Note 1
- Organization and Basis of Presentation
Organization and Line of Business
Prior to January 1, 2020, the Company was in
the business of providing infrastructure assets to licensed producers, processors and retailers engaged in the cannabis industry.
Due to the restrictive regulatory and operational challenges the Company faced in that business it was decided to pivot away from
cannabis and instead focus on opportunities in the hemp industry.
The Company plans to acquire assets such as
equipment, real estate and operating entities engaged in hemp related activities and to repurpose its existing assets for use in
hemp operations. As discussed below, the Company has acquired a company (GPS) engaged in the formulation, manufacturing,
branding, fulfillment and distribution of hemp-derived CBD products at its cGMP, FDA-registered facility in Santa Ana, California.
GPS's continually expanding product offering is sold directly to consumers online as well as through wholesale partners (both online
and brick and mortar stores) under its retail brand name, Zen Drops. The product offering includes tinctures, salves, gummies,
transdermal patches and oral thin films.
On May 22, 2016 the Company completed the acquisition
of Greenlife Botanix ("Greenlife") a Colorado corporation. 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 executed a rescission agreement with Freedom Seed and Feed, "FSF", which prevented Greenlife
from becoming 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, 2017.
On
March 31, 2020, the Company sold its 100% interest in GreenLife to Evolution Equities Corporation,
a Nevada Corporation for the sum of $1.00. At the time of the sale, GreenLife had no assets and had liabilities in the amount of
$201,445. Of the liabilities that were in GreenLife, $138,945 were owed to Brent McMahon, a related party. The gain on deconsolidation
has been reflected as an increase in Additional
Paid in Capital of $201,445 as the transaction was with a related party controlled
by a stockholder in the company, resulting in the effective treatment of the gain as a stockholder contribution. The company assesses
its joint ventures and partnerships at inception to determine if any meet the qualifications of a variable interest entity ("VIE")
in accordance with Accounting Standards Codification ("ASC") 810, "Consolidation." If a joint venture or partnership
is a VIE and the company is the primary beneficiary, the joint venture or partnership is fully consolidated. Management has determined
GreenLife does not meet the definition of a business under ASC 805 and is therefore not subject to VIE guidance and should remain
deconsolidated after the sale date. Furthermore, the Company forgave the balance of $50,000 due from Greenlife on the transaction
date, resulting in at $50,000 loss.
In May 2017,
the Company formed MYHI-AZ , an Arizona Corporation
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 right to extend the lease for an additional 2 years. The lease began August 15, 2017. The lease provided
for a monthly lease rate of $20,000 a month and required advance payment for operating supplies and expenses. The monthly lease
rate was recorded as Revenue and an Account Receivable while the advances were recorded as Other Receivable. The monthly lease
payments were to commence on harvesting of the first crop. 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 this crop resulted in a deferral of collection of the lease rental payments and the operating cost payments. The power
failure highlighted electrical issues with the facility where the containers were being used and improvements to the containers
that could be made. The container improvements and facility power requirement issue took a few months to resolve.
Effective June
5, 2018, MYHI-AZ and D9 agreed to convert the current amount due under the operating lease, representing $150,000 in lease payments
and $22,294 in 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 was 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 per month beginning November 1, 2018. This replacement lease was terminated on March
31, 2019 as D9 was unable to successfully complete a harvest. due to the ongoing power problems and a shift in the focus of their
company to extraction only. The Note however remains in full force and effect. During the three month period ended June 30, 2019,
the Company decided to sell the containers to generate capital to finance its own change in focus to extraction. On August 20,
2019, the Company completed the sale of the containers for proceeds of $100,000 (see note 5).
On August 18,
2018, the Company entered into an Exchange Agreement (the “Exchange Agreement”) with Alchemy Capital LLC (“Alchemy”)
pursuant to which Alchemy, the sole shareholder of One Lab Co (“Labco ”),
a Nevada Corporation agreed to exchange 100% of the capital stock of Labco for 88,000,000 restricted shares of the Company (the
“MYHI Shares”). The Exchange Agreement called for the issuance of 20,000,000 MYHI Shares at Closing and 68,000,000
MYHI Shares after certain equipment under order by Labco at the time (the “Equipment”) was delivered pursuant to a
Lease Agreement (the “Lease”) between Labco and Workforce Labor Solutions, LLC (“the Lessee”). The Equipment
consists of a state-of-the-art intermodal extraction laboratory, engineered and designed specifically for processing cannabis.
