UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]       Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period endedSeptember 30, 2017March 31, 2018

[ ]       Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to_______

Commission File Number:000-55609

Rocky Mountain High Brands, Inc.

(Exact name of registrant as specified in its charter)

Nevada90-0895673

(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

9101 LBJ Freeway, Suite 200, Dallas, TX 75243

(Address of principal executive offices)

(800)-260-9062

(Registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] 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.

[ ] Large accelerated filer [ ] Accelerated filer

[ ] Non-accelerated filer [X] Smaller reporting company

[X] ] Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  [ ]

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 896,655,5201,578,250,540 common shares as of November 13, 2017.May 15, 2018.

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 (§ 229.405 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 [X] No [ ]

TABLE OF CONTENTS

PART 1- FINANCIAL STATEMENTS

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Our financial statements included in this Form 10-Q are as follows:

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2017March 31, 2018 are not necessarily indicative of the results that can be expected for the full year.

Rocky Mountain High Brands, Inc.

Consolidated Balance Sheets

(Unaudited)

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements

Rocky Mountain High Brands, Inc.

Consolidated Statements of Operations

(Unaudited)

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.

Rocky Mountain High Brands, Inc.

Consolidated Balance SheetsStatements of Cash Flows

(Unaudited)

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements

Rocky Mountain High Brands, Inc.

Consolidated Statements of Operations

(Unaudited)

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.

Rocky Mountain High Brands, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.

Rocky Mountain High Brands, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

. 

NOTE 1 – General

Rocky Mountain High Brands, Inc. (“RMHB” or the “Company”) was incorporated under the laws of the State of Nevada. On July 17, 2014, the Company changed its name from Republic of Texas Brands Incorporated to Totally Hemp Crazy, Inc and on October 23, 2015, the Company changed its name to Rocky Mountain High Brands, Inc.

RMHB has developedcurrently operates through its parent company, four wholly-owned subsidiaries and one minority-owned subsidiary, which the Company controls. All subsidiaries are consolidated for financial reporting purposes.

RMHB is currently sellinga consumer goods company that specializes in developing, manufacturing, marketing, and distributing high-quality, health conscious, cannabidiol (“CBD”) and hemp- infused products that span various categories including beverage, food, fitness, skin care and more. RMHB also markets a naturally high alkaline spring water as part of our brand portfolio.

In March 2018, the marketplace aCompany launched the HEMPd brand with tinctures, gummies, water soluble drops, capsules, lotions, salves, and E-juice liquids and cartridges. The Company plans to introduce CBD-infused waters and additional HEMPd product offerings during the remainder of 2018. HEMPd products are marketed through the Company’s Rocky Mountain Hemp Company subsidiary. Customer shipments of HEMPd products began in late March 2018.

The Company continues to market its lineup of fivefour naturally flavored hemp-infused functional beverages (Citrus Energy, Black Tea, Mango Energy and Lemonade) and a low-calorie Coconut Lime Energy drink, as well as hemp-infused 2oz. energy shots throughMango Energy Shots and Mixed Berry Energy Shots. RMHB also bottles and distributes its nationwide distributor network and online. Effective June 30, 2016,naturally high alkaline spring water under the Company entered into a business alliance with Poafpybitty Family, LLC to launchname Eagle Spirit Spring Water, a line of purified, high-alkaline spring water sourced from Native American tribal land in Oklahoma. Water.

NOTE 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2017March 31, 2018 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended September 30, 2017March 31, 2018 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s form 10-K/A10-KT for the yeartransition period ended June 30,December 31, 2017 filed with the SEC on October 12, 2017.April 2, 2018.

Principles of Consolidation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The consolidated financial statements include the accounts of the Company, its wholly-owned and controlled subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

Cash

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

Revenue Recognition

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition.” It records revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided. Payments received prior to shipment of goods are recorded as deferred revenue.

Revenue Recognition 

In May 2014 the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry specific guidance. This new standard requires a company to recognize revenues when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The FASB subsequently issued the following amendments to ASU No. 2014-09 that have the same effective date and transition date: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations; ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing; ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients; and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The Company adopted these amendments with ASU 2014-09 (collectively, the new revenue standards).

The new revenue standards became effective for the Company on January 1, 2018, and were adopted using the modified retrospective method. The adoption of the new revenue standards as of January 1, 2018 did not change the Company’s revenue recognition as the majority of its revenues continue to be recognized when the customer takes control of its product. As the Company did not identify any accounting changes that impacted the amount of reported revenues with respect to its product revenues, no adjustment to retained earnings was required upon adoption.

Under the new revenue standards, the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. 

Accounts Receivable and Allowance for Doubtful Accounts Receivable

The Company has a policy of reserving for uncollectible accounts based on the best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable and perform ongoing credit evaluations of customers and maintain an allowance for potential bad debts if required.

It is determined whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases,weuse assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance as necessary.

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate the collectability of receivables.

Inventories

Inventories, which consist only of the Company’s finished products held for resale, are stated at the lower of cost, determined using the first-in, first-out, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to dispose of the product.

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations.

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for 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 on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

The derivative liability, which relates to the conversion feature of convertible debt and common stock warrants and options, is classified as a Level 3 liability, and is the only financial liability measure at fair value on a recurring basis.

The change in the Level 3 financial instrument is as follows:

The estimated fair value of the derivative instruments were valued using the Black-Scholes option pricing model, using the following assumptions as of September 30, 2017:March 31, 2018:

EstimateEstimated Dividends			None
Expected Volatility			127.3%162.6%
Risk-FreeRisk Free Interest Rate			1.06%1.723%
Expected Termterm			.1-1.8 .1 to 4.5 years

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

Capitalized Software

Direct costs related to software development, including coding, website application development, infrastructure development and graphics development, are capitalized and included in other assets. Amortization is provided for on a straight-line basis over the useful life of the software. Costs related to planning, content development, and operating and maintaining software are expensed as incurred.

Impairment of Long-Lived Assets

The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flow and recognizes an impairment loss when the estimated undiscounted future cash flow expected to result from the use of the asset plus the net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, it reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. No impairment charges were recorded during the three months ended September 30, 2017March 31, 2018 and September 30, 2016.2017.

Share-based Payments

Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented.

