Note 1 - Organization and Basis of Presentation
Organization and Line of Business
Mountain High Acquisitions Corp., formerly
known as Wireless Attachments, Inc., (the “Company”, "MYHI") was incorporated under the laws of the State
of Colorado on September 22, 2010. The Company was incorporated for the purpose of developing solar cloth membranes for outdoor
active wear that covert sunlight into electrical power and that can be used for charging and/or operating mobile devices such as
the iPod and the iPhone.
Canna-Life Corporation (“Canna-Life”)
was incorporated in the State of Colorado on January 29, 2014. On March 6, 2014, the Company entered into a share exchange agreement
with Canna-Life. Pursuant to the agreement, the Company acquired from Canna-Life all of the issued and outstanding capital stock
consisting of 8,104,000 shares of common stock in exchange for 8,104,000 shares of the Company’s common stock.
Concurrently with the closing of the transaction,
Alan Smith, Chief Executive Officer of Canna-Life purchased 120,000,000 shares of the Company’s common stock from the Company’s
majority stockholder. In addition, Mr. Smith then entered into an agreement with the Company pursuant to which he returned 113,500,000
shares of the Company’s common stock for cancellation. Mr. Smith was not compensated for the cancellation of his shares of
the Company’s common stock. Upon completion of the foregoing transactions, the Company had an aggregate of 23,892,000 shares
of common stock issued and outstanding of which 14,604,000 shares (61%) were owned by the former stockholders of Canna-Life.
The exchange of shares with Canna-Life was
accounted for as a reverse acquisition under the purchase method of accounting since Canna-Life obtained control of the Company
and the Chief Executive Officer of Canna-Life became the Chief Executive Officer and sole director of the Company. Accordingly,
the merger of Canna-Life into the Company was recorded as a recapitalization of Canna-Life, Canna-Life being treated as the continuing
entity. The historical financial statements presented are the financial statements of Canna-Life. The share exchange agreement
has been treated as a recapitalization and not as a business combination; therefore, no pro forma information is disclosed. At
the date of this transaction, the net liabilities of the legal acquirer, Mountain High Acquisitions Corp, were $36,110.
On April 30, 2015, the Company entered into
a Sale and Purchase Agreement to sell Canna-Life Corporation (the "CL Agreement") to Evolution Equities Corporation and
Alan Smith ("Purchasers"). Under the terms of the CL Agreement the Company sold 8,104,000 (100%) of its shares of Canna-Life
and execute a Note Payable for $80,000 to Evolution Equities Corporation in exchange for the extinguishment of $490,416 of debt
due to the Purchasers at March 31, 2015 and $1.00 cash. As a result of this transaction all activity for Canna-Life has been reclassified
as discontinued operations in the financial statements for MYHI.
On May 19, 2015, the Company entered into the
First Amendment to the Share Exchange Agreement with Freedom Seed and Feed Shareholders, the "FSF Agreement" or "FSF",
to acquire the controlling shares of Freedom Feed and Seed in exchange for 31,429,000 shares of MYHI. During the due diligence
process the Company advanced $75,645.30 to FSF for operating expenses. The Company executed notes payable for the advanced funds.
On June 30, 2015, the Company executed a Rescission Agreement with FSF canceling the FSF Agreement. The Company was unable to collect
the amounts advanced to FSF and wrote off the advance to Other Income (Expense) in June 2015.
On May 22, 2015 the Company completed the
acquisition of Greenlife Botanix ("Greenlife") as detailed in the First Amendment to the Shareholder Agreement dated
February 8, 2015. The Company issued 10,000,000 restricted shares of its common stock to the shareholders of Greenlife in exchange
for their 100% interest in Greenlife. The shares were valued at the market value on the date of issuance, $0.23, for a total consideration
of $2,300,000. The amount paid for Greenlife was recorded as Goodwill due to the start up nature of Greenlife and the minimal
net assets of Greenlife at the time of acquisition. Subsequent to the purchase of Greenlife the Company entered into a rescission
agreement wit
h Freedom Seed and Feed, "FSF", which
impaired the integration of Greenlife and FSF into a fully integrated cosmetic company. Due to the rescission of FSF and the remarketing
of the Greenlife product line the Company evaluated the book value of the asset and elected to impair the Goodwill value of Greenlife
and expensed the $2,300,000 book value in the year ended March 31, 2016. Below is the Audited Balance Sheet for Greenlife at
the time of acquisition. There were no changes between December 31, 2014 and the acquisition date of May 22, 2015. Greenlife started
operations on September 18, 2014.
