See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to Condensed Consolidated Financial
Statements
September 30, 2018
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Organization
The Company was incorporated in the State
of Nevada on February 21, 2013, under the name of Arkadia International, Inc. The Company was originally engaged in the business
of the acquisition of in demand equipment, cars, and goods with the intent to resell these in the U.S. territories or export to
overseas countries. On October 3, 2014, the Company experienced a change in control. Richard C. Cowan acquired approximately 93%
of the issued and outstanding common stock of the Company at the time. On November 6, 2014, the Company merged with Freedom Leaf
Inc., a private Nevada corporation, and the Company changed its name to Freedom Leaf Inc. In connection with the merger, the sole
officer, director and stockholder of the private company, Clifford J. Perry, became an officer and director of the Company, and
Mr. Perry received approximately 48.1% of the Company’s common stock post-merger.
For financial
reporting purposes, this merger was accounted for as a "reverse acquisition" rather than a business combination, and
the private company was deemed to be the accounting acquirer in the transaction, with the Company deemed to be the acquired company
for financial reporting purposes. Consequently, the assets and liabilities and the operations that were reflected in the historical
financial statements of the Company prior to the merger are those of the private company, and they were recorded at the historical
cost basis of the private company, and the financial statements after completion of the merger include the combined assets and
liabilities of the Company and the private company, the historical operations of the private company only, and the operations of
both companies from the closing date of the merger.
Freedom Leaf Inc. is a reporting public
company traded under the symbol (OTCQB: FRLF) with corporate headquarters located at 3571 E. Sunset Road, Las Vegas, Nevada, 89120.
Subsidiary Entities:
|
☐
|
Cannabis Business Solutions Inc. (“Cannabis Business Solutions”), a Nevada corporation, was formed on February 5, 2014, and is a wholly-owned subsidiary of the Company. This subsidiary had no activity until the agreement with Valencia Web Technology S.L., B-97183354 (see Note 2).
|
|
☐
|
Leafceuticals Inc. (“Leafceuticals”), formerly known as Cannabiz U, Inc., a Nevada corporation, was formed on February 13, 2014, and is a wholly-owned subsidiary of the Company.
|
|
☐
|
Freedom Leaf International Inc. (“Freedom Leaf International”), a Nevada corporation, was formed on November 27, 2015, and is a wholly-owned subsidiary of the Company. This subsidiary has had no activity to date.
|
|
☐
|
Leafceuticals Europe, SL, a wholly-owned subsidiary of the Company’s owns our Valencia greenhouse operations.
|
|
☐
|
Freedom Leaf Cares Inc. (“Freedom Leaf Cares”), a Nevada corporation, was formed on October 1, 2014, and is a wholly-owned subsidiary of the Company. Freedom Leaf Cares was dissolved in 2016. Until dissolution, this subsidiary had no activity.
|
|
☐
|
Tierra Science Global, LLC. (“Tierra”),
a Nevada corporation, was formed on August 23, 2017, and, as of its acquisition by Freedom Leaf on July 26, 2018 with an effective
date of August 1, 2018, is a wholly-owned subsidiary of the Company.
|
Nature of Operations
Freedom Leaf Inc. is a group of diversified,
multinational, vertically-integrated hemp businesses and cannabis media companies. Freedom Leaf has strived to be a leading go-to
resource in the cannabis, medical marijuana, and industrial hemp industries since 2014, founded by professionals with Decades of
combined experience in cannabis legalization advocacy. The Company is continuously building a diverse, global portfolio of valuable
businesses and enterprises through strategic mergers, acquisitions, and acceleration projects across the hemp and cannabis industry.
Utilizing these mergers and acquisitions, Freedom Leaf is building a solid foundation for our vertically-integrated hemp company
to maximize both stockholder value and revenue growth. Our cultivation and extraction divisions allow FRLF to grow and source our
own hemp extract, which allows dramatically lower production costs for our wholly-owned hemp product lines, thereby generating
more revenue for each product sold. We also formulate and manufacture the majority of our products in our own in-house formulation
centers, also greatly reducing our costs and increasing revenue. In addition, our extensive domestic and international media companies
ensure we can continuously direct traffic to our many ecommerce sites and nationwide retail locations. For valuation purposes,
the Company’s focus is on developing and implementing multiple, mutually-reinforcing revenue streams; through which revenue,
net income and stockholder value are maximized by cross-marketing across its brands and advertising through its media properties.
