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 ended June 30, 2020 | ||
[ ] | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 | |
For the transition period from March 31, 2020, to June 30, 2020. |
Commission File Number: 000-55609
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period endedSeptember 30, 2017
[ ] 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.)
Nevada | 90-0895673 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
9101 LBJ Freeway,1000 Shiloh Rd., Suite 200, Dallas,Plano, TX 7524375074
(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)
Securities registered pursuant to Section 12(b) of the Act: None.
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: 896,655,520284,451,184 common shares as of November 13, 2017.June 30, 2020.
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 [ ]
1 |
TABLE OF CONTENTS
PART 1- FINANCIAL STATEMENTS
TABLE OF CONTENTS PART 1- FINANCIAL STATEMENTS
| ||
Item 1: | Consolidated Financial Statements | |
Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | Pages 4 - 8 |
Item 3: | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4: | Controls and Procedures | |
PART II – OTHER INFORMATION
| ||
Item 1: | Legal Proceedings | |
Item 1A: | Risk Factors | |
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3: | Defaults Upon Senior Securities | |
Item 4: | Mine Safety Disclosures | |
Item 5: | Other Information | |
Item 6: | Exhibits |
2 |
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Our financial statements included in this Form 10-Q are as follows:
F-1 | Consolidated Balance Sheets as of |
F-2 | Consolidated Statements of Operations for the three months ended |
F-3 | Consolidated Statements of Cash Flows for the three months ended |
F-4 | Consolidated Statements of Shareholders’ Deficit for the three months ended June 30, 2020 (unaudited) and 2019; |
F-5 | Notes to Consolidated Financial Statements (unaudited). |
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 SeptemberJune 30, 20172020, are not necessarily indicative of the results that can be expected for the full year.
3 |
Rocky Mountain High Brands, Inc.
Consolidated Balance Sheets
(Unaudited)
June 30, 2020 | December 31,2019 | ||||||||||||
September 30, 2017 | June 30, 2017 | ||||||||||||
CURRENT ASSETS | |||||||||||||
Cash | $ | 19,266 | $ | 91,675 | $ | 32,240 | $ | 53,606 | |||||
Accounts Receivable, net of allowance of $221,268 and $138,373 | 1,657 | 63,268 | |||||||||||
Restricted Cash | 14,474 | ||||||||||||
Accounts Receivable, net of allowance of $0 and $0, respectively | 18,162 | ||||||||||||
Inventory | 195,363 | 224,695 | 150,039 | 238,035 | |||||||||
Prepaid Expenses and Other Current Assets | 682,435 | 774,338 | 1,105,610 | 174,726 | |||||||||
TOTAL CURRENT ASSETS | 898,721 | 1,153,976 | 1,287,889 | 499,003 | |||||||||
Property and Equipment, net | 43,730 | 48,133 | 2,136,017 | 19,342 | |||||||||
Intangible Assets | 1,408,367 | 13,008 | |||||||||||
Other Assets | 102,256 | 77,256 | 11,593 | 14,606 | |||||||||
TOTAL ASSETS | $ | 1,044,707 | $ | 1,279,365 | $ | 4,843,866 | $ | 545,959 | |||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | |||||||||||||
CURRENT LIABILITIES | |||||||||||||
Accounts Payable and Accrued Liabilities | $ | 547,137 | $ | 441,190 | $ | 1,262,740 | $ | 1,143,217 | |||||
Related Party Convertible Notes Payable, net of debt discount | 438,832 | 266,247 | |||||||||||
Related Party Notes Payable | — | — | |||||||||||
Other Payables & Stock related payables | 3,003,912 | 30,406 | |||||||||||
Convertible Notes Payable, net of debt discount | 782,099 | 733,253 | 971,142 | 1,008,950 | |||||||||
Note Payable-Other | 23,164 | 26,130 | |||||||||||
Redemption Value of Series C Preferred Stock | 1,661,424 | 1,661,424 | |||||||||||
Notes Payable | 180,100 | 30,000 | |||||||||||
Accrued Interest | 447,974 | 382,820 | 115,737 | 96,134 | |||||||||
Deferred Revenue | 510,696 | 445,925 | |||||||||||
Derivative Liability | 3,590,301 | 5,072,579 | 771,391 | 413,678 | |||||||||
TOTAL CURRENT LIABILITIES | 7,490,931 | 8,583,643 | |||||||||||
