UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-Q

 

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

MOUNTAIN HIGH ACQUISITIONS CORP.

(Exact name of registrant as specified in its charter)

 

Colorado	333-175825	27-3515499
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of Incorporation)		Identification Number)
	6501 E. Greenway Pkwy., Suite 103-412 Scottsdale, AZ 85254
	(Address of principal executive offices)
	(303) 358-3840
	(Registrant’s Telephone Number)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑    No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑    No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Ruble 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐	Accelerated filer  ☐
Non-accelerated filer  ☐ (Do not check if a smaller reporting company)	Smaller reporting company  ☑

 

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

 

As of March 31, 2016, there were 33,418,934 shares of the registrant’s $0.0001 par value common stock issued and outstanding.

 

MOUNTAIN HIGH ACQUISITIONS CORP.

QUARTERLY REPORT

PERIOD ENDED SEPTEMBER 30, 2015

 

TABLE OF CONTENTS

 

			Page No.
		PART I - FINANCIAL INFORMATION
Item 1.		Financial Statements	3
Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.		Controls and Procedures	16
		PART II - OTHER INFORMATION
Item 1.		Legal Proceedings	17
Item1A.		Risk Factors	17
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.		Defaults Upon Senior Securities	17
Item 4.		Mine Safety Disclosures	17
Item 5.		Other Information	17
Item 6.		Exhibits	17
		Signatures	18

 

Special Note Regarding Forward-Looking Statements

 

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Mountain High Acquisitions Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

 

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "MYHI" refers to Mountain High Acquisitions Corp.

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

INDEX			F-1
Condensed Consolidated Balance Sheets as of  September 30, 2015 (Unaudited) and March 31, 2015			F-2
Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2015 and September 30, 2014 (Unaudited) and for the Six Months Ended September 30, 2015 and September 30, 2014 (Unaudited)			F-3
Condensed Consolidated Statements of Cash Flows for the Three Months  Ended September 30, 2015 and September 30, 2014 (Unaudited)			F-4
Notes to the Condensed Consolidated Financial Statements (Unaudited)			F-5

 

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED BALANCE SHEETS
		Unaudited				Audited
		September 30,				March 31,
		2015				2015
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	319			$	45
TOTAL CURRENT ASSETS			319				45
ADVANCES			—				50,000
INVENTORY			19,198				—
TOTAL ASSETS		$	19,517			$	50,045
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable		$	74,023			$	97,479
Accrued payroll			87,500				—
Notes payable			226,906				48,521
Advances from Related Parties			16,100				441,895
TOTAL CURRENT LIABILITIES			404,529				587,895
COMMITMENTS AND CONTINGENCIES			—				—
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.0001 par value; 250,000,000 shares authorized,
nil shares issued and outstanding			—				—
Common stock, $0.0001 par value; 250,000,000 shares authorized,
33,252,267 and 24,142,000 shares issued and outstanding respectively			3,325				2,414
Additional paid in capital			4,747,910				1,917,976
Accumulated (deficit)			(5,136,247	)			(2,458,240	)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)			(385,012	)			(537,850	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)		$	19,517			$	50,045
The accompanying notes are an integral part of these consolidated financial statements

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
AND FOR THE  SIX MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(UNAUDITED)
		Three Months Ended								Six Months Ended
		September 30								September 30
		2015				2014				2015				2014
Revenue		$	3,437			$	—			$	19,273			$	—
Cost of revenue			—				—				38				—
Gross profit			3,437				—				19,235				—
Selling, general and administrative expenses			75,152				35,490				274,508				1,333,491
Impairment			—				—				2,300,000				—
			75,152				35,490				2,574,508				1,333,491
(Loss) from operations			(71,715	)			(35,490	)			(2,555,273	)			(1,333,491	)
Other income (expense)			(1,826	)			—				(122,734	)			—
Net (loss) before discontinued operations		$	(73,541	)		$	(35,490	)		$	(2,678,007	)		$	(1,333,491	)
Loss on discontinued operations			—				(865,817	)			—				(893,457	)
Net income (loss)			(73,541	)			(901,307	)			(2,678,007	)			(2,226,948	)
Weighted average shares outstanding - basic and diluted			28,079,857				23,892,000				28,079,857				23,892,000
(Loss) per shares - basic and diluted discontinued  operations		$	—			$	(0.04	)		$	—			$	(0.04	)
(Loss) per shares - basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.10	)		$	(0.06	)
The accompanying notes are an integral part of these consolidated financial statements