The Company’s major business lines are:
☐
|
Legal Industrial Hemp Cultivation
|
☐
|
Cannabidiol Extraction, Distillation, and Processing
|
☐
|
Expert Product Formulation
|
☐
|
Nutraceutical Brand Marketing
|
☐
|
Ancillary Products & Niche Markets
|
☐
|
Affiliate Marketing Programs
|
☐
|
Global Media & Advertising Networks
|
Basis of Presentation
The Company prepares its consolidated financial
statements in conformity with generally accepted accounting principles in the United States of America. The unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals,
which are, in the opinion of management, necessary for a fair presentation of such statements. These unaudited condensed consolidated
financial statements have been prepared in accordance with GAAP pursuant to the rules and regulations of the Securities and
Exchange Commission (“SEC”). Additionally, the results of operations for the three months ended September 30,
2018 are not necessarily indicative of the results that may be expected for the entire year. These unaudited condensed consolidated
financial statements should be read in conjunction with the Company’s audited consolidated financial statements for
the year ended June 30, 2018 included in the Company’s 2018 Annual Report on Form 10-K, filed with the SEC on October
15, 2018.
Principles of Consolidation
The Company consolidates any variable interest
entities of which it is the primary beneficiary. Equity investments through which the Company exercises significant influence over
but does not control the investee and is not the primary beneficiary of the investee’s activities are accounted for using
the equity method. Investments through which the Company is not able to exercise significant influence over the investee and which
do not have readily determinable fair values are accounted for under the cost method. All material inter-company accounts have
been eliminated in the consolidation.
Use of Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Significant estimates in the accompanying consolidated financial statements include
the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the
web site and property and equipment, valuation of warrants and beneficial conversion feature debt discounts, valuation of derivatives,
valuation of share-based payments and the valuation allowance on deferred tax assets.
Fair Value of Financial Instruments
The Company measures its financial assets
and liabilities in accordance with generally accepted accounting principles. For certain of our financial instruments, including
cash, accounts payable, accrued expenses, and short-term loans the carrying amounts approximate fair value due to their short maturities.
We follow accounting guidance for financial
and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires
certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting
pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based
payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach
(present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement
cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value
into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as quoted
prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices
that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets
and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little
or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market
participant would use.
Revenue Recognition
The Company recognizes revenue for our
services in accordance with ASC 605-10, "Revenue Recognition in Financial Statements." Under these guidelines, revenue
is recognized on transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of service
has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has five
primary revenue streams as follows:
|
·
|
Advertising
Services – Revenue from advertising is recognized over the contracted period in which advertising services are
performed. Advertising services are considered performed when an ad is displayed to users.
|
|
|
|
|
·
|
Product Sales – Revenue from the sale of the Company’s branded products is recognized in the period in which product is shipped. Sales billed or cash received in advance of actual shipment are deferred and recorded as income in the period in which shipment is made. Shipping and handling fees billed to customers is included in net sales. Shipping and handling costs are expensed as incurred and included in cost of sales. All sales are presented net of sales taxes, which are excluded from revenue.
|
|
|
|
|
·
|
Licensing Revenue – Revenue from licensing arrangements is recognized when earned, estimable and realizable. The timing of revenue recognition is dependent on the terms of each license agreement and on the timing of sales of licensed products. The Company generally recognizes royalty revenue when it is reported to the Company by its licensees, which is generally one quarter in arrears from the licensees’ sales of licensed products. For licensing fees that are not determined by the licensees’ sales, the Company generally recognizes license fee revenue on a straight-line basis over the life of the license.
|
Net Earnings (Loss) Per Share
In accordance with ASC 260-10, “Earnings
Per Share,” basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by
the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using
the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common
stock equivalent shares that may dilute future earnings per share consist of Series A convertible preferred stock and warrants
to purchase common stock. As of September 30, 2018, there were 94,830,801 such common stock equivalents. Equivalent shares are
not utilized when the effect is anti-dilutive.