GREENLIFE BOTANIX, INC
|
BALANCE SHEET
|
|
|
Audited
|
|
|
December 31,
|
|
|
2014
|
ASSETS
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,191
|
|
TOTAL CURRENT ASSETS
|
|
|
2,191
|
|
TOTAL ASSETS
|
|
$
|
2,191
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
Advances from Related Parties
|
|
|
16,100
|
|
TOTAL CURRENT LIABILITIES
|
|
|
16,100
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
—
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT):
|
|
|
|
|
Accumulated (deficit)
|
|
|
(13,909
|
)
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
(13,909
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$
|
2,191
|
|
Going Concern
The accompanying consolidated financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate
continuation of the Company as a going concern. The Company has incurred a net loss of $2,938,475 and used cash for operations
of $355,839 for the year ended March 31, 2016 and has an accumulated deficit of $5,396,715 and a working capital deficit of $446,682
as of March 31, 2016. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern. Management plans to continue to raise capital to fund the Company’s operations and believes that it can
continue to raise equity or debt financing to support its operations until the Company is able to generate positive cash flow from
operations.
Note 2 – Summary of Significant
Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The accompanying consolidated financial statements have been presented in United States Dollars ($ or “USD”). The fiscal year end is March 31.
Principles of Consolidation
The accounts of the Company and its wholly–owned
subsidiary GreenLife Botanix are included in the accompanying consolidated financial statements. All intercompany balances and
transactions were eliminated in consolidation.
Use of Estimates
The preparation of financial statements in
conformity with US GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and
judgment involved.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand
and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months
or less.
Revenue Recognition
In accordance with the Securities and Exchange
Commission’s (“SEC”) Staff Accounting Bulletin No. 104,
Revenue Recognition
, the Company will recognize
revenue when it is realized or realizable and earned. The Company must meet all of the following four criteria under SAB 104 to
recognize revenue:
-
Persuasive evidence of an arrangement exists
-
Delivery has occurred
-
The sales price is fixed or determinable
-
Collection is reasonably assured
Inventories
Inventories
consisting of cosmetic products are stated at the lower of cost or market. Cost is determined using the first-in, first-out method
and are adjusted to actual cost quarterly based on a physical count. Net realizable value is the estimated selling price in the
ordinary course of business, less applicable variable selling expenses.
Intangible Assets
The Company accounts for intangibles in accordance
with ASC 350, Intangible-Goodwill and Other. The Company evaluates intangibles, at a minimum, on an annual basis and whenever
events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of intangibles is tested
by comparing the carrying amount to the fair value. The fair values are estimated using undiscounted projected net cash flows.
If the carrying amount exceeds its fair value, intangibles are considered impaired and a second step is performed to measure the
amount of impairment loss, if any. The Company
evaluates the impairment of intangibles as of the
end of each fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount
may not be recoverable. These circumstances include:
|
·
|
a
significant decrease in the market value of an asset;
|
|
·
|
a
significant adverse change in the extent or manner in which an asset is used; or
|
|
·
|
an
accumulation of costs significantly in excess of the amount originally expected for the
acquisition of an asset.
|
The Company
recognized an impairment expense related to intangible assets during the year ended March 31, 2016 of $2,300,000 and nil for the
year ended March 31, 2015.
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 and 2016.
The Company
has no tax positions at March 31, 2016, or March 31, 2015, for which the ultimate deductibility is highly certain but for which
there is uncertainty about the timing of such deductibility.
Basic and Diluted Loss Per Share
Earnings per share is calculated in accordance
with the ASC Topic 260,
Earnings Per Share
. Basic earnings per share is based upon the weighted average number of common
shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants
were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed
to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used
to purchase common stock at the average market price during the period. There were 904,000 warrants outstanding at March 31, 2016,
which were excluded from the diluted loss per share calculation as their inclusion would be anti-dilutive.
Discontinued Operations
The Generally Accepted Accounting Principles
framework requires special presentation treatment of discontinued operations. This requirement refers to the results of operations
of a component of an entity that is either being held for sale or which has already been disposed of.
