evolution and RGS are related parties due to Mr. Smith's and Mr. Stifel's ownership interest and positions in those companies. Evolution and RGS were each paid $45,000 for the six months ended September 30, 2018. For the six months ended September 30, 2018 and 2017 accruals for Evolution and RGS were $45,000 each.

 

 

Note 7 – Commitments and Contingencies

 

None.

 

 

Note 8 – Subsequent Events

 

In accordance with ASC 855-10, the Company has analyzed its operations subsequent to September 30, 2018 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

 

  F- 8  

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this report are made as of the date of this report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

BUSINESS OPERATIONS

 

In May 2017, the Company formed MYHI-AZ to acquire equipment to service the growing cannabis industry. In June 2017 the Company entered into a consulting agreement with D9 Manufacturing, "D9", to provide D9 customers with infrastructure equipment. Also in June 2017, MYHI-AZ purchased 2 intermodal grow containers from D9 to be used in a grow operation in Arizona. MYHI-AZ leased the grow containers to D9 for 3 years with the ability to extend the lease for an additional 2 years. The lease began August 15, 2017. The lease provides for a monthly lease rate of $20,000 a month and requires advance payment for operating supplies and expenses. The monthly lease rate is recorded as revenue and an Account Receivable while the advances are recorded as an Other Receivable. Both amounts are due when the crop is harvested. The containers were planted in October 2017 with an expected harvest in January 2018. The initial grow operation encountered a power failure which ultimately resulted in the loss of the crop. The loss of the crop has resulted in a deferral of collection of the lease rental payments and the operating cost payments. The power failure highlighted additional issues with the containers and the facility where the containers are being used. The container issues and facility power requirement issue took a few months to resolve.

 

Effective June 11, 2018, MYHI-AZ and D9 Manufacturing Corp., (the "Parties"), agreed to convert the current amount due under the operating lease, representing $150,000 lease payments and $22,294 operating expenses, into a $135,000 note payable, (the "Note"),, with a term of 3 years and interest rate of 7% per annum, and to capitalize $35,000 for improvements to the containers. The first payment on the Note is due October 3, 2018. The Parties also agreed to terminate the current lease effective March 31, 2018 and replace it with a new lease beginning July 1, 2018 with lease payments of $5,000.00 per month beginning November 1, 2018.

 

Effective August 18, 2018 (the “Effective Date”), Mountain High Acquisitions Corp, (“MYHI”), on the one hand, and One Lab Co (“Labco”) and Alchemy Capital, LLC (the “Alchemy”), on the other hand, entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which Alchemy, the sole shareholder of Labco, agreed to exchange 100% of the capital stock of Labco for 88,000,000 restricted shares of MYHI (the “MYHI Shares”) in accordance with the following schedule: 20,000,000 MYHI shares at Closing and 68,000,000 MYHI Shares after certain equipment currently under order by Labco (the “Equipment”) is delivered to the lessee under a lease agreement between Labco and the lessee (the “Lease”). Additionally, Alchemy agreed to pay monthly lease payments of $25,000 to Labco beginning ten days after the Effective Date and until the Equipment is delivered. The Equipment consists of a state-of-the-art intermodal extraction laboratory engineered and designed specifically for processing cannabis. MYHI issued the 20,000,000 shares of restricted common stock on August 20, 2018 and recorded Goodwill of $1,290,000.

 

  11  

 

RESULTS OF OPERATIONS

 

Working C apital

 

    As of
September 30, 2018
Total Current Assets   $ 103,635  
Total Current Liabilities     (497,786 )
Working Capital (Deficit)   $ (394,151 )

 

Cash Flows

    Three months Ended September 30, 2018
Cash Flows from (used in) Operating Activities   $ (1,484,933 )
Cash Flows from (used in) Investing Activities     1,360,652  
Cash Flows from (used in) Financing Activities     22,789  
Net Increase (decrease) in Cash during period   $ (101,492 )

 

Operating Revenues

 

Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017

 

During the three months ended September 30, 2018, the Company recorded revenues of $61,875 compared to $30,000 revenue for the three months ended September 30, 2017. The revenue in the three months ended September 30, 2018 and 2017 was for lease revenue. The lease revenue is pursuant to a lease agreement and is due and payable when invoiced.

 

Six Months Ended September 30, 2018 Compared to Six Months Ended September 30, 2017

 

During the six months ended September 30, 2018, the Company recorded revenues of $61,875 compared to $30,000 revenue for the six months ended September 30, 2017. The revenue in the six months ended September 30, 2018 and 2017was for lease revenue. The lease revenue is pursuant to a lease agreements and is due and payable when invoiced.