Going Concern
The Company has a net loss attributable
to common stockholders for the nine months ended September 30, 2018 of $1,111,766 and working capital deficit as of September
30, 2018 of $66,935 and has used cash in operations of $525,800 for the three months ended September 30, 2018. In addition, as
of September 30, 2018, the Company had an accumulated deficit of $10,643,599. These conditions raise substantial doubt about the
Company’s ability to continue as a going concern for a period of one year from the date of the issuance of these financial
statements.
The accompanying consolidated financial
statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and
the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue
its operations is dependent on the execution of management’s plans, which include the raising of capital through the debt
and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If
the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to
the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial
statements.
There can be no assurances that the Company
will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated
financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities
that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without
additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations,
the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.
NOTE 2 – INVENTORY
Inventories at September 30, 2018 and June
30, 2018 consisted of the following:
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2018
|
|
Raw materials
|
|
$
|
–
|
|
|
$
|
–
|
|
Work-in-process
|
|
|
101,794
|
|
|
|
126,047
|
|
Finished goods
|
|
|
260,450
|
|
|
|
111,681
|
|
Inventory reserve
|
|
|
(36,039
|
)
|
|
|
(36,039)
|
|
Inventory, net
|
|
$
|
326,205
|
|
|
$
|
201,689
|
|
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment at September 30, 2018 and June 30, 2018
consisted of the following:
|
|
September 30,
2018
|
|
|
June 30,
2018
|
|
Machinery and equipment
|
|
$
|
2,015,099
|
|
|
$
|
2,022,980
|
|
Furniture and fixtures
|
|
|
25,000
|
|
|
|
25,000
|
|
Land
|
|
|
625,980
|
|
|
|
630,805
|
|
Buildings
|
|
|
2,154,359
|
|
|
|
2,170,963
|
|
Total property and equipment
|
|
|
4,820,438
|
|
|
|
2,975,268
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(199,365
|
)
|
|
|
(63,698
|
)
|
Property and equipment, net
|
|
$
|
4,621,073
|
|
|
$
|
4,786,050
|
|
The depreciation expense for the three months ended September
30, 2018 and 2017, was $143,619 and $6,187, respectively.
NOTE 4 – INTANGIBLE ASSETS
Intangible assets at September 30, 2018 and June 30, 2018 consisted
of the following:
|
|
September 30,
2018
|
|
|
June 30,
2018
|
|
Websites and other intangible assets
|
|
$
|
599,674
|
|
|
$
|
519,923
|
|
Trademarks and trade names
|
|
|
397,682
|
|
|
|
342,682
|
|
Customer relationships
|
|
|
1,041,000
|
|
|
|
712,000
|
|
Patents and intellectual property
|
|
|
264,160
|
|
|
|
264,160
|
|
Total intangible assets
|
|
|
2,302,516
|
|
|
|
1,838,765
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
(535,454
|
)
|
|
|
(316,191
|
)
|
Intangible assets, net
|
|
$
|
1,767,060
|
|
|
$
|
1,522,574
|
|
The amortization expense for the three months ended September
30, 2018 and 2017, was $219,265 and $204, respectively.
The following table presents the amortization for the next five
years:
2019
|
|
|
813,346
|
|
2020
|
|
|
544,755
|
|
2021
|
|
|
173,301
|
|
2022
|
|
|
171,965
|
|
2023 and thereafter
|
|
|
63,693
|
|
Total
|
|
$
|
1,767,060
|
|
NOTE 5 – BUSINESS COMBINATION
Tierra Science Global
On July 26, 2018, the Company acquired
100% of the membership interests of Tierra Science Global, LLC (“Tierra”), a nutraceutical business, for which it:
(i) issued to that Company’s owners 2,000,000 shares of the Company’s common stock, valued at $246,000 based on the
closing price of the common stock on that day and (ii) entered into employment agreements with the Company’s principal executives.
Pursuant to those employment agreements, each of the Tierra’s two sellers was contacted to receive: (i) the greater of $2,000
per month or 2.5% of the prior month’s gross margin from sales and (ii) $25,000 of Company common stock for each $500,000
in cumulative net profits. The Company intends to expand Tierra’s product offering to include various cannabidiol products
branded as “powered by Freedom Leaf.