The Lease calls for monthly payments of $25,000 and has a five year term commencing November 1, 2018 with an option to renew for
a second five year term. As of March 31, 2020, the Lessee was in arrears on the lease. The Company has been in constant discussion
with the Lessee regarding this delinquency but has been unable to come to a resolution of the matter. The Company intends to terminate
the lease agreement immediately and to relocate the equipment at the earliest opportunity.
In conjunction
with the acquisition of One Lab Co and its tangible assets including the Equipment and the Lease, the Company also acquired intangible
assets such as industry relationships, access to capital resources and acquisition opportunities. These intangible assets were
classified as Goodwill. MYHI issued the 88,000,000 shares of restricted common stock in accordance with the terms of the Exchange
Agreement and recorded the acquisition of the Equipment at a cost value of $159,666 and Goodwill of $4,605,134. As of March 31,
2019, the intangible asset was fully impaired.
On May 8, 2020, Mountain High Acquisitions
Corp, (“MYHI”) and Trilogy Capital LLC ("Trilogy") entered into an Exchange Agreement (the “Exchange
Agreement”) pursuant to which MYHI agreed to purchase from Trilogy all of the capital stock of GPS Associates, Inc., a Delaware
corporation ("GPS") in exchange (the "Exchange") for 215,250,000 restricted shares of MYHI (the “MYHI
Shares"). Dr. Judy Pham is the sole member and manager of Trilogy. Dr Pham is also the sole member and manager of Alchemy
Capital, LLC ("Alchemy") which owns
53,727,273 shares
of the MYHI's Common Stock .
GPS is a California based company engaged
in the formulation, manufacturing, branding, fulfillment and distribution of hemp-derived CBD products at its cGMP, FDA-registered
facility in Santa Ana, California. GPS's team of professionals includes physiologists, chemists, herbalists and botanists committed
to combining high-quality organic CBD with synergistic organic, raw herbs to produce pure, premium consumer products. All
products manufactured by GPS are tested at independent, third party laboratories to prove potency and purity.
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 $485,536
for the year ended March 31, 2020 and has an accumulated deficit of $15,610,923 and a working capital deficit of $143,862 as of
March 31, 2020. In addition, the Company had $5,542 of
cash on hand at year end as well has sustained recurring operating losses. These
conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as
a going concern. Management plans to continue to raise capital to fund the Company’s operations and believes that it can
continue to raise equity or debt financing to support its operations until the Company is able to generate positive cash flow from
operations.
Note
2 – Summary of Significant Accounting Policies
Basis
of Presentation
The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”). The accompanying consolidated financial statements have been presented in United States Dollars ($ or “USD”).
The fiscal year end is March 31.
Principles of Consolidation
The accounts of the Company and its wholly–owned
subsidiaries MYHI-AZ and One Lab Co 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.
Fair Value of Financial Instruments
Fair value is the price that would be received
from selling an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides
a hierarchy for inputs used in measuring fair value that prioritize the use of observable inputs over the use of unobservable inputs,
when such observable inputs are available. The three levels of inputs that may be used to measure fair value are as follows:
● Level
1 - Quoted prices in active markets for identical assets or liabilities.
● Level
2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets
with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant
inputs are observable or can be derived principally from, or corroborated with, observable market data.
● Level
3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions
and judgments made by the Company.
Assets and liabilities are classified based
on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification
on a quarterly basis. Changes in the observable inputs may result in a reclassification of assets and liabilities within the three
levels of the hierarchy outlined above.
The carrying amounts of certain financial instruments,
such as cash equivalents, short term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair
value due to their relatively short maturities.
Concentrations
For the years ended March 31, 2020 and 2019,
one customer accounted for nil% and 100%, respectively, of the Company’s revenues.
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 . Financial
instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts
at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At March 31,
2020 and 2019, the Company had $0 and $0 in excess of the FDIC insured limit, respectively.
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.