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 2015 AND 2014
(UNAUDITED)
		September 30,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)		$	(2,678,007	)		$	(2,226,948	)
Adjustment to reconcile net loss to net
Cash used in operating activities:
Fair value of warrants issued for consulting services			—				1,257,000
Changes in:
Deposits for acquisitions			—				844,000
Impairment goodwill			2,300,000				—
Advances to Affiliate			50,000				—
Accounts payable			136				—
Extinguishment of Debt			53,040				—
Accrued liabilities			87,500				—
Related parties			(6,186	)			—
Inventory			(19,198	)			—
Current liabilities			117,897				52,409
Discontinued operations			—				39,387
Net cash used in operating activities			(94,818	)			(34,152	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of GreenLife			2,669				—
Disposition of Canna-Life			41,923				—
Net cash provided (used) by investing activities			44,592				—
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares			50,500				—
Proceeds from advances from stockholder			—				34,017
Net cash provided by financing activities			50,500				34,017
NET DECREASE IN CASH AND CASH EQUIVALENTS			274				(135	)
CASH AND CASH EQUIVALENTS
Beginning of the period			45				811
End of the period		$	319				676
Supplemental disclosures of cash flow information
Taxes paid		$	—			$	—
Interest paid		$	—			$	—
The accompanying notes are an integral part of these consolidated financial statements

 

Note 1 - Organization and Basis of Presentation

 

Organization and Line of Business

 

Mountain High Acquisitions Corp., formerly known as Wireless Attachments, Inc., (the “Company”) 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.

 

As a result of the reverse merger transactions described above the historical financial statements presented are those of Canna-Life, the operating entity. The Company is now engaged in the business to hold, develop and manage real property.

 

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 executed a Note Payable for $80,000 to Evolutions 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 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 with 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 three months ended June 30, 2015.

 

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 $2,678,007 and used cash for operations of $94,818 for the six months ended September 30, 2015 and has an accumulated deficit of $5,136,247 and a working capital deficit of $404,210 as of September 30, 2015. 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 Canna-Life and 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 six months ended September 30, 2015 of $2,300,000 and nil for the six months ended September 30, 2014.

 

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 and 2015.

 

The Company has no tax positions at September 30, 2015, 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 September 30, 2015, 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 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 stockholder at September 30, 2015 and March 31, 2015 was $16,100 and $441,895, respectively. The amount is unsecured, due upon demand and non-interest bearing.

 

Note 4 – Discontinued Operations

 

The Company had no activity for discontinued operations for the three months and six months ended September 30, 2015.

 

The Company had a loss from discontinued operations of $865,817 for the three months ended September 30, 2014 and $893,457 for the six months ended September 30, 2014. 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.

 

The Company issued 7,500,000 shares of common stock to its founder for $7,500 upon incorporation.

 

In connection with a private placement offering, in March 2014 the Company sold 604,000 units, each unit consisting of one share of the Company’s common stock and a warrant to purchase one share of the Company’s common stock. The warrants have an exercise price of $4.75 and expire on March 6, 2017.

 

In connection with a reverse merger transaction, the original stockholders of the Company retained 15,788,000 shares of common stock of which 6,500,000 of those shares were purchased by Mr. Smith concurrent with the closing of the transaction between the Company and Canna-Life (see Note 1).

 

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. These shares were issued on April 14, 2015.

 

During the three months ended September 30, 2015 the Company issued 336,667 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 three months ended June 30, 2015.

 

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 vest immediately and shall expire on April 3, 2016.

 

The fair value of the 300,000 warrants was determined to be $1,257,000, 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:

 

•

Dividend yield of 0%

•

Expected volatility of 215%

•

Risk-free interest rate of 0.24%

•

Expected life of 2.0 years

The following table 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, September 30, 2015				904,000			$	4.50				1.38
	Exercisable, September 30, 2015				904,000			$	4.50				1.38			$	—

 

The number and weighted average exercise prices of all warrants outstanding as of September 30, 2015, 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				0.61
	4.75				604,000				4.75				1.43
					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 $4,232,351, 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 six months ended September 30, 2015: 

 

Current taxes		$	—
Deferred taxes			1,005,652
Less: valuation allowance			(1,005,652	)
Net income tax provision		$	—

 

The Company’s effective tax rate differs from the high statutory rate for the period ended September 30, 2015, 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 June 30, 2015, the components of these temporary differences and the deferred tax asset were as follows: 

 

Deferred Tax assets:
Net operating loss carryforward		$	2,029,791
Less: valuation allowance			(2,029,791	)
Net deferred tax assets		$	—

 

Note 7 – Commitments and Contingencies

 

Master Property Purchase and Sale Agreement

 