Purchase Consideration:
The provisional fair value of the purchase
consideration issued to the sellers of Tierra was allocated to the net tangible assets acquired. We accounted for the acquisition
of Tierra as the purchase of a business under GAAP under the acquisition method of accounting, the assets and liabilities acquired
were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair
value of the net assets acquired, net of liabilities assumed, was approximately $300,630. The excess of the aggregate fair value
of the net tangible and intangible assets has been treated as goodwill. The purchase price allocation was based, in part, on management’s
knowledge of Tierra’s business and is preliminary. Once the Company completes its analysis to finalize the purchase price
allocation, which includes finalizing the valuation report from a third-party appraiser and a review of potential intangible assets,
it is reasonably possible that there could be significant changes to the preliminary values below.
Provisional consideration given:
Cash Consideration
|
|
|
|
Common stock shares given
|
|
|
300,630
|
|
Notes payable assumed
|
|
|
129,800
|
|
Total consideration given
|
|
$
|
430,430
|
|
Assets acquired and liabilities assumed at preliminary fair value:
Current assets
|
|
$
|
1,210
|
|
Current liabilities
|
|
|
33,780
|
|
Net Working Capital
|
|
|
(32,570
|
)
|
|
|
|
|
|
Property and equipment
|
|
|
15,000
|
|
Trade names and trademarks *
|
|
|
55,000
|
|
Customer contracts and relationships*
|
|
|
209,000
|
|
Other intangible assets *
|
|
|
184,000
|
|
Total Consideration
|
|
$
|
430,430
|
|
|
*
|
We are reviewing for potential intangible assets, which potentially may change the intangible assets.
|
The following presents the pro-forma combined
results of operations of the Company with Tierra as if the entities were combined on July 1, 2017.
|
|
For the Three Months Ended
|
|
|
|
September 30,
|
|
|
|
2018
|
|
Revenues, net
|
|
$
|
644,039
|
|
Net loss allocable to common stockholders
|
|
|
(1,131,157
|
)
|
Net loss per common share
|
|
$
|
(0.01
|
)
|
Weighted-average number of share outstanding
|
|
|
195,296,119
|
|
Revenue recognized by Tierra from
acquisition through September 30, 2018 was $118,643. The pro-forma results of operations are presented for information
purposes only. The pro-forma results of operations are not intended to present actual results that would have been attained
had the acquisitions been completed as of July 1, 2018 or to project potential operating results as of any future date or
for any future periods.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, we may be involved
in litigation relating to claims arising out of our operations in the normal course of business. As of November 19, 2018, there
were no pending or threatened lawsuits.
NOTE 7 – RELATED PARTIES
Cowan, a former director and officer of
the Company, has payables and accruals due to him of $15,485 and $15,485 as of September 30, 2018 and June 30, 2018, respectively,
which amounts were recorded in Payable to related party. The payable, as agreed upon verbally, has a maturity date greater than
one year, without any other set terms for repayment. Imputed interest is immaterial.
Clifford J. Perry (“Perry”),
Chief Executive officer, Chief Financial Officer, and a director of the Company, has payables and accruals due to him of $25,013
($609 of which was recorded as Payable to related party and the remainder of which (accrued salaries) was recorded as Accounts
payable and accrued expenses) and $32,813 as of September 30, 2018 and June 30, 2018, respectively. Imputed interest is immaterial.
Raymond P. Medeiros (“Medeiros”),
a director of the Company, has payables and accruals due to him of $76,227 (all of which was recorded as Accounts payable and
accrued expenses) and $63,000 as of September 30, 2018 and June 30, 2018, respectively. Imputed interest is immaterial.