The Company issued restricted stock to consultants and employees for various services. Cost for these transactions are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities.” Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

Preferred Stock

We apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, we classified our preferred shares in stockholders’ equity. Our preferred shares do not feature any redemption rights within the holders’ control or conditional redemption features not within our control. Accordingly, unless otherwise noted, all issuances of preferred stock are presented as a component of consolidated shareholders’ deficit.

Advertising

Advertising and marketing expenses are charged to operations as incurred.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has no material uncertain tax positions.

NOTE 3 – Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a shareholders’ deficit of $6,446,224$985,464 and an accumulated deficit of $25,469,361$33,994,478 as of September 30, 2017,March 31, 2018 and has generated operating losses since inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue raising capital.

On October 12, 2017, the Company executedentered into an Equity Financing Agreement (“EFA”) with GHS Investments, LLC (“GHS”). Under the agreement,, which provides for GHS has committed to purchase up $12 millionto $12,000,000 of the Company’s common stock over a 24-month period at a 20% discount off the market price, as defined in the agreement. The agreement contains certain restrictions on the timing of the stock purchases and requires the Company to file a registration statement with the Securities and Exchange Commission (“SEC”) to register the common shares issuable under the agreement. In conjunction with the Equity Financing Agreement, the Company entered into a $250,000 secured convertible promissory note with a term of nine months and bearing interest at 10%. The note is convertible to common shares based on a formula with a discount tocontractually agreed upon market price. On November 2, 2017,discount. In February 2018 the Company entered into a second $250,000 secured convertible promissory note with similar terms after filing a registration statement on Form S-1 withbegan sales of common stock to GHS under the SEC on November 1, 2017 to register 300,000,000 shares at $.02 per share for a total offering of $6 million. The Company expects to fund its operational and investing needs throughEFA. Management believes the EFA over the next two years.will provide sufficient cash flows until cash flows from operations become consistently positive.

NOTE 4 – Inventory

As of September 30, 2017March 31, 2018 and June 30,December 31, 2017, inventory consisted of the following:

NOTE 5 – Prepaid Expenses and Other Current Assets

As of September 30, 2017March 31, 2018 and June 30,December 31, 2017, prepaid expenses and other current assets were as follows:

NOTE 6 – Property and Equipment

As of September 30, 2017March 31, 2018 and June 30,December 31, 2017, property and equipment were as follows:

For the three months ended September 30,March 31, 2018 and 2017, and September 30, 2016, depreciation expense was $4,584$4,681 and $11,659,$7,257, respectively.

NOTE 7 – Accounts Payable and Accrued Liabilities

As of March 31, 2018 and December 31, 2017, accounts payable and accrued liabilities consisted of the following:

NOTE 78 – Convertible Notes Payable

As of September 30, 2017March 31, 2018 and June 30,December 31, 2017, the Company’s convertible notes payable were as follows:

For the three months ended September 30,March 31, 2018 and 2017, and September 30, 2016, interest expense on these notes, including amortization of the discount, was $124,584$375,545 and $29,089,$36,744, respectively.

The Company has determined that the conversion feature embedded in certain of the notes referred to above that contain a potential variable conversion amount constitutes a derivative which has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt. The excess of the derivative value over the face amount of the note is recorded immediately to interest expense at inception. The Company recorded $101,587no interest expense for the three months ended March 31, 2018 and 2017, respectively, relating to the excess of derivative value over the face amount of convertible notes payable.

The Company recorded $2,432,909 and $0 of interest expense for the three months ended September 30,March 31, 2018 and 2017, and 2016, respectively, at the inception of thecertain convertible notes payable relating to the excess of derivative valuethe beneficial conversion feature over the face amount of the notes.related convertible notes payable.

NOTE 89 – Note Payable-OtherNotes Payable

As of March 31, 2018 and 2017, the Company’s notes payable were as follows:

On September 1, 2016, the Company purchased used office furniture and equipment from its landlord. The Company executed a note payable in the amount of $40,122 at an interest rate of 0% and with monthly payments of $1,115.$1,114. The Company imputed interest on the note and recorded a discounted note balance of $36,634 on September 1, 2016. The term of the note is three years. The balance on the note was $23,164 and $26,130 on September

On November 30, 2017 the Company amended two notes payable to GHS in the aggregate principal amount of $500,000. The notes, which were originally made on October 12 and June 30,November 2, 2017 respectively. and included conversion prices at a 20% discount off market price, as defined in the agreements. The amendments removed the conversion features in the notes. Upon amendment, the Company recorded a loss on extinguishment of these notes of $15,256. As of December 31, 2017 the notes, which were previously included in Convertible Notes Payable are included in Notes Payable. On January 9, 2018 the notes were again amended to reinstate the conversion feature. These notes are included in Convertible Notes Payable as of March 31, 2018.

For the three months ended September 30,March 31, 2018 and 2017, and September 30, 2016, interest expense on this notethese notes was $377$631 and $183,$629, respectively.

NOTE 910 – Related Party Convertible Notes Payable

As of September 30, 2017March 31, 2018 and June 30, 2017, the Company’s related party convertible notes payable were as follows:

For the three months ended September 30,March 31, 2018 and 2017, and 2016, interest expense on these notes, including amortization of the discount, was $191,826

$8,043 and $82,934,$216,653, respectively.

The Company has determined that the conversion feature embedded in certain of the notes referred to above that contain a potential variable conversion amount constitutes a derivative which has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt. The excess of the derivative value over the face amount of the note is recorded immediately to interest expense at inception. The Company recorded no interest expense for the three months ended September 30,March 31, 2018 and 2017, and 2016, respectively, at the inception of the notes relating to the excess of derivative value over the face of the notes.

NOTE 1011 – Shareholders’ Deficit

Common Stock

As of September 30, 2017 and June 30, 2017March 31, 2018 the Company has 950,000,0004,000,000,000 shares of common stock authorized. On October 31, 2017 the authorization was increased to 4,000,000,000.

During the three months ended September 30, 2017March 31, 2018 the Company issued 6,740,928349,573,488 shares of common stock, including 6,240,928168,805,244 shares for convertible notes payable conversions of $498,784, 135,149,014 shares for cash of $1,293,600, 29,096,402 shares for option exercises and 500,00016,522,828 shares for cash.services rendered with a value of $202,833.

On July 14, 2017 the Board of Directors increased the authorized shares in the Rocky Mountain High Brands, Inc. 2017 Incentive Plan to 65,000,000.