Under
ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects
the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount
of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five
steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or
services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the
transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance
obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies
the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for
the goods or services it transfers to the customer.
Our revenue in
2019 represented lease revenue for the grow containers pursuant to the Company's lease with D9 and the extraction equipment lease
pursuant to the Labco share exchange agreement. D9
is not a related party. For the year ended March 31, 2020, the Company recorded no revenue.
Fixed
Assets
Fixed Assets are stated at cost. Depreciation
is provided 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 asset are capitalized and depreciated
over the estimated remaining useful life of the asset.
Long-lived assets, which include property,
equipment, goodwill and identifiable intangible assets, are reviewed for impairment whenever events or changes in business circumstances
indicate impairment may exist. If the Company determines that the carrying value of a long-lived asset may not be recoverable,
a permanent impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its estimated
fair value. If an initial assessment indicates it is more likely than not an impairment may exist, it is evaluated by comparing
the unit’s estimated fair value to its carrying value. Fair value is generally estimated using an income approach that discounts
estimated future cash flows using discount rates judged by management to be commensurate with the applicable risk. Estimates of
future sales, operating results, cash flows and discount rates are subject to changes in the economic environment, including such
factors as the general level of market interest rates, expected equity market returns and the volatility of markets served, particularly
when recessionary economic circumstances continue for an extended period of time. Management believes the estimates of future cash
flows and fair values are reasonable; however, changes in estimates due to variance from assumptions could materially affect the
evaluations.
Fixed assets as of March 31, 2020 and 2019,
respectively, have not been impaired.
Intangible Assets
The Company accounts
for intangibles in accordance with ASC 350, Intangibles -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:
|
·
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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
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|
·
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an accumulation of costs
significantly in excess of the amount originally expected for the acquisition of an asset.
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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 2012, 2013, 2014,
2015, 2016, 2017, 2018 and 2019.
The
Company has no tax positions at March 31, 2020 or March 31, 2019, 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.
Note 3 – Note Receivable
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 right to extend the lease for an additional 2 years. The lease began August 15, 2017. The lease provided
for a monthly lease rate of $20,000 a month and required advance payment for operating supplies and expenses. The monthly lease
rate was recorded as Revenue and an Account Receivable while the advances were recorded as Other Receivable. The monthly lease
payments were to commence on harvesting of the first crop. 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 this crop resulted in a deferral of collection of the lease rental payments and the operating cost payments. The power
failure highlighted electrical issues with the facility where the containers were being used and improvements to the containers
that could be made. While the container improvements were made, the facility power requirement issues were never fully resolved.
Effective September 11, 2018, MYHI-AZ and D9
agreed to convert the current amount due under the operating lease, representing $150,000 in lease payments and $22,294 in 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 was due October 3, 2018.
In addition, and in anticipation of the resolution
of the power issues at the grow facility, the Parties 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 per month beginning November 1, 2018. This replacement
lease was terminated on March 31, 2019 as D9 was unable to successfully complete a harvest due to the ongoing power problems and
a shift in the focus of their company to extraction only. The Note however remained in full force and effect.
As of
March 31, 2020, the Company evaluated the collectability of the note and believes
the balance of $73,361 is collectible. D9 is current in its required Note payments.
Note 4 – Prepaids
Prepaids as of March 31, 2020 and 2019, were
$7,500 and $0, respectively. These include a $5,000 prepayment to our director and officer for future services, and $2,500 for
outside consultant.
Note 5 – Fixed Assets
Fixed assets consist of the following at March
31, 2020 and 2019, respectively:
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|
For
the year ended
March
31, 2020
|
|
For
the year ended
March
31, 2019
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Extraction
Equipment
|
|
$
|
159,667
|
|
|
$
|
159,667
|
|
Grow
Equipment
|
|
|
—
|
|
|
|
235,000
|
|
Total
cost
|
|
$
|
159,667
|
|
|
$
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394,667
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|
Less:
Accumulated depreciation and amortization
|
|
|
(43,832
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)
|
|
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(88,811
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)
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Total
|
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$
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115,835
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|
|
$
|
305,856
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Total depreciation
expense for the years ended March 31, 2020 and 2019 was $50,233 and $58,811, respectively.