 

Operating Expenses and Net Loss

 

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

 

The net loss for the three months ended September 30, 2018 was $31,351, compared to a net loss of $414,117 for the three months ended September 30, 2017.

 

The loss for the three months ended September 30, 2018 consists of director fee of $45,000, other SG&A of $30,469, depreciation of $11,750 and interest expense of $8,413 offset by $2,406 of other income.

 

The net loss for the three months ended September 30, 2017 consisted of Depreciation of $10,000, Warrant expense of $115,100, consulting expense of $118,920, commission related to borrowing of $30,200 beneficial interest expense of $63,000, forbearance expense of $27,250 and original issue discount of $34.000.

 

Six Months Ended September 30, 2017 Compared to Six Months Ended September 30, 2016

 

The net loss for the six months ended September 30, 2018 was $733,673, compared to a loss of $2,852,918 for the six months ended September 30, 2017.

 

The loss for the six months ended September 30, 2018 consists of warrant expense of $597,000, director fee of $90,000, other SG&A of $71,396, depreciation of $23,500 and interest expense of $16,707 offset by other income of $3,055.

 

The net loss for the six months ended September 30, 2017 consisted of Depreciation of $10,000, warrant expense of $115,100, consulting expense of $263,540, director fees of $90,000, commission related to borrowing of $30,200, professional fees of $45,671, beneficial interest expense of $136,500, loss on preferred stock $2,084,300 forbearance expense of $27,250 and original issue discount of $34.000.

 

Liquidity and Capital Resources

 

At September 30, 2018, the Company’s cash balance and total assets were $7,972 and $1,700,050, respectively.

 

At September 30, 2018, the Company had total liabilities of $497,786, consisting of $151,480 in accounts payable and $333,806 convertible notes payable.

 

As at September 30, 2018, the Company had a working capital deficit of $394,151.    

 

  12  

 

Cashflow used in Operating Activities

 

During the six month period ended September 30, 2018, the Company used $1,484,933 of cash for Operating Activities compared to cash used for operating activities of $685,072 for the six months ended September 30, 2017.

 

Cash used for operations for the six months ended September 30, 2018 were our loss of $733,673, increase in goodwill of $1,290,000, increase in deposits of $70,652 offset by warrants expense of $597,000.

 

Cash used for operations for the six months ended September 30, 2017 consisted of our loss of $2,852,918 offset by $136,500 for beneficial interest on Notes Payable, loss on issuance of Preferred stock of $2,084,300 , warrant expense of $115,100 an increase in Current Liabilities of $61,946 offset by an increase in receivables of $40,000 and an increase in fixed assets of $200,000.

 

Cashflow used in Investing Activities

 

Cash provided by investing activities was $1,360,652 for the acquisition of Labco compared to $0 for the six months ended September 30, 2017

 

Cashflow from Financing Activities

 

During the six month period ended September 30, 2018, the Company provided $22,789 of cash provided by financing activities compared to cash provided by financing activities of $727,607 for the six months ended September 30, 2017.

 

During the six months ended September 30, 2018, the Company used $45,262 from note conversions and $61,971 from borrowings and received $6,080 from shares issued for services.

 

During the six months ended September 30, 2017, the Company received $263,540 from the issue of shares for services and $573,682 from borrowings offset by $109,615 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. No assurance can be given as to the availability of financing or on the terms thereof. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern.

 

  13  

 

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.

 

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.

 

  14  

 

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 September 30, 2018 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 September 30, 2018. 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 September 30, 2018, 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 September 30, 2018, 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.

 

  15  

 

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
  4.01   Promissory Note   Filed with the SEC on September13, 2018 on Form 8K. Incorporated by reference
  4.02   Warrant Settlement Agreement   Files with the SEC on September28, 2018 on Form 10K. Incorporated by reference
  10.01   Equipment Lease D9 and MYHI-AZ   Filed with the SEC on September13, 2018 on Form 8K. Incorporated by reference.
  10.02   Exchange Agreement   Filed with the SEC on August 21, 2018 on Form 8K. Incorporated by reference.
  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 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: November 5, 2018 /s/ Alan Smith                
  Alan Smith
  Its: President, CEO, Treasurer and Director

 

 

Dated: November 5, 2018 /s/ Richard G. Stifel                
  Richard G. Stifel
  Its:CFO, Secretary and Director

 

 

17

Mountain High Acquisitions (CE) (USOTC:MYHI)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Mountain High Acquisitions (CE) Charts.
Mountain High Acquisitions (CE) (USOTC:MYHI)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Mountain High Acquisitions (CE) Charts.