TOTAL LIABILITIES | 6,815,787 | 3,168,310 | |||||||||||
SHAREHOLDERS' DEFICIT | |||||||||||||
Preferred Stock - Series A - Par Value of $.001 1,000,000 shares authorized; 1,000,000 shares issued and outstanding as of September 30, 2017 and June 30, 2017 | 1,000 | 1,000 | |||||||||||
Preferred Stock - Series B - Par Value of $.001 5,000,000 shares authorized; no shares issued and outstanding | — | — | |||||||||||
Preferred Stock - Series C - Par Value of $.001 2,000,000 shares authorized; 1,107,607 shares outstanding (classified as a liability as of September 30, 2017 and June 30, 2017) | — | — | |||||||||||
Preferred Stock - Series D - Par Value of $.001 2,000,000 shares authorized; no shares issued and outstanding | — | — | |||||||||||
Preferred Stock - Series E - Par Value of $.001 789,474 shares authorized, issued, and outstanding as of September 30, 2017; No shares authorized, issued, and outstanding as of June 30, 2017 | 789 | — | |||||||||||
Common Stock - Par Value of $.001 950,000,000 shares authorized; 793,266,046 shares issued and outstanding as of September 30, 2017; 786,525,118 shares issued and outstanding as of June 30, 2017 | 793,266 | 786,525 | |||||||||||
Additional Paid In Capital | 18,228,082 | 18,062,830 | |||||||||||
Preferred Stock - Series A - Par Value of $.001; 1,000,000 shares designated; No shares issued and outstanding as of June 30, 2020 | — | — | |||||||||||
Preferred Stock - Series B - Par Value of $.001; 7,000,000 shares designated; No shares issued and outstanding as of June 30, 2020 | — | — | |||||||||||
Preferred Stock - Series C - Par Value of $.001; 2,000,000 shares designated; No shares issued and outstanding as of June 30, 2020 | — | — | |||||||||||
Preferred Stock - Series D - Par Value of $.001; 2,000,000 shares designated; No shares issued and outstanding as of June 30, 2020 | — | — | |||||||||||
Preferred Stock - Series E - Par Value of $.001; 789,474 shares designated; No shares issued and outstanding as of June 30, 2020 | — | — | |||||||||||
Preferred Stock - Series F - Par Value of $.001; 1,680 shares designated; No shares issued and outstanding as of June 30, 2020 | — | ||||||||||||
Preferred Stock - Series G - Par Value of $.001; 10,000 shares designated; no shares issued and outstanding as of June 30, 2020, and 10 shares issued and outstanding as of December 31, 2019 | — | 10 | |||||||||||
Preferred Stock - Series H - Par Value of $.001; 5,000 shares designated; No shares issued and outstanding as of June 30, 2020, | — | ||||||||||||
Common Stock - Par Value of $.001; 1,000,000,000 shares authorized; 284,451,184 shares issued and outstanding as of June 30, 2020; 137,915,630 shares issued and outstanding as of December 31, 2019 | 284,451 | 137,915 | |||||||||||
Additional Paid-In Capital | 40,482,224 | 37,528,496 | |||||||||||
Accumulated Deficit | (25,469,361) | (26,154,633) | (42,734,969 | ) | (40,285,145) | ||||||||
Total Rocky Mountain High Brands Shareholders' Deficit | (1,968,294 | ) | (2,618,724) | ||||||||||
Noncontrolling Interests | (3,627 | ) | (3,627) | ||||||||||
TOTAL SHAREHOLDERS' DEFICIT | (6,446,224) | (7,304,278) | (1,971,921 | ) | (2,622,351 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | 1,044,707 | $ | 1,279,365 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 4,843,866 | $ | 545,959 |
The Accompanying Notes are an Integral Part of the Consolidated Financial Statements
F-1 |
Rocky Mountain High Brands, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended | Three Months Ended | Six Months Ended | ||||||||||||||||||
September 30, 2017 | September 30, 2016 | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||||||
Sales | $ | 41,002 | $ | 295,587 | $ | 669,489 | $ | 36,572 | $ | 782,932 | $ | 113,001 | ||||||||
Cost of Sales | 43,800 | 90,020 | 742,258 | 38,854 | 959,338 | 114,584 | ||||||||||||||
Gross Profit (Loss) | (2,798 | ) | 205,567 | (72,769 | ) | (2,282) | (176,406) | (1,583) | ||||||||||||
Operating Expenses | ||||||||||||||||||||