Loss on Sale of Equipment
During the three-month period ended June 30,
2019, the Company decided to sell the grow containers with a carrying value of $139,788, to generate capital to finance its own
change in focus to extraction. On August 20, 2019, the Company completed the sale of the containers for proceeds of $100,000, recognizing
a loss on sale of equipment of $39,788.
Note 6 – Accrued liabilities
As of March 31,
2020 and 2019 , total accrued liabilities consisted
of $0 and $149,955, respectively.
As of March 31,
2020 and 2019, a total of $0 and $138,945, respectively was related to a liability due to Brent McMahon, a 24% shareholder of the
Company , for Greenlife BotaniX, (“Greenlife”)
selling and administrative expenses paid by him between
2015 and 2017. In addition, as of March 31, 2020 and 2019, a total of $0 and $12,500, respectively was related to Greenlife office
lease expenses.
On March 31, 2020, the Company sold its 100%
interest in GreenLife to Evolution Equities Corporation, a Nevada Corporation for the sum of $1.00. At the time of the sale, GreenLife
had no assets and had liabilities in the amount of $201,445. Of the liabilities that were in GreenLife, $138,945 were owed to Brent
McMahon, a related party. Management has determined that Greenlife does not meet the definition of a business per ASC 805 and was
not a Variable Interest Entity (VIE). The gain to the company of the removal of liabilities in the books has been reflected as
an increase in Additional Paid in Capital of $201,445 as the transaction was with a related party. The company assesses its joint
ventures and partnerships at inception to determine if any meet the qualifications of a variable interest entity ("VIE")
in accordance with Accounting Standards Codification ("ASC") 810, "Consolidation." If a joint venture or partnership
is a VIE and the company is the primary beneficiary, the joint venture or partnership is fully consolidated. Management has determined
GreenLife does not meet this test.
Note 7 – Equity
Preferred
Stock
The Company has 250,000,000 shares of
Series B preferred stock with a par value of $0.0001 per share.
On June 9, 2017, the Company authorized up
to 200,000 shares of Series B stock issuable. The shares have liquidation preference as well as 20:1 voting rights. The stated
value of the shares are $0.75 per share and are redeemable by the Company, at the Company’s option, at any point after June
9, 2020 with 30 days notice for the $0.75 per share. The shares are convertible by the Holder at $0.075 per share at any point
up until the day before they are redeemed.
On June 12,
2017, the Company issued 100,000 shares of Series B Convertible Preferred stock, par value $0.0001, 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 of 20,000,000 shares less the associated consulting expense of $109,700.
These
are the only shares of Series B Preferred Stock outstanding as of March 31, 2020 and 2019.
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.
During the year ended March 31, 2020, the Company
converted $130,449 of convertible notes into 16,852,691 shares of common stock.
Note 8 - Notes
Payable
On April 24, 2019, the Company entered in
a convertible note payable in the amount of $112,500. The Company recorded discounts of
$2,500 of debt offering costs and an original issue discount of $10,000 on issuance. During the year ended March 31, 2020, the
Company fully amortized these discounts, resulting in $12,500 of interest expense.
The Company
determined there to be an embedded derivative liability present
per the criteria of ASC 815, which requires the elements of the instrument to be bifurcated. The note had conversion provisions
allowing the holder to convert the note into shares of the Company at a discount, as described in the table below. The Company recorded
a derivative liability of $121,053 which was calculated at issuance (April 24, 2019) based on the amount the note could be converted
into at that time, over and above the note payable.
At
March 31, 2020 the balance on the outstanding convertible note payable with interest accrued in the
amount of $93,130 net of $0 discounts.
As of March 31,
2020, the value of the derivative liability was
$111,181, and the company reduced the derivative liability by $9,872 by recognizing a gain on the reduction in other income section
of the income statement.