The designated results of operations must be
reported as a discontinued operation within the financial statements if both of the following conditions are present:
|
·
|
Resulting elimination
.
The disposal transaction will result in the operations and cash flows of the component being eliminated from company operations.
|
|
·
|
Continuing involvement
.
There will be no significant continuing involvement by the company in the operations of the component, once the disposal transaction
has been completed. Continuing involvement implies the ability to influence the operating or financial policies of the disposed
component.
|
Due to the above requirements, the financial
results relating to Canna-Life are classified as discontinued operations in the MYHI consolidated financial statements.
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08,
Presentation of Financial Statements
(Topic 205) and Property, Plant and Equipment (Topic 360)
. ASU 2014-08 amends the requirements for reporting discontinued operations
and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic
shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued
operations. This new accounting guidance is effective for annual periods beginning after December 15, 2014. The Company is currently
evaluating the impact of adopting ASU 2014-08 on the Company's results of operations or financial condition.
In September 2014, the FASB issued ASU No.
2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment
to Variable Interest Entities Guidance in Topic 810, Consolidation which removes the definition of a development stage entity from
Topic 915, thereby removing the distinction between development stage entities and other reporting entities from U.S. GAAP. In
addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information
on the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development
stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in
the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.
The amendment is effective for annual reporting periods beginning after December 15, 2014. Early application is permitted. The
Company chose to adopt ASU No. 2014-10 in the period ended March 31, 2014.
Other recent authoritative guidance issued
by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified
Public Accountants, and the SEC, did not, or are not expected to have a material effect on the Company’s consolidated financial
statements.
Note 3 – Advances from Stockholder
Alan Smith, the Company’s Chief Executive
officer and a director, has advanced money to fund the Company’s operations. The amount due to this stockholder at March
31, 2016 and March 31, 2015 was a 5% convertible note payable of $15,001 and an unsecured liability of $441,895, respectively.
The $16,100 Advances from related parties refers to an unsecured advance by the President of GreenLife Botanix, Brent McMahon.
Mr. McMahon is not an officer or Director of the Company. Mr. McMahon is a shareholder of MYHI stock.
Note 4 – Discontinued Operations
The Company had no activity for discontinued
operations year ended March 31, 2016.
The Company had a loss from discontinued operations
of $890,473 for the year ended March 31, 2015. The losses related to the discontinued Canna-Life operations that were sold in
April 2015.
Note 5 – Equity
Common Stock
The Company has authorized 250,000,000 shares
of common stock with a par value of $0.0001 per share and 250,000,000 shares of preferred stock with a par value of $0.0001 per
share.
On December 8, 2014, the Company issued 250,000
restricted shares of restricted common stock to Richard G. Stifel, the Company's CFO and a Director, for serving as a Director
of the Company. The Company recorded an expense of $25,000 for the fair market value of these shares.
During March 2015, the Company sold 420,000
restricted shares of common stock through a private placement at $0.15 per share. The Company received the $63,000 in FY 2015.
The Company recorded the issuance of the stock in FY 2016, when the shares were actually delivered.
During the year ended March 31, 2016 the Company
issued 503,334 restricted shares through a private placement at $0.15 per share.
On May 22, 2015, The Company issued 10,000,000
restricted shares to the shareholders of Greenlife Botanix pursuant to closing the Share Exchange Agreement dated February 8, 2015.
The shares were valued at the fair market trading value, $0.23, on the closing date.
The Company issued 353,600 restricted shares
to a vendor in lieu of payment of $35,360 that was owed to the vendor at March 31, 2015. The shares were recorded at the fair market
value of $0.25 per share or $88,400. The difference in value, $53,040, was written off as a loss on extinguishment of debt in the
year ended March 31, 2016.
Pursuant to agreements with potential investors;
Alan Smith, CEO and a Director, retired 2,000,000 shares he received from the reverse merger referenced above. The share retirement
was valued at par $0.0001 per share.
Warrants
On April 3, 2014, the Company’s entered
into a consulting agreement with Dr. Bob Melamede. Pursuant to the consulting agreement, Dr. Melamede was to serve as a member
of the Company’s newly formed Advisory Board and act as the Scientific Advisor of the Advisory Board for a term of 12 months.
In exchange for Dr. Melamede’s services, he was to receive: (1) $10,000 per year, due and payable in advance; and (2) 300,000
common stock purchase warrants at an exercise price of $4.00 per share, that vested immediately. These warrants expired on April
3, 2016.