Preferred Stock

The Company has 20,000,000 shares of preferred stock authorized as of September 30, 2017,March 31, 2018, of which 10,000,00012,789,474 are specifically designated to a series of preferred stock and 10,000,0007,210,526 remain undesignated.

Series A Preferred Stock

The Company hashad 1,000,000 shares of Series A Preferred Stock authorizeddesignated and outstanding as of September 30, 2017March 31, 2018 and June 30,December 31, 2017. LSW Holdings, LLC (“LSW”), is the holder of these shares is our controlling shareholder.shares. Lily Li, who was the Company’s Executive Vice President until April 5, 2018, is the Managing Member of LSW and, in that capacity, has the authority to direct voting and investment decisions with regard to its holdings in the company. See Note 16 – Subsequent Events.

On July 5, 2017, the Company amended the Certificate of Designation for our Series A Preferred stock. The amendment changed the conversion ratio of our Series A Preferred stock from 1,200 shares of common stock for every share of Series A Preferred stock to 100 shares of common stock for every share of Series A Preferred stock. The amendment was approved by the Company’s Board of Directors and LSW, the holder of our Series A Preferred Stock.

On July 24, 2017, the Company’s Board of Directors approved an amendment to the Certificate of Designation for the Series A Preferred Stock that changed the voting rights back to 400 votes from 1,200 for every share of Series A Preferred Stock.

Series B Preferred Stock

The Company has 5,000,0007,000,000 shares of Series B Preferred Stock authorized,designated, of which none arewere outstanding as of September 30, 2017March 31, 2018 and June 30,December 31, 2017.

Series C Preferred Stock

The Company has 2,000,000 shares of Series C Preferred Stock authorized,designated, of which 1,107,607 arenone were outstanding as of September 30, 2017March 31, 2018 and June 30,December 31, 2017. The shares areSeries C Preferred Stock is 12% interest bearing, cumulative, exchangeable, non-voting, convertible preferred stock of the Company. Each Series C Preferred share is convertible to 50 shares of common stock.

The redemption value of the Series C Preferred stock has been reclassified to current liabilities in accordance with the agreement executed between the Company and the holder of the shares.

Series D Preferred Stock

The Company has 2,000,000 shares of Series D Preferred Stock authorized,designated, of which none arewere outstanding as of September 30, 2017March 31, 2018 and June 30,December 31, 2017. Series D Preferred Stock is a non-voting, non-interest bearing convertible preferred stock. Each Series D preferred share is convertible to 100 shares of common stock.

Series E Preferred Stock

On September 19, 2017, the Board of Directors approved a new Series E Preferred Stock. Holders of Series E Preferred Stock are entitled to cast 2,000 votes per share of Series E Preferred Stock on any proposal to increase our authorized capital stock, with no other voting rights. Series E Preferred Stock is convertible to common stock on a 1:1 basis. On the same day, the Board granted our Chairman 789,474 shares of Series E Preferred stock as payment for his deferred compensation. On October 31, 2017, Mr. Welch converted his 789,474 shares of Series E Preferred Stock to 789,474 shares of common stock. As of March 31, 2018 and December 31, 2017 there were no shares outstanding.

Warrants

During the three months ended September 30, 2017March 31, 2018 the Company granted no common stock warrants, none were exercised, and 1,187,500none were cancelled.

Options

Options

During the three months ended September 30, 2017March 31, 2018 the Company granted 650,000no options to purchase common stock. No optionsstock, 23,607,193 were exercised, orand none were cancelled.

NOTE 11–12– Concentrations

During the three months ended September 30,March 31, 2018 the Company’s two largest customers accounted for approximately 28% and 12% of sales, respectively. During the three months ended March 31, 2017, the Company’s two largest customers accounted for approximately 18%25% and 7% of sales, respectively. During the three months ended September 30, 2016, the Company’s two largest customers accounted for approximately 81% and 3%14% of sales, respectively.

NOTE 1213 – Income Taxes

The reconciliation of income tax benefit at the U.S. statutory rate of(21% for the three months ended March 31, 2018 and 34% for the three months ended March 31, 2017) to the Company’s effective rate for the periods presented is as follows:

The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of September 30, 2017March 31, 2018 and June 30,December 31, 2017 are as follows:

As of September 30, 2017,March 31, 2018 the Company had approximately $13,900,000$17,000,000 of federal and state net operating loss carryovers (“NOLs”), which begin to expire in 2027.2028. Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. We have estimated our provision for income taxes in accordance with the Tax Act and guidance available as of the date of this filing but have kept the full valuation allowance. As a result the Company has recorded no income tax expense during the three months ended March 31, 2018.

The Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 34% to 21%, resulting in a deferred tax expense of approximately $2,000,000 in 2017 that is still fully valued against as of March 31, 2018. This expense is attributable to the Company being in a net deferred tax asset position at the time of remeasurement. The company maintains a full valuation allowance.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The deferred tax expense recorded in connection with the remeasurement of deferred tax assets is a provisional amount and a reasonable estimate at December 31, 2017 based upon the best information currently available. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2018 when the analysis is complete. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.

NOTE 1314 – Commitments

Office LeaseLeases

The Company has a three-year lease for corporate office space. The lease commenced on September 1, 2016 with monthly payments of $7,715 in year one, $7,972 in year two and $8,229 in year three. The lease is being accounted for on a straight-line basis over its term.

On January 18, 2018, the RMHC entered into a 12-month office use agreement for office space in Denver, Colorado. Monthly payments are $91.

Other Leases

The Company rents storage space from various third parties on a month-to-month basis.

NOTE 1415 – Legal Proceedings

Please refer to our AnnualTransition Report on Form 10-K/A10-KT filed October 12, 2017April 2, 2018 for information regarding our pending legal proceedings. The following represents an update to the items disclosed in that filing:

Claims Against Donna Rayburn

On October 6, 2017 the Company executed a Release and Settlement Agreement with Donna Rayburn regarding the litigation between the Company and Ms. Rayburn. Ms. Rayburn released the Company from all claims and returned 10 million stock warrants.