On April 30, 2014, the Company entered into a Master Property Purchase and Sale Agreement (the “Agreement”) with Deep Blue Enterprises, LLC, a Colorado limited liability company that is the successor in interest to New Alternatives Consulting LLC (“Deep Blue”).  Subject to the terms and conditions of the Agreement, the Company was to acquire 100% of Deep Blue’s interests in three properties commonly known as the “Isabelle Property,” which is located in Lafayette, Boulder County, Colorado, the “Pueblo Property,” which is located in Avondale, Pueblo County, Colorado, and the “Madison St. Property,” which is located in Denver, Denver County, Colorado (collectively referred to herein as the “Properties”). As consideration for the acquisition of Deep Blue’s interests in the Properties, the Company was to pay to Deep Blue an aggregate of $12,500,000 which was to be payable in various installments over the next year. Effective August 2014, the Company let the Agreement with Deep Blue expire. The monies paid to Deep Blue during the due diligence period were unrecoverable from Deep Blue and written off as of September 30, 2014.

 

On September 12, 2014, the Company completed its due diligence on the purchase of 2.38 acres of property and related structures known as the Greenhorn property, located in Pueblo Colorado. The Company advanced $6,000.00 earnest money for the Greenhorn property through a related party. In November, 2014 the Company decided not to pursue the purchase of the Greenhorn property due economic changes in the market and expensed all costs related to the purchase, $7,000, to selling, general and administrative expenses.

 

Note 8 – Subsequent Events

 

The Company has determined that there are no subsequent events to report pertaining to the three months ended September 30, 2015.

 

 

ITEM 2.

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

 

FORWARD-LOOKING STATEMENTS

 

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

 

 

RESULTS OF OPERATIONS

 

Working Capital

		As of September 30, 2015
Total Current Assets		$	319
Total Current Liabilities			404,529
Working Capital (Deficit)		$	(404,210	)

 

Cash Flows

		Six months Ended September 30, 2015
Cash Flows from (used in) Operating Activities		$	(94,818	)
Cash Flows from (used in) Investing Activities			44,592
Cash Flows from (used in) Financing Activities			50,500
Net Increase (decrease) in Cash during period		$	274

 

Operating Revenues

 

During the three months ending September 30, 2015, the Company recorded sales of $3,437 compared to no revenue for the three months ended September 30, 2014. For the six months ending September 30, 2015 the Company recorded sales of $19,273 compared to no sales for the six months ended September 30, 2014. Cost of Revenue is a small percentage of revenue due to the acquisition of sample inventory when GreenLife was acquired. The samples were valued at $0.

 

Operating Expenses and Net Loss

 

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014

 

The net loss for the three month period ended September 30, 2015 was $73,541, compared to a loss of $901,307 for the three months ended September 30, 2014.

 

The loss for the three months ended September 30, 2015 consisted primarily of $30,000 for accrued payroll, $4,313 for legal and accounting expenses and $16,650 for contract labor.

 

The net loss for the three months ended September 30, 2014 was $901,307, consisting of $35,490 for legal fees, consulting fees and travel expenses related to due diligence procedures and $865,817 for the loss on discontinued operations.

 

Six Months Ended September 30, 2015 Compared to Six Months Ended September 30, 2014

 

The net loss for the six months ended September 30, 2015 was $2,678,007, compared to a loss of $2,226,948 for the six months ended September 30, 2014.

 

The loss for the six months ended September 30, 2015 consisted of the impairment of Goodwill incurred from the purchase of GreenLife of $2,300,000, $87,500 for accrued payroll related costs, $59,621 for legal and accounting and $43,063 for contract labor. Other Income (Expense) was for a gain on the sale of Canna-Life of $48,473, a loss on the acquisition of GreenLife of $27,029 and loss on the rescission of the Freedom Seed and Feed transaction of $88,145 and a loss on the extinguishment of debt of $53,040 and interest expense on notes payable of $2,992.

 

The net loss for the six months ended September 30, 2014 was $2,226,948 consisting of $1,257,000 for the issuance of warrants, $119,948 for legal fees, consulting fees and travel expenses related to due diligence procedures for the purchase of new properties and a loss on discontinued operations of $893,457.

 

 

Liquidity and Capital Resources

 

At September 30, 2015, the Company’s cash balance and total assets were $319 and $19,517, respectively.

 

At September 30, 2015, the Company had total liabilities of $404,529, consisting of $74,023 in accounts payable, $226,906 in notes payable, accrued payroll of $87,500 and $16,100 in advances from a related party.  

 

As at September 30, 2015, the Company had a working capital deficit of $404,210.    