NOTE 8 – NOTES PAYABLE
|
|
September 30,
|
|
|
June 30,
|
|
|
|
2018
|
|
|
2018
|
|
|
|
|
|
|
|
|
Note payable bearing interest at 0.0%, originated March 3, 2017, due on March 3, 2020
|
|
|
97,500
|
|
|
|
99,000
|
|
|
|
|
|
|
|
|
|
|
Note payable bearing interest at 5.0%, originated May 17, 2018, due on December 31, 2022
|
|
|
4,650,044
|
|
|
|
4,629,486
|
|
|
|
|
|
|
|
|
|
|
Note payable bearing interest at 0.0%, originated June 5, 2018, due on September 5, 2018
|
|
|
–
|
|
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
Note payable bearing interest at 8.0%, originated July 3, 2018, due on January 3, 2019, net of original issuance discounts of $3,098 and $-0- respectively
|
|
|
62,902
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Note payable, assumed in acquisition of Tierra Sciences, bearing interested at 0.0% originated on October 23, 2017, due on demand
|
|
|
10,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Note payable, assumed in acquisition of Tierra Sciences, bearing interested at 0.0% originated on February 21, 2018, due on demand
|
|
|
14,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Note payable, assumed in acquisition of Tierra Sciences, bearing interested at 0.0% originated on July 26, 2018, due on demand
|
|
|
4,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
4,838,446
|
|
|
$
|
4,823,486
|
|
Less: current portion
|
|
|
(375,556
|
)
|
|
|
(381,575
|
)
|
|
|
|
|
|
|
|
|
|
Long-term notes payable
|
|
$
|
4,462,890
|
|
|
$
|
4,441,911
|
|
In connection with the IRIE acquisition,
the Company assumed a $100,000 promissory note, which bears no interest and is payable at the rate of $500 per month with the
balance due on March 3, 2020. The note was forgiven in full by the note holder on September 1, 2018 which has been recorded as
a gain on forgiveness of debt on the Company’s consolidated statement of operations and comprehensive loss.
NOTE 9 – STOCKHOLDERS’ EQUITY
Series A Preferred Stock
On May 24, 2016, the Board of Directors
of the Company authorized amending the Company’s Articles of Incorporation to authorize 10,000,000 shares of “blank
check” preferred stock and designate 1,000,000 of the shares as Series A preferred stock. Each share of the Series A preferred
stock is entitled to 500 votes and is convertible into 100 shares of common stock.
As of September 30, 2018, 684,012 shares
of Series A preferred stock were held by Mr. Perry and 264,010 shares of Series A preferred stock were held by Mr. Cowan.
Common Stock
The Company was authorized to issue up
to 75,000,000 shares of common stock, par value $0.001 per share. On January 21, 2015, the Company increased its authorized capital
to 500,000,000 shares of common stock. Each outstanding share of common stock entitles the holder to one vote per share on all
matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive
rights.
As of September 30, 2018, 221,090,815
shares of common stock were issued, issuable and outstanding. During the quarter ended September 30, 2018, the Company agreed
to issue 35,721,450 shares of common stock, as detailed below, resulting in there being 22,090,815 shares outstanding as of September
30, 2018:
|
|
Shares
|
|
|
Value ($)
|
|
|
Price Per Share
|
|
Stock issued for business combination
|
|
|
2,000,000
|
|
|
$
|
300,630
|
|
|
|
$0.15
|
|
Stock issued for cost method investment
|
|
|
3,000,000
|
|
|
|
375,000
|
|
|
|
$0.13
|
|
Issuance of common stock for cash and warrants
|
|
|
29,702,424
|
|
|
|
548,799
|
|
|
|
$0.02-$0.13
|
|
Issuance of common stock for services
|
|
|
1,019,026
|
|
|
|
139,100
|
|
|
|
$0.08-$0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
35,721,450
|
|
|
$
|
1,382,017
|
|
|
|
|
|
Warrants
As of June 30, 2018, warrants to acquire 7,494,444
shares of common stock were outstanding.
The following warrants were issued during
the quarter:
In connection with the September
28, 2018 Securities Purchase Agreement (the “
Securities Purchase Agreement
”) the Company entered into with Merida
and seven other investors (Merida and the seven other investors collectively the “
Investors
”), pursuant to which
the Investors purchased, for an aggregate purchase price of $3,000,000 (the “
Purchase Price
”), 25,000,000 shares
of the Company’s common stock (the “
Common Shares
”), the following Warrants were issued:
|
1.
|
the Investors received a three-year, non-cashless warrants to acquire 25,000,000 shares of the
Company’s common stock at $0.18/share (the “
Warrants
”), and
|
|
2.
|
for leading the syndicate and providing 68% of the funds in the offering, Merida received a three-year,
non-cashless warrants to acquire 17,000,000 shares of the Company’s common stock at $0.25/share (the “
Bonus Warrants
”).
|
As of September 30, 2018, warrants to acquire 50,794,444 shares of common stock
were outstanding.