Arbitration Claim of Roy J. Meadows Against Rocky Mountain High Brands, Inc. (RMHB) dated February 24, 2016

On October 6, 2017 the Company executed a Release and Settlement Agreement with Roy Meadows (“Meadows Settlement”) regarding the litigation between the parties. As part of the Meadows Settlement, the Company agreed to issue 45 million shares of the Company’s common stock, including 20 million shares issued immediately and 25 million shares to be issued upon the effectiveness of the Company’s increased common share authorization. Mr. Meadows is subject to a “leak-out” formula whereby he is limited in the number of shares he can re-sell if the stock price is below $.06 per share. In connection with this settlement, the Company agreed to an exchange of the Preferred C Stock back to the originating note payable in accordance with the terms of the Exchange Agreement. Mr. Meadows assigned the note to GHS Investments, LLC, (“GHS”) an outside investment group, in exchange for consideration paid to him by GHS. Mr. Meadows released the Company from all claims and returned 55,096,825 stock warrants.

192ndJudicial District Court of Dallas County Texas, filed February 16, 2017, DC-17-02058. Rocky Mountain High Brands, Inc. v. Dewmar International BMC, Inc.

RMHB filed suit against Dewmar for breach of contract and for an accounting. RMHB is in the process of obtaining a default judgment against Dewmar for its failure to file an answer to the suit.

134thJudicial District Court of Dallas County, Texas, filed April 28, 2017. Rocky Mountain High Brands, Inc. v Lyonpride Music, LLC, United States District Court Northern District of Texas, 3:18-cv-00045-C

RMHBThe Company filed suit against Lyonpride Music, LLC (“Lyonpride”) for fraud and for declaratory relief with respect to a contract between the parties. RMHB seeksThe Company is seeking monetary damages against said Defendant.Lyonpride. The case has been referred to binding arbitration.

134thJudicial District Court of Dallas County, Texas. Filed June 26, 2017. Rocky Mountain High Brands, Inc. v Statewide Beverage Company, Inc.

RMHB has filed suit for breach of contract, common law fraud and declaratory relief.

Los Angeles Superior Court, BC669367, filed July 24, 2017. Statewide Beverage Company, Inc. v. Rocky Mountain High Brands, Inc.

Statewide Beverage Company, Inc. filed a breach of contract claim, dealing withand the same fact issuesCompany has filed counterclaims for breach of contract, common law fraud and declaratory relief. The case is currently in the above case of RMHB v Statewide. RMHB still has not been served in this case.discovery phase.

Dallas County Texas, Case Number DC-17-15441 filed November 8, 2017. Rocky Mountain High Brands, Inc. f/k/a Republic of Texas Brands, Inc. Plaintiff, vs. Jerry Grisaffi, Joe Radcliffe, LSW Holdings, LLC, Lily Li, Epic Group One, LLC, Kenneth Radcliffe, Dennis Radcliffe, Phil Uhrik, Michael Radcliffe, Frank Izzo, Morgan Albright, John Garrison, BB Winks, LLC, Crackerjack Classic, LLC, and Universal Consulting, LLC.

RMHBThe Company is seeking the return of Series A Preferred stockStock and common stock issued to certain defendants or later obtained by certain other defendants for little or no consideration paid to the Company. RMHBThe Company alleges the Company’samong other things that RMHB’s former Chairman of the Board breached his fiduciary duty to the Company by issuing these shares to himself and others.

RMHB is also seeking to void the Indemnification and Release Agreement between the parties that was executed in June 2017. The Company is awaiting response from discovery requests at the current time. A trial date has been set for December 2018.

NOTE 1516 – AcquisitionsSubsequent Events

Rocky Mountain High Water Company LLC

In July 2016,Between April 1, 2018 and May 14, 2018, the Company entered into a business alliance with Poafpybitty Family, LLC to launch Eagle Spirit Spring Water, a line of purified, high-alkaline spring water sourced from Native American tribal land in Oklahoma. The agreement calls for the Company to pay a royalty on each gallon of water collected at the spring. Production of filtered spring water filled bottles commenced in August 2016 and sales began in October 2016.

In consideration for the 20-year water and surface rights, and a related 10-year renewal option, the Company paid Poafpybitty Family, LLC cash payments of $22,500 and issued a warrant for 500,00068,970,595 shares of the Company’s common stock, exercisable at $.03 per share over a three-year period beginning July 27, 2016.

The agreement grants the Company an exclusive right to develop land adjacent to the springof which 62,848,940 were for commercial purposes as agreed to by both parties. Additionally, the Company has agreed to grow hempcash, 4,000,000 were for experimental or commercial purposes on the land within three years.debt conversions, and 2,121,655 were for services rendered.

On November 12, 2016,April 5, 2018 the Company terminated its Executive Vice President, Lily Li.

On May 11, 2018 Jerry Grisaffi, the Company’s former Chairman of the Board, filed a countersuit in the Company’s lawsuit against Mr. Grisaffi and others, which is described in Note 15 – Legal Proceedings. In the counter suit, Mr. Grisaffi seeks repayment, in cash or stock, of two convertible notes payable plus accrued interest. Those are the same two notes the Company is seeking to void in its lawsuit against Mr Grisaffi. Mr. Grisaffi is also attempting to enforce his indemnification agreement with the Poafpybitty Family was amended to giveCompany, which the Company a controlling voting interest of 75% of RMHW, while the Poafpybitty Family received 51% of the equity interest. The amended agreement is being accounted for as a step-acquisition, with the resulting goodwill of $49,911 includedalso seeking to void in other assets.its suit. The Company is obtaining an outside valuation ofhas not yet responded to the rights to use the land and obtain the water described in the agreement. Beginning November 12, 2016, the operations of RMHW are consolidated in the financial statements of RMHB.countersuit.

NOTE 16 – Subsequent Events

Between October 1, 2017 and November 13, 2017 the Company issued 103,389,474 shares of common stock, of which 52,000,000 were for debt conversions, 45,000,000 were for a legal settlement, and 6,389,474 were for services rendered.

On October 6, 2017 the Company executed a Release and Settlement Agreement with Roy Meadows (“Meadows Settlement”) regarding the litigation between the parties. As part of the Meadows Settlement, the Company agreed to issue 45 million shares of the Company’s common stock, including 20 million shares issued immediately and 25 million shares to be issued upon the effectiveness of the Company’s increased common share authorization. Mr. Meadows is subject to a “leak-out” formula whereby he is limited in the number of shares he can re-sell if the stock price is below $.06 per share. In connection with this settlement, the Company agreed to an exchange of the Preferred C Stock back to the originating note payable in accordance with the terms of the Exchange Agreement. Mr. Meadows assigned the note to GHS Investments, LLC, (“GHS”) an outside investment group, in exchange for consideration paid to him by GHS. Also on October 6, 2017 the Company exchanged that note for a new secured convertible promissory note to GHS with a principal of $1,107,607, a term of nine months, and interest of 10% annually. The new note is convertible to common shares based on a formula with a discount to market price. Mr. Meadows released the Company from all claims and returned 55,096,825 stock warrants.