The fair value of the 300,000 warrants was
determined to be $1,257,000 in the fiscal year ended March 31, 2015, which was recorded as “Selling, general and administrative
expenses” on the accompanying consolidated statement of operations. The fair value was determined using the Black-Scholes
model with the following assumptions:
|
·
|
Expected volatility of 215%
|
|
·
|
Risk-free interest rate of 0.24%
|
|
·
|
Expected life of 2.0 years
|
The following ta
ble
summarizes the warrant activity:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
Number of
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
Warrants
|
|
Price
$
|
|
Life
(in years)
|
|
Value
$
|
|
Outstanding,
March 31, 2014
|
|
|
|
604,000
|
|
|
$
|
4.75
|
|
|
|
|
|
|
|
|
|
|
Granted
April 30, 2014
|
|
|
|
300,000
|
|
|
$
|
4.00
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Canceled
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
March 31, 2016
|
|
|
|
904,000
|
|
|
$
|
4.50
|
|
|
|
0.93
|
|
|
|
|
|
|
Exercisable,
March 31, 2016
|
|
|
|
904,000
|
|
|
$
|
4.50
|
|
|
|
0.93
|
|
|
$
|
—
|
|
The number and
weighted average exercise prices of all warrants outstanding as of March 31, 2016, are as follows:
|
|
|
|
|
Warrants
Outstanding and Exercisable
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Exercise
|
|
|
Number
|
|
|
Exercise
|
|
|
Remaining
|
|
Price
$
|
|
|
of
Warrants
|
|
|
Price
$
|
|
|
Life
(Years)
|
|
|
4.00
|
|
|
|
300,000
|
|
|
|
4.00
|
|
|
|
0.01
|
|
|
4.75
|
|
|
|
604,000
|
|
|
|
4.75
|
|
|
|
0.93
|
|
|
|
|
|
|
904,000
|
|
|
|
|
|
|
|
|
|
Note 6 –
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 $4,352,973 expiring in various years through 2036. The tax benefit
of these net operating losses has been offset by a full allowance for realization. The use of the net operating loss carryfowards
may be limited due to the change in control.
Income tax expense
(benefit) consists of the following for the year ended March 31, 2016:
Current taxes
|
|
$
|
—
|
|
Deferred taxes
|
|
|
1,086,205
|
|
Less: valuation allowance
|
|
|
(1,086,205
|
)
|
Net income tax provision
|
|
$
|
—
|
|
The Company’s effective tax
rate differs from the high statutory rate for the period ended March 31, 2016, due to the following (expressed as a percentage
of pre-tax income):
Federal taxes at statutory rate
|
|
$
|
34.0
|
%
|
State taxes, net of federal tax benefit
|
|
|
5.0
|
%
|
Valuation allowance
|
|
|
(39.0
|
)%
|
Effective income tax
rate
|
|
$
|
0.0
|
%
|
As of March 31, 2016,
the components of these temporary differences and the deferred tax asset were as follows:
Deferred
Tax assets:
|
|
|
|
|
Net
operating loss carryforward
|
|
$
|
2,150,457
|
|
Less:
valuation allowance
|
|
|
(2,150,457
|
)
|
Net
deferred tax assets
|
|
$
|
—
|
|
Note
7 - Notes Payable
During the year
ended March 31, 2016 the Company issued notes payable to private parties and converted some of its liabilities to the officers
into notes payable. Each note had interest rates of 3%-5% and had a conversion provision allowing the holder to convert the note
into shares of the Company
at a discount. The discount varied from 70% of the trading value at the conversion date to the
lower of 80% of the share value on the conversion date or $0.015, this is referred to as the Beneficial Conversion Feature, "BCF".
Due to the fact that the notes could be converted immediately or any time thereafter, there is no amortization of expense, so
the Company has elected to record an expense in the current year for the difference between the "BCF and the share value
on the date the note was executed, This resulted in an expense of $173,798 in the year ended March 31, 2016.
Note 8 – Commitments and Contingencies
None.
Note 9 – Subsequent Events
During May 2016, the
Company converted $102,097 of convertible notes payable into 4,333,333 shares of the Company's restricted stock and 2,473,131
shares of the Company's free trading stock. All shares were converted at $0.015 per share.