A summary of the status of the options
and warrants granted as at September 30, 2018 and June 30, 2018, and changes during the years then ended is presented below:
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|
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|
Weighted-
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
Number of
|
|
|
Price per
|
|
|
|
|
Warrants
|
|
|
Share
|
|
|
Outstanding at June 30, 2018
|
|
|
|
8,794,444
|
|
|
|
|
|
|
Granted
|
|
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|
42,000,000
|
|
|
$
|
0.21
|
|
|
Exercised
|
|
|
|
–
|
|
|
$
|
–
|
|
|
Cancelled
|
|
|
|
–
|
|
|
$
|
–
|
|
|
Outstanding at September 30, 2018
|
|
|
|
50,764,444
|
|
|
$
|
0.19
|
|
|
Exercisable at September 30, 2018
|
|
|
|
50,794,444
|
|
|
$
|
0.19
|
|
A summary of the status of the warrants outstanding at September
30, 2018 is presented below:
Range of Exercise Prices
|
|
|
|
Number Outstanding
|
|
|
|
Weighted-Average Remaining Contractual Life
|
|
|
|
Number Exercisable
|
|
|
Weighted-Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.01 – $0.09
|
|
|
|
2,200,000
|
|
|
|
1.64 years
|
|
|
|
2,200,000
|
|
|
$
|
0.05
|
|
|
$0.01 – $0.09
|
|
|
|
30,594,444
|
|
|
|
2.72
years
|
|
|
|
30,594,444
|
|
|
$
|
0.17
|
|
|
$0.01 – $0.09
|
|
|
|
18,000,000
|
|
|
|
2.96 years
|
|
|
|
18,000,000
|
|
|
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
$0.01 – $0.29
|
|
|
|
50,794,444
|
|
|
|
2.76
years
|
|
|
|
50,794,444
|
|
|
$
|
0.10
|
|
Stock Option Plan
On June 27, 2016, the Board of Directors
approved the 2016 Stock Option Plan which has reserved 10,000,000 shares of common stock. There are no stock options outstanding
as of September 30, 2018.
NOTE 10 – REVENUE CLASSES
Selected financial information for the
Company’s operating revenue classes for the three months ended September 30, 2018 and 2017, are as follows:
|
|
For the three months ended
|
|
Revenues:
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Magazine related
|
|
$
|
472
|
|
|
$
|
–
|
|
Referral fees
|
|
|
–
|
|
|
|
–
|
|
Licensing fees
|
|
|
–
|
|
|
|
–
|
|
Product sales
|
|
|
608,186
|
|
|
|
1,327
|
|
Equipment sales commissions
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
$
|
608,658
|
|
|
$
|
1,327
|
|
|
|
For the three months ended
|
|
Direct costs of revenue:
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Magazine related
|
|
$
|
14,053
|
|
|
$
|
33,146
|
|
Extraction
|
|
|
–
|
|
|
|
–
|
|
Referral fees
|
|
|
–
|
|
|
|
–
|
|
Licensing fees
|
|
|
–
|
|
|
|
–
|
|
Product sales
|
|
|
255,072
|
|
|
|
–
|
|
Equipment sales commissions
|
|
|
–
|
|
|
|
–
|
|
Total
|
|
$
|
269,125
|
|
|
$
|
33,146
|
|
The Company’s four revenue classes
are magazine related, referral fees, licensing fees (see Note 2), product sales and equipment sales commissions (see Note 2).
NOTE 11 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events
through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined
that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.
On October 29, 2018, the Company issued 36,350 shares of common
stock, at $0.144 per share, to an accounting firm for services rendered in July and August totaling $5,225.
On November 15, 2018, the Company consummated the acquisition
of the assets of AccuVape, Inc. (www.accuvape.net), which produce and sell various vape-related products. Accuvape was founded
in 2013 as a vaporizer company to fill the growing needs of the emerging vape market. Today, Accuvape: distributes to all 50 states,
Canada, the UK and EU and has Midwest and West Coast distribution centers and over 550 authorized retailers that carry Accuvape
products.