The Company also executed a Release and Settlement Agreement with Donna Rayburn (“Rayburn Settlement”) regarding the litigation between the Company and Ms. Rayburn. Ms. Rayburn released the Company from all claims and returned 10 million stock warrants.

On October 12, 2017 the Company executed an Equity Financing Agreement (“EFA”) with GHS. Under the agreement, GHS has committed to purchase up $12 million of the Company’s common stock over a 24-month period at a 20% discount off the market price, as defined in the agreement. The agreement contains certain restrictions on the timing of the stock purchases and requires the Company to file a registration statement with the Securities and Exchange Commission (“SEC”) to register the common shares issuable under the agreement. In conjunction with the EFA, the Company entered into a $250,000 secured convertible promissory note with a term of nine months and bearing interest at 10%. The note is convertible to common shares based on a formula with a discount to market price. On November 2, 2017, the Company entered into a second $250,000 secured convertible promissory note with similar terms after filing a registration statement on Form S-1 with the SEC on November 1, 2017. The Company expects to fund its operational and investing needs through the EFA over the next two years.

In October 2017, the Company hired a Chief Commercialization Officer and a Director of Marketing.

On October 31, 2017, the Company increased its common stock share authorization to 4,000,000,000.

Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results ofOperations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”“may,”“will,” “would,”“willbe,”“willcontinue,”“willlikely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Company Overview

Rocky Mountain High Brands, Inc. is a Nevada corporation. RMHB currently operates through its parent company, three wholly-owned subsidiaries and one minority-owned subsidiary, which the Company controls. All subsidiaries are consolidated for financial reporting purposes:

RMHB is a consumer goods company specializingthat specializes in brand development ofdeveloping, manufacturing, marketing, and distributing high-quality, health conscious, cannabidiol (“CBD”) and hemp-infused products that span various categories including beverage, food, fitness, skin care and beverage products.more. RMHB also markets a naturally high alkaline spring water as part of our brand portfolio.

In March 2018, the Company launched the HEMPd brand with 16 products including tinctures, gummies, water soluble drops, capsules, lotions, salves, and E-juice liquids and cartridges. The Company currently markets aplans to introduce CBD-infused waters and additional HEMPd product offerings during the remainder of 2018. HEMPd products are marketed through the Company’s Rocky Mountain Hemp Company subsidiary. Customer shipments of HEMPd products began in late March 2018.

The Company continues to market its lineup of fivefour naturally flavored hemp-infused functional beverages (Citrus Energy, Black Tea, Mango Energy and Lemonade) and a low-calorie hemp-infused Coconut Lime Energy drink. The Company also offersdrink, as well as hemp-infused 2oz. Mango Energy Shots and Mixed Berry Energy Shots. In August 2016 the Company launched Eagle Spirit Spring Water, a line ofRMHB also bottles and distributes its naturally high alkaline spring water.

After developingwater under the beverage products, RMHB completed its first production run in February of 2015. Since then RMHB has had production runs for hemp-infused beverages totaling over 3,900,000 cans. Each beverage contains approximately 50mg (our first production run) to 100mg of hempseed extract and all-natural ingredients. The hemp-infused products are shelf stable (no refrigeration necessary) with a shelf life oftwo years.

During fiscal year 2017, the Company also produced energy shots and Relaxation Brownies.name Eagle Spirit Spring Water.

In September 2016, the CompanyEagle Spirit bottled its first high alkaline spring water, Eagle Spirit Spring Water and has completed several production runs since, including approximately 110,000 16.9 oz. bottles and 1,800 2.64-gallon (10-liter) “Bag in a Box.”

In March and April 2017, the Company completed additional production runs of its more popular hemp-infused beverages, Citrus Energy and Mango Energy.

In August 2017, the Company sold its remaining inventory of Smarterita wine-based beverages. There are currently no plans to resume production of this alcoholic beverage.

Current Product Offerings

Under its Rocky Mountain High Brands name, the Company currently markets a lineup of five hemp-infused 16 oz. beverages including:

The Company is also currently marketing a two-flavor lineup of energy shots.

The Company plans to sell its remaining inventory of these products during the first half of fiscal year 2018. In order to execute this plan, the Company will offer larger discounts to distributors and retailers and higher commissions to its broker network, likely resulting in lower gross profit margins for the first and second quarter of 2018.

Our Eagle Spirit Land and Water Company currently markets its naturally high alkaline spring water in two sizes: a 16.9 oz. plastic bottle sold in cases of 24 and a 2.64-gallon (10-liter) Bag in a Box.

Strategic Update and Planned Product Offerings

The Company has recently updated its long-term strategic plan. Management’s goal is to become the category leader in the hemp-infused beverage market, a segment of the functional beverage market. Functional beverages, or beverages that convey health benefits, are the fastest growing segment within the beverage market.

The Company is developing four newly reformulated, sugar-free, non-energy, hemp-infused beverage flavors. In addition to the new formulas, the beverages will feature 12 oz. cans, an all-new look and will replace all current hemp-infused beverage offerings. Two of the four beverage flavors will be carbonated. Flavor choices will be similar to past offerings. Management plans to begin production on the new beverages in February 2018. Marketing will focus on the health benefits of hemp, including Omega-3 and Omega-6 fatty acids, amino acids, and natural, plant-based fiber.

The Company is also reviewing its other product offerings, but there are no immediate plans to produce additional Relaxation Brownies or energy shots.

In October 2017 the Company hired a Chief Commercialization Officer and a Director of Marketing.

Results of Operations

Three Months Ended September 30, 2017March 31, 2018 Compared to Three Months Ended September 30, 2016March 31, 2017

Financial Summary

The Company’s sales for the three months ended September 30, 2017March 31, 2018 were $41,002$50,909 compared to $295,587$117,814 for the three months ended September 30, 2016.March 31, 2017.

The Company’s net incomeloss for the three months ended September 30, 2017March 31, 2018 was $685,272$2,332,064 compared to a net loss of $730,277$4,469,320 for the three months ended September 30, 2016.March 31, 2017.