Further
details of the outstanding convertible note as of
March 31, 2020 are as follows:
Note holder
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St George Investments LLC
|
Original principal amount
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$112,500
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Debt Offering Costs
|
$ (2,500)
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Original Issue Discount
|
$ (10,000)
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Net proceeds to the Company
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$ 100,000
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Term
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12 months
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Interest rate
|
10% computed on the basis of a 360 day year comprised of twelve thirty month days, compounded daily
|
Security
|
Not secured
|
Prepayment rights
|
The Company had the right to prepay the Note with five trading days notice at 125% of the outstanding balance
|
Conversion rights
|
On
notice, the Note holder had the right to convert all or a portion of the outstanding balance of the Note into common shares of
the Company at a rate of 65% of the average of the 2 lowest closing bid prices in the 20 trading days preceding the notice. Should
the company not be, or stop being DTC / DWAC eligible, the discount rate will increase by 5 %
for each instance.
|
Interest expense
for this note for the year ending March 31, 2020 and 2019 was $10,630 and $0.
Accrued interest for this note for the year ending March 31, 2020 and 2019 was $2,474 and $0.
Outstanding
balances on convertible notes as of March 31, 2020 and 2019 were $93,130
and $98,553. Furthermore, total outstanding
derivative liability on the convertible notes as of March 31, 2020 and 2019 were $111,181 and $0. Subsequently on April 23, 2020
the convertible note, with then-outstanding principal of $93,130 and accrued interest of $2,474 was settled and paid in full.
In addition, on January 23, 2017, the Company
took out a note of $10,000, at 5% interest with a third party. On January 17, 2020, the Company converted all then-outstanding
principal of $10,000 and accrued interest of $1,490 into 383,059 shares of the Company’s common stock. This note had a balance
at March 31, 2020 and 2019, respectively, of $0 and $11,092. Accrued interest as of March 31, 2020 and 2019 was $0 and $1,011.
On January 23,
2018, the Company took out a note of $335,000, at 10% interest with a third party. A total of 18,129,731 shares of the Company’s
common stock was issued to settle the note from 2018 to 2019. This loan had a balance as of March 31, 2020 and 2019, respectively,
of $0 and $87,461. Accrued interest as of March 31,
2020 and 2019 was $0 and $479.
Accrued interest
as of March 31, 2020 and 2019 was $2,474 and $1,490.
Note 9 - Related Party Transactions
Effective April
1, 2017, Alan Smith assigned his consulting agreements and all future amounts due under the agreements to Evolution Equities Corp,
"Evolution". Evolution is a related party due to Mr. Smith's 100% ownership
interest and positions in the company. Evolution was paid $100,907 for the year ended March 31, 2020
and $90,000 for the year ended March 31, 2019. As of March 31, 2020 and 2019, the amount owed to Evolution was $305 and
$0, this amount is included in Accounts Payable and is non-interest bearing and due on demand. Additionally, the Company has retained
KWPR Group, “KWPR”, a public relations company to assist with web site maintenance, press release preparation and social
network posts. KWPR is a related party as the owner Kelly Wood is wife to the CEO Mr. Alan Smith. As of March 31, 2020, and 2019
the total fees paid to KWPR were $30,000
and $0 . Additionally,
as of March 31, 2020 and 2019, prepaids due to the director and officer and outside consultant were $7,500 and $0, respectively.
These include a $5,000 prepayment to our director and officer for future services, and $2,500 for outside consultant.
On March 31, 2020, the Company sold its 100% interest in GreenLife
to Evolution Equities Corporation , an entity owned and controlled by Mr. Smith,
for the sum of $1.00. At the time of the sale, GreenLife had no assets and had liabilities
in the amount of $201,445. Of the liabilities that were in GreenLife, $138,945 were owed to Brent McMahon, a related party. The
gain on deconsolidation has been reflected as an increase in Additional Paid in Capital
of $201,445 as the transaction was with a related party controlled by a stockholder
in the company, resulting in the effective treatment of the gain as a stockholder contribution. The company assesses its joint
ventures and partnerships at inception to determine if any meet the qualifications of a variable interest entity ("VIE")
in accordance with Accounting Standards Codification ("ASC") 810, "Consolidation." If a joint venture or partnership
is a VIE and the company is the primary beneficiary, the joint venture or partnership is fully consolidated. Management has determined
GreenLife does not meet does not meet the definition of a business under ASC 805 and is therefore not subject to VIE guidance and
should remain deconsolidated after the sale date. Furthermore, the Company forgave the balance of $50,000 due from Greenlife on
the transaction date, resulting in a $50,000 loss.