 

Cashflow used in Operating Activities

 

During the six month period ended September 30, 2015, the Company used $94,818 of cash for operating activities compared to cash used for operating activities of $34,152 for the six months ended September 30, 2014. Cash used for operations for the six months ended September 30, 2015 was due to an operating loss of $2,678,007 and the acquisition of $19,198 of inventory, offset by $2,300,000 for Goodwill impairment, the conversion of the advances of $50,000, extinguishment of debt of $53,040, accrued payroll of $87,500 and an increase in current liabilities of 117,897. Cash used in operations for the six months ended September 30, 2014 was the result of a net loss of $2,226,948, offset by the non-cash expense of $1,257,000 for the fair valuation of warrants issued for consulting services, changes in current liabilities of $91,796 and discontinued operations of $844,000.

 

Cashflow used in Investing Activities

 

During the six month period ended September 30, 2015, the Company acquired GreenLife Botanix for a net increase in cashflow of $2,669 and sold Canna-Life for a net gain of $41,923. There were no investing activities in the six months ended September 30, 2014

 

Cashflow from Financing Activities

 

During the six months ended September 30, 2015 the Company received cash from a private placement of restricted stock in the amount of $50,500. During the six month period ended September 30, 2014, the Company received $34,017 of cash from one stockholder.

 

Going Concern

 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Future Financings

 

We will continue to rely on equity sales of our common shares and advances from our majority stockholder in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.

 

Critical Accounting Policies

 

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Contractual Obligations

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Recently Issued Accounting Pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

ITEM 4.

Controls and Procedures

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

Based on an evaluation as of our most recent fiscal year end our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2015 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2015. Our management has concluded that, as of September 30, 2015, our internal control over financial reporting is effective.

 

Changes in Internal Control and Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with the evaluation we conducted of the effectiveness of our internal control over financial reporting as of September 30, 2015, that occurred during our first fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  

 

This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

PART II—OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM 1A.

RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

Quarterly Issuances:

 

None

 

Subsequent Issuances:

 

None

 

ITEM 3.

Defaults Upon Senior Securities

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.

OTHER INFORMATION

 

None.

 

ITEM 6.

EXHIBITS

 

Exhibit Number	Description of Exhibit	Filing
3.01	Articles of Incorporation	Filed with the SEC on July 27, 2011 as part of our Registration Statement on Form S-1.
3.01(a)	Amendment to Articles of Incorporation dated September 22, 2010	Filed with the SEC on October 7, 2011 as part of our Amended Registration Statement on Form S-1/A.
3.01(b)	Amendment to Articles of Incorporation dated March 6, 2014	Filed with the SEC on March 10, 2014 as part of our Current Report on Form 8-K.
3.02	Bylaws	Filed with the SEC on July 27, 2011 as part of our Registration Statement on Form S-1.
10.01	Share Exchange Agreement by and among the Company, the controlling stockholders of the Company, Canna-Life, and the shareholders of Canna-Life dated March 6, 2014	Filed with the SEC on March 10, 2014 as part of our Current Report on Form 8-K.
10.02	Addendum to Share Exchange Agreement dated March 18, 2014	Filed with the SEC on March 20, 2014 as part of our Current Report on Form 8-K.
10.03	Consulting Agreement by and between the Company and Dr. Bob Melamede dated April 3, 2014	Filed with the SEC on April 15, 2014 as part of our Current Report on Form 8-K.
10.04	Master Property Purchase and Sale Agreement between Canna-Life Corporation and Deep Blue Enterprises, LLC dated April 30, 2014	Filed with the SEC on May 5, 2014 as part of our Current Report on Form 8-K.
16.01	Letter from Comiskey & Company dated September21, 2013	Filed with the SEC on September25, 2013, as part of our Current Report on Form 8-K.
16.02	Letter from AJ Robbins, P.C. dated February 3, 2014	Filed with the SEC on February 4, 2014, as part of our Current Report on Form 8-K.
16.03	Letter from Haynie & Company, P.C. dated October 31, 2014	Filed with the SEC on October 31, 2014, as part of our Current Report on Form 8-K.
31.01	Certification of Principal Executive Officer Pursuant to Rule 13a-14	Filed herewith.
31.02	Certification of Principal Financial Officer Pursuant to Rule 13a-14	Filed herewith.
32.01	CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith.
101.INS*	XBRL Instance Document	Filed herewith.
101.SCH*	XBRL Taxonomy Extension Schema Document	Filed herewith.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document	Filed herewith.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith.

 

             (i) *Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

	MOUNTAIN HIGH ACQUISITIONS CORP.
Dated:  March 31, 2016	/s/ Alan Smith
	By: Alan Smith
	Its: President, CEO, Treasurer and Director

 

 

Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:

 

 

Dated:  March 31, 2016	/s/ Alan Smith
	Alan Smith
	Its: President, CEO, Treasurer and Director
Dated:  March 31, 2016	/s/ Richard G. Stifel
	Richard G. Stifel
	Its: CFO, Secretary and Director

 

 

18