Sales

For the three months ended September 30, 2017March 31, 2018 sales were $41,002$50,909 compared to $295,587$117,814 for the three months ended September 30, 2016,March 31, 2017, a decrease of $254,585$66,905 or 86%57%. The sales decrease was driven by the lack of funding for inventory production, direct sales support, and advertising and promotionsell-off of the Company’s current hemp-infused beverage and energy shots inventories in anticipation of the launch of our new HEMPd brand products. Selling prices per case were lower in 2018 than in 2017. In the three months ended September 30, 2017March 31, 2018 sales consisted of approximately 57%53% online sales, 37% distributor sales, 33%and 10% direct to retailer sales, and 10% online sales compared to 95%74% distributor sales and 5%26% online sales for the three months ended September 30, 2016.March 31, 2017.

Cost of Sales

For the three months ended September 30, 2017,March 31, 2018, cost of sales was $43,800$66,990 or 107%132% of sales, compared to $90,020$56,835 or 31%48% of sales for the three months ended September 30, 2016, a decreaseMarch 31, 2017, an increase of $46,220$10,155 or 51%18%. Cost of sales decreased in 2017 due to the decrease in sales, but increased as a percentage of sales increased in 20172018 as a result of lower netthe decreased selling prices as the Company sells its remainingof our hemp-infused beveragebeverages and shots, inventories.which in turn reduced margins.

Operating Expenses

For the three months ended September 30, 2017,March 31, 2018, operating expenses were $661,069$1,150,340 or 1,612%2,260% of sales, compared to $1,182,089$1,932,809 or 400%1,641% of sales for the three months ended September 30, 2016.March 31, 2017. Areas in which the Company experienced material changes in operating expenses are discussed below.

General and Administrative

For the three months ended September 30, 2017,March 31, 2018, general and administrative expenses were $604,751$1,080,518 or 1,475%2,123% of sales, compared to $864,549

$1,248,202 or 293%1,059% of sales for the three months ended September 30, 2016.March 31, 2017, a decrease of $167,684 or 13%. The decrease in general and administrative expenses in 20172018 was primarily driven by management’s efforts to reduce expenses as a result of the Company’s lack of funding. Thedecreases in legal fees and bad debt expense, partially offset by an increase in general and administrative expensescorporate salaries as a percentagethe Company prepared for the introduction of sales is due to lower sales in 2017.its HEMPd brand.

Advertising and Marketing

For the three months ended September 30, 2017,March 31, 2018, advertising and marketing expenses were $56,318$69,822 or 137% of sales, compared to $317,540

$684,607 or 107%581% of sales for the three months ended September 30, 2016.March 31, 2017, a decrease of $614,785 or 90%. The decrease in advertising and marketing expenses in 20172018 was primarily driven by management’s efforts to reduce expenses as a result of the Company’s lack of funding. Also, in 2016 the Company incurred significant promotional expenses relatedmanagement’s decision to a large sale to a distributor. There was no comparable sale in 2017. The increase indecrease advertising and marketing expenses asexpenditures on the Company’s hemp-infused beverages and energy shots in preparation for the launch of the new HEMPd brand. In 2017 the Company executed a percentage of sales is duelarge marketing contract with a third party promoter and issued stock to lower salesa distributor in 2017.exchange for promotional activity.

Other (Income) Expense

Interest Expense

For the three months ended September 30, 2017,March 31, 2018, interest expense was $464,110,$2,817,128, compared to $234,519$133,051 for the three months ended September 30, 2016.March 31, 2017, an increase of $2,684,077. The increase in interest expense, which includes the amortization of the discount on convertible debt, excess of the derivative liability resulting from the excess conversion feature on certain convertible notes payable, and, in 2017, interest on Series C Preferred Stock, was due to increased debt activity in 2018.

Loss on Extinguishment of Debt

For the three months ended March 31, 2018, the Company recorded a net loss on extinguishment of debt of $196,500 related to the settlement of convertible debt. There was no gain or loss on extinguishment of debt for the three months ended March 31, 2017.

Gain (Loss) on Change in Fair Value of Derivative Liability

For the three months ended September 30, 2017,March 31, 2018, the Company recorded a gain on the change in fair value of derivative liability of $1,813,249

$1,847,985 compared to a gainloss of $480,764$2,464,439 for the three months ended September 30, 2016.March 31, 2017. In both periods,2018 the gain resulted from the decrease in the price of the Company’s underlying stock, which is used to calculate the fair value of the related derivative liability, from the beginning of the period to the end of the period. In 2017 the loss resulted from the increase in the price of the Company’s underlying stock from the beginning of the period to the end of the period.

Income Taxes

For the three months ended September 30,March 31, 2018 and March 31, 2017, and September 30, 2016, the Company recorded no income tax provision due to a full valuation allowance provided on deferred tax assets resulting from net operating losses.

Liquidity and Capital Resources

As of September 30, 2017,March 31, 2018, the Company had current assets of $898,721,$1,199,510, consisting of cash of $19,266,$580,946, accounts receivable (net) of $1,657,$7,803, inventory of $195,363,$71,160, and prepaid expenses and other current assets of $682,435.$539,601. As of September 30, 2017, we March 31, 2018,the Companyhad current liabilities of $7,490,931,$2,269,837, consisting of accounts payable and accrued liabilities of $547,137,$431,937, related party convertible notes payable (net) of $438,832,$179,000, convertible notes payable (net) of $782,099, other$749,208, notes payable of $23,164, redemption value of Series C Preferred Stock of $1,661,424,$46,895, accrued interest of $447,974,$43,253, and derivative liability of $3,590,301.$819,544. During the three months ended September 30, 2017,March 31, 2018, the Company received proceeds of $8,500$1,470,000 related to private offering stock salesthe sale of 500,000135,149,014 shares of common stock.stock under its Equity Financing Agreement with GHS Investments, LLC.

Cash flows from operating activities

Net cash used in operating activities during the three months ended September 30, 2017March 31, 2018 was $396,930$997,793 compared to $566,056$811,961 during the three months ended September 30, 2016.March 31, 2017. The change was principally driven by management’s effortsgreater use of stock-based payments to conserve cash during 2017.vendors and employees in 2017 compared to 2018.