Note 10 – Officer and Director fees
During the year
ended March 31, 2020 and 2019, respectively, the
total officer and director fees paid were $100,907
and $90,000 to the Company’s CEO and Director. Additionally,
as of March 31, 2019 a total of $60,000 was paid to the former CFO and Director of the Company, but there were no amounts paid
to the former CFO and director during the period
ending March 31, 2020. There were no amounts accrued and unpaid as of March 31, 2020 or 2019, respectively.
Note 11 – Commitments and Contingencies
As of March 31, 2020, and 2019 and for the
fiscal years then ended, the Company identified no material commitments and contingencies requiring disclosure or adjustment to
the financial statements.
Note 12 – Income Taxes
The Company accounts for income taxes using
the asset and liability approach 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 had
federal net operating loss carryforwards as of March
31, 2020 and 2019 of approximately $5,871,365 and $5,434,865 expiring in various years
through 2040. 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 a change in control.
The Company’s
effective tax rate differs from the high statutory rate for the year ended March 31, 2020
and 2019, 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
|
%
|
The corporate tax rate in Arizona is 6.98% and the corporate
tax rate in Colorado is 4.63%. Were the Company to have income in both locations, there would be offsetting deductions, thus the
Company does not believe we would pay the full tax rate in both locations. Management is continuing to monitor the state taxes
(as well as Federal) to insure we are utilizing the best strategies to keep our effect tax rate as low as legally possible.
As of March 31, 2020 ,
the components of these temporary differences and the deferred tax asset were as follows:
|
|
|
Deferred Tax assets:
|
|
|
Net
operating loss carryforward
|
|
$
|
1,526,555
|
|
Less:
valuation allowance
|
|
|
(1,526,555
|
)
|
Net
deferred tax assets
|
|
$
|
—
|
|
As of March 31, 2019 ,
the components of these temporary differences and the deferred tax asset were as follows:
|
|
|
Deferred Tax assets:
|
|
|
Net
operating loss carryforward
|
|
$
|
1,413,065
|
|
Less:
valuation allowance
|
|
|
(1,413,065
|
)
|
Net
deferred tax assets
|
|
$
|
—
|
|
The following tables set forth the components
of deferred income taxes as of March 31, 2020 and 2019:
|
|
March 31, 2020
|
|
March 31 2019
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Bad debt allowance
|
|
$
|
—
|
|
|
|
—
|
|
Accrued expenses
|
|
|
—
|
|
|
|
—
|
|
Share based compensation accruals
|
|
|
—
|
|
|
|
—
|
|
Net operating loss carryforwards
|
|
|
5,871,365
|
|
|
|
5,434,865
|
|
Unrealized losses
|
|
|
0
|
|
|
|
0
|
|
Total deferred tax assets
|
|
|
5,871,365
|
|
|
|
5,434,865
|
|
Less: valuation allowance
|
|
|
(5,871,365
|
)
|
|
|
(5,434,865
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
—
|
|
|
|
—
|
|
Fixed assets
|
|
|
—
|
|
|
|
—
|
|
Goodwill and intangible assets
|
|
|
—
|
|
|
|
—
|
|
Unrealized gains
|
|
|
—
|
|
|
|
—
|
|
Total deferred tax liabilities
|
|
|
—
|
|
|
|
—
|
|
Less: valuation allowance
|
|
|
(—)
|
|
|
|
(—)
|
|
Net deferred tax liabilities
|
|
$
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets, net
|
|
$
|
—
|
|
|
|
—
|
|
Note 13 – Subsequent Events
On
April 23, 2020, the Company entered into a Securities Purchase Agreement with Trilogy
Capital, LLC pursuant to which the Company agreed to issue 11,750,000 of its restricted common shares
(the “MYHI Shares”) to Trilogy and Trilogy agreed to purchase the MYHI Shares for $94,000. The proceeds from the sale
of the MYHI Shares were used to pay the outstanding obligations of the Company under a Convertible Promissory Note dated April
24, 2019 issued to St. George Investments, LLC, which totaled $90,656
of principal and $2,474 of accrued interest as of April 23, 2020.
Share Exchange Agreement
On
May 8, 2020, The Company and Trilogy entered into an Exchange Agreement pursuant to which the Company
agreed to purchase from Trilogy all of the capital stock of GPS Associates, Inc., a Delaware corporation ("GPS") in exchange
for 215,250,000 restricted shares of the Company (the “MYHI Shares"). Dr. Judy Pham is the sole member and manager of
Trilogy. Dr Pham is also the sole member and manager of Alchemy Capital LLC ("Alchemy") which owns 53,727,273 shares
of the Company's Common Stock. The audited financial statements of GPS consisting of balance sheets as of December 31, 2019 and
2018 and for the applicable interim periods and the related statements of operations, stockholders equity and cash flows for the
years and interim periods then ended together with proforma financial statements consisting of proforma unaudited combined balance
sheets as of December 31, 2019 and interim period and unaudited proforma combined statement of operations for the year ended December
31, 2019 and interim period will be filed pursuant to the rules according to the Current Report on the from 8-K announcing this
transaction.
As of the date of the Exchange
Agreement, May 8, 2020, based on the closing price, the 215,250,000 shares issued were valued at $1,650,000.
On May 13, 2020, the Exchange was consummated.
As an interim step to assure the acquisition
of GPS by MYHI, pursuant to an Exchange Agreement dated as April 10, 2020 between Trilogy and the shareholders of GPS (the "GPS/Trilogy
Transaction"), Trilogy purchased all of the capital stock of GPS for $300,000 and 5,000,000 shares of the common stock of
MYHI (subject to adjustment based on the future value of the MYHI shares and the EBITDA of GPS). The 5,000,000 shares were to be
delivered to the GPS shareholders upon the consummation of the Exchange referred to in Item 1.01. Subsequent to the closing of
the GPS/Trilogy Transaction, Trilogy provided financing to GPS for the acquisition of equipment and the purchase of raw material
inventories. Among other things, the financing enabled GPS to increase its revenues from the sale of hand sanitizers as discussed
below under "Description of GPS" which in turn increased the valuation of GPS used by MYHI in its purchase of GPS.
Description of GPS
GPS is a California based company engaged
in the formulation, manufacturing, branding, fulfillment and distribution of hemp-derived CBD products at its cGMP, FDA-registered
facility in Santa Ana, California. GPS's team of professionals includes physiologists, chemists, herbalists and botanists committed
to combining high-quality organic CBD with synergistic organic, raw herbs to produce pure, premium consumer products. All
products manufactured by GPS are tested at independent, third party laboratories to prove potency and purity.
GPS's continually expanding product
offering is sold directly to consumers online as well as through wholesale partners (both online and brick and mortar stores) under
its retail brand name, Zen Drops. The product offering includes tinctures, salves, gummies, transdermal patches and oral thin films.
However, GPS's primary focus is manufacturing
products for its white label clients nationwide. In this regard, GPS acts as a contract manufacturer. The labeling is with the
client company's logo and branding and sold through the client's channels to its customers.
The GPS product development team blends
organic raw herbs with CBD isolate and CBD distillate extracted from organically grown hemp to ensure safety, potency and purity.
Also, the graphic design team creates logos, labels and other marketing assets to assist its white-label clients, the objective
being to provide the client’s CBD brand with maximum visual impact in the market.
Once a white label client has approved
the custom formulation and branded art work developed by GPS, the client’s new CBD product goes into production at GPS’s
facility. All batches come with a certificate of analysis of the cannabinoid breakdown from a third-party testing facility. After
testing, the products are bottled, capped, sealed and labeled with the client’s custom labels. The entire order is then packed
and shipped to the white label client.
To meet
the demand created by the Coronavirus pandemic, GPS has expanded its operations to produce medical grade, alcohol-based hand sanitizer
- proven to be 99.9% effective against germs. Additional production and bottling equipment has been acquired to rapidly expand
GPS’s manufacturing capacity for this product line. The hand sanitizer line is formulated to include powerful botanical constituents
such as red thyme oil, which has exceptional antiviral, antimicrobial and antiseptic properties .
In accordance with FASB ASC 855-10, Subsequent Events, the Company
has analyzed its operations subsequent to March 31, 2020 to the date these consolidated financial statements were issued, and has
determined that it does not have any additional material subsequent events to disclose in these consolidated financial statements.