Cash flows from investing activities

Net cash used in investing activities during the three months ended September 30, 2017March 31, 2018 was $1,013$32,270 compared to $41,409$8,809 during the three months ended September 30, 2016.March 31, 2017. In 20172018 the Company madeinvested in software development for its new HEMPd.com website and acquired $1,050 in equipment compared to $8,809 in equipment acquisitions of $1,013 compared to 2016 when the Company made investments in Rocky Mountain High Water Company of $39,774 and net equipment acquisitions of $1,635.2017.

Cash flows from financing activities

Net cash provided by financing activities during the three months ended September 30, 2017March 31, 2018 was $325,534$1,594,026 compared to $505,210$666,167 during the three months ended September 30, 2016.March 31, 2017. In 2017,2018, proceeds of $220,000$300,000 were from the issuance of convertible notes payable compared to $220,000$0 in 2016. The2017. In 2017 the Company also issued $100,000 inreceived proceeds of $110,000 from the issuance of related party convertible notes payable. There were no proceeds from the issuance of related party convertible notes payable in the three months ended September 30, 2017 compared to $35,000 in 2016.2018. In 20162018 the Company issued a note payable for $35,960repaid $175,974 on convertible and related to the purchase of office furniture and equipment. Repayments on that noteparty convertible notes payable. There were $2,966 during the three months ended September 30,no repayments in 2017. In 20172018 there were proceeds of $8,500$1,470,000 from the issuance of common stock compared to $214,250$558,882 in 2016.2017.

Outstanding Material Indebtedness

Recently, the Company’s operations have been funded primarily through the private sales of common stock or the issuance of convertible promissory notes, which are convertible to common stock at fixed prices ranging from $0.01 to $0.024, at discounts to market price ranging from 20% to 50%, or combinations thereof. As of September 30, 2017March 31, 2018 the Company had total notes payable outstanding of $1,244,095$975,103 (net of discount).

On July 28, 2017,weexecuted an agreement with Eagle Equities, LLC (“Eagle Equities”) to sell up to $500,000 in convertible notes to Eagle Equities. On that same date,weissued a 12-month, convertible note bearing interest at 8% to Eagle Equities in exchange for funding $220,000, net of fees. The note is convertible to common stock at a 45% discount to market based on a look-back formula. The Company has the ability to obtain additional funding of $220,000 by issuing another convertible note to Eagle Equities eight months from the date of the original note.

On October 12, 2017 the Company executed an Equity Financing Agreement (“EFA”) with GHS Investments LLC (“GHS”). Under the agreement, GHS has committed to purchase up $12 million of the Company’s common stock over a 24-month period at a 20% discount off the market price, as defined in the agreement. The agreement contains certain restrictions on the timing of the stock purchases and requires the Company to file a registration statement with the Securities and Exchange Commission to register the common shares issuable under the agreement. In conjunction with the Equity Financing Agreement, the Company entered into a $250,000 secured convertible promissory note with a term of nine months and bearing interest at 10%. The note is convertible to common shares based on a formula with a discount to market price. On November 2, 2017, the Company entered into a second $250,000 secured convertible promissory note with similar terms after filing a registration statement on Form S-1 on November 11, 2017. The Company expects to fund its operational and investing needs through the EFA over the next two years.

Future Liquidity Requirements

The Company’s anticipated operational shortfall for the next twelve months is $1,200,000. For thenext two years,we anticipate cash needs to be between $2,000,000 and $5,000,000. We plan to utilize the EFA executed with GHS in October 2017 to raise the required capital.

Off Balance Sheet Arrangements

As of September 30, 2017, there are no off balance sheet arrangements.

Going Concern

We have experienced recurring losses from operations and to date, we have not been able to produce sufficient sales to become cash flow positive and profitable on a consistent basis. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. For these reasons, our auditor has raised substantial doubt about our ability to continue as a going concern.

On October 12, 2017 the Company executed an Equity Financing Agreement (“EFA”) with GHS Investments LLC (“GHS”). Under the agreement, GHS has committed to purchase up $12 million of the Company’s common stock over a 24-month period at a 20% discount off the market price, as defined in the agreement. The agreement contains certain restrictions on the timing of the stock purchases and requires the Company to file a registration statement with the Securities and Exchange Commission (“SEC”) to register the common shares issuable under the agreement. In conjunction with the Equity Financing Agreement, the Company entered into a $250,000 secured convertible promissory note with a term of nine months and bearing interest at 10%. The note is convertible to common shares based on a formula with a discount to market price. On November 2,1, 2017, the Company entered intofiled a second $250,000 secured convertible promissory note with similar terms after filing a registration statementRegistration Statement on Form S-1 withto register 300,000,000 common shares to be resold by GHS. On February 9, 2018 the Company received a Notice of Effectiveness from the SEC on November 1, 2017.an amended Form S-1 registering 250,000,000 common shares. The Company began stock sales to GHS on February 13, 2018. Since February 13, 2018 the Company has sold 197,997,954 common shares to GHS under this EFA. The Company plans to file another Form S-1 in May 2018 to register additional shares. The Company expects to fund its operational and investing needs through the EFA over the next two years.

Critical Accounting PoliciesFuture Liquidity Requirements

In December 2001,During the SEC requested that all registrants list their most “critical accounting polices”next twelve months we expect our operational cash shortfall to be approximately $850,000 to $1,500,000, depending on the timing, development, advertising, and marketing needs related to our future product rollouts. Our cash needs will be higher in the Management Discussion and Analysis. The SEC indicated thatsecond quarter of 2018, we expect our outside cash needs to lessen with a “critical accounting policy” is one which is both important tonet operational positive cash flow in the portrayalfourth quarter of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.2018. We do not believe that the following accounting policies currently fit this definition:

Use of Estimates

The preparation of the financial statements in conformityexpect our operational cash needs will be met by our current funding arrangements with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

Cash

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.GHS.

Revenue Recognition

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition.” It records revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided. Payments received prior to shipment of goods are recorded as deferred revenue.

Accounts Receivable and Allowance for Doubtful Accounts Receivable

The Company has a policy of reserving for uncollectible accounts based on the best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable and perform ongoing credit evaluations of customers and maintain an allowance for potential bad debts if required.

It is determined whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases,weuse assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance as necessary. 

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for 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 on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

The derivative liability, which relates to the conversion feature of convertible debt and common stock warrants and options, is classified as a Level 3 liability, and is the only financial liability measure at fair value on a recurring basis.

The change in the Level 3 financial instrument is as follows:

The estimated fair value of the derivative instruments were valued using the Black-Scholes option pricing model, using the following assumptions as of September 30, 2017:

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.Off Balance Sheet Arrangements

ImpairmentAs of Long-Lived Assets

The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flow and recognizes an impairment loss when the estimated undiscounted future cash flow expected to result from the use of the asset plus the net proceeds expected from disposition of the asset, if any,March 31, 2018, there are less than the carrying value of the asset. When the Company identifies an impairment, it reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. No impairment charges were recorded during the three months ended September 30, 2017 and September 30, 2016.no off-balance sheet arrangements.

Share-Based Payments

Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented.Going Concern

The Company issued restrictedhas a shareholders’ deficit of $985,464 and an accumulated deficit of $33,994,478 as of March 31, 2018 and has generated operating losses since inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue raising capital.

On October 12, 2017, the Company entered into an Equity Financing Agreement (“EFA”) with GHS Investments, LLC (“GHS”), which provides for GHS to purchase up to $12,000,000 of the Company’s common stock over a 24-month period based on a contractually agreed upon market discount. In February 2018 the Company began sales of common stock to consultants and employees for various services. Cost for these transactions are measured atGHS under the fair value ofEFA. Management believes the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.EFA will provide sufficient cash flows until cash flows from operations become consistently positive.

Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”. Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

Preferred Stock

We apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which includes preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, we classified our preferred shares in stockholders’ equity. Our preferred shares do not feature any redemption rights within the holders’ control or conditional redemption features not within our control. Accordingly, unless otherwise noted, all issuances of preferred stock are presented as a component of consolidated shareholders’ deficit.

Advertising

Advertising and marketing expenses are charged to operations as incurred.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has no material uncertain tax positions.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2017.March 31, 2018. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Michael Welch, and our Chief Financial Officer, Jens Mielke. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2017,March 31, 2018 our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the yearthree months ended June 30, 2017.March 31, 2018.

Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

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 are 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 Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion oftwoor more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to our AnnualTransition Report on Form 10-K/A10-KT filed October 12, 2017April 2, 2018 for information regarding our pending legal proceedings. The following represents an update to the items disclosed in that filing:

Claims Against Donna Rayburn

On October 6, 2017 the Company executed a Release and Settlement Agreement with Donna Rayburn regarding the litigation between the Company and Ms. Rayburn. Ms. Rayburn released the Company from all claims and returned 10 million stock warrants.

Arbitration Claim of Roy J. Meadows Against Rocky Mountain High Brands, Inc. (RMHB) dated February 24, 2016

On October 6, 2017 the Company executed a Release and Settlement Agreement with Roy Meadows (“Meadows Settlement”) regarding the litigation between the parties. As part of the Meadows Settlement, the Company agreed to issue 45 million shares of the Company’s common stock, including 20 million shares issued immediately and 25 million shares to be issued upon the effectiveness of the Company’s increased common share authorization. Mr. Meadows is subject to a “leak-out” formula whereby he is limited in the number of shares he can re-sell if the stock price is below $.06 per share. In connection with this settlement, the Company agreed to an exchange of the Preferred C Stock back to the originating note payable in accordance with the terms of the Exchange Agreement. Mr. Meadows assigned the note to GHS Investments, LLC, (“GHS”) an outside investment group, in exchange for consideration paid to him by GHS. Mr. Meadows released the Company from all claims and returned 55,096,825 stock warrants.

192nd Judicial District Court of Dallas County Texas, filed February 16, 201, DC-17-02058

Rocky Mountain High Brands, Inc. v. Dewmar International BMC, Inc. RMHB filed suit against Dewmar for breach of contract and for an accounting. RMHB is in the process of obtaining a default judgment against Dewmar for its failure to file an answer to the suit.

134thJudicial District Court of Dallas County, Texas, filed April 28, 2017. Rocky Mountain High Brands, Inc. v Lyonpride Music, LLC, United States District Court Northern District of Texas, 3:18-cv-00045-C

RMHBThe Company filed suit against Lyonpride Music, LLC (“Lyonpride”) for fraud and for declaratory relief with respect to a contract between the parties. RMHB seeksThe Company is seeking monetary damages against said Defendant.Lyonpride. The case has been referred to binding arbitration.

134thJudicial District Court of Dallas County, Texas. Filed June 26, 2017 Rocky Mountain High Brands, Inc. v Statewide Beverage Company, Inc.

RMHB has filed suit for breach of contract, common law fraud and declaratory relief.

Los Angeles Superior Court, BC669367, filed July 24, 2017. Statewide Beverage Company, Inc. v. Rocky Mountain High Brands, Inc.

Statewide Beverage Company, Inc. filed a breach of contract claim, dealing withand the same fact issuesCompany has filed counterclaims for breach of contract, common law fraud and declaratory relief. The case is currently in the above case of RMHB v Statewide. RMHB still has not been served in this case.discovery phase.

Dallas County Texas, Case Number DC-17-15441 filed November 8, 2017. Rocky Mountain High Brands, Inc. f/k/a Republic of Texas Brands, Inc. Plaintiff, vs. Jerry Grisaffi, Joe Radcliffe, LSW Holdings, LLC, Lily Li, Epic Group One, LLC, Kenneth Radcliffe, Dennis Radcliffe, Phil Uhrik, Michael Radcliffe, Frank Izzo, Morgan Albright, John Garrison, BB Winks, LLC, Crackerjack Classic, LLC, and Universal Consulting, LLC.

RMHBThe Company is seeking the return of Series A Preferred stockStock and common stock issued to certain defendants or later obtained by certain other defendants for little or no consideration paid to the Company. RMHBThe Company alleges the Company’samong other things that RMHB’s former Chairman of the Board breached his fiduciary duty to the Company by issuing these shares to himself and others.

RMHB is also seeking to void the Indemnification and Release Agreement between the parties that was executed in June 2017. The Company is awaiting response from discovery requests at the current time. A trial date has been set for December 2018.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following equity securities were issued between March 30, 2018 and May 15, 2018:

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following equity securities were issued between January 1, 2017 and November 13, 2017:

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Rocky Mountain High Brands, Inc.

Date: November 14, 2017May 17, 2018

By:/s/ Michael Welch

Michael Welch

Title: Chairman of the Board of Directors, President, and Chief Executive Officer

Date: November 14, 2017May 17, 2018

By:/s/ Jens Mielke

Jens Mielke

Title: Chief Financial Officer