General and Administrative | 604,751 | 864,549 | 1,248,234 | 696,846 | 1,832,303 | 1,653,486 | ||||||||||||||
Advertising and Marketing | 56,318 | 317,540 | 24,442 | 158,985 | 69,104 | 368,375 | ||||||||||||||
Total Operating Expenses | 661,069 | 1,182,089 | (1,272,676 | ) | 858,831 | (1,901,407) | 2,021,861 | |||||||||||||
Loss from Operations | (663,867 | ) | (976,522) | (1,345,445 | ) | (858,113) | (2,007,813) | (2,023,444) | ||||||||||||
Other (Income)/Expenses: | ||||||||||||||||||||
Interest Expense | 464,110 | 234,519 | 108,863 | 339,368 | 260,418 | 632,754 | ||||||||||||||
Gain on Change in Fair Value of Derivative Liability | (1,813,249 | ) | (480,764) | |||||||||||||||||
Total Other (Income) Expenses: | (1,349,139 | ) | (246,245) | |||||||||||||||||
Loss on Extinguishment of Debt | — | (689,991) | 74,164 | (230,840) | ||||||||||||||||
(Gain) Loss on Change in Fair Value of Derivative Liability | 15,894 | (390,520) | 37,429 | 195,063 | ||||||||||||||||
Total Other (Income) Expenses | 124,757 | (190,943) | 369,011 | (93,014) | ||||||||||||||||
Income (Loss) Before Income Tax Provision | 685,272 | (730,277) | ||||||||||||||||||
Loss Before Income Tax Provision | (1,470,202 | ) | (667,170) | (2,815,835) | (1,930,430) | |||||||||||||||
Income Tax Provision | — | — | — | — | — | — | ||||||||||||||
Net Income (Loss) | $ | 685,272 | $ | (730,277) | ||||||||||||||||
Net Loss | $ | (1,470,202 | ) | $ | (667,170) | $ | (2,815,835) | $ | (1,930,430) | |||||||||||
Net Income (Loss) per Common Share - Basic and Diluted | $ | 0.00 | $ | (0.00) | ||||||||||||||||
Net Loss Attributable to Noncontrolling Interests | — | — | — | — | ||||||||||||||||
Net Loss Attributable to Rocky Mountain High Brands | $ | (1,470,202 | ) | $ | (667,170) | (2,815,835 | (1,930,430) | |||||||||||||
Net Loss per Common Share - Basic and Diluted | $ | (0.01 | )) | $ | (0.01) | $ | (0.01) | $ | (0.02 | |||||||||||
Weighted Average Shares Outstanding | 788,609,275 | 594,531,676 | 1,569,700 | 106,076,970 | 142,225,592 | 102,934 |
The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.Statements
F-2 |
Rocky Mountain High Brands, Inc.
Consolidated Statements of Cash Flows
(Unaudited) |
(Unaudited)
Three Months Ended | |||||||
September 30, 2017 | September 30, 2016 | ||||||
Operating Activities: | |||||||
Net Income (Loss) | $ | 685,272 | $ | (730,277) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Stock-based compensation | 82,824 | 49,704 | |||||
Warrants and options issued for services rendered | 23,074 | 191,969 | |||||
Non-cash interest expense | 464,110 | 233,826 | |||||
Gain on change in fair value of derivative liability | (1,813,249 | ) | (480,764) | ||||
Loss on disposal of property and equipment | 832 | — | |||||
Bad debt expense | 64,042 | — | |||||
Depreciation expense | 4,584 | 11,659 | |||||
Changes in operating assets and liabilities: | — | — | |||||
Accounts Receivable | (2,431 | ) | (244,503) | ||||
Inventory | 29,332 | 30,738 | |||||
Prepaid expenses | 24,079 | 84,540 | |||||
Other assets | (25,000 | ) | (18,430) | ||||
Accounts payable and accrued liabilities | 65,601 | 305,482 | |||||
NET CASH USED IN OPERATING ACTIVITIES | (396,930 | ) | (566,056) | ||||
Investing Activities: | |||||||
Investment in Rocky Mountain High Water Company | — | (39,774) | |||||
Acquisition of property and equipment | (1,013 | ) | (36,635) | ||||
Disposal of property and equipment | — | 35,000 | |||||
NET CASH USED IN INVESTING ACTIVITIES | (1,013 | ) | (41,409) | ||||
Financing Activities: | |||||||
Proceeds from issuance of convertible notes | 220,000 | 220,000 | |||||
Proceeds from issuance of related party notes | 100,000 | 35,000 | |||||
Proceeds from issuance of note payable-other | — | 35,960 | |||||
Repayment of note payable-other | (2,966 | ) | — | ||||
Proceeds from issuance of common stock | 8,500 | 214,250 | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 325,534 | 505,210 | |||||
INCREASE (DECREASE) IN CASH | (72,409 | ) | (102,255) | ||||
CASH - BEGINNING OF PERIOD | 91,675 | 102,255 | |||||
CASH - END OF PERIOD | $ | 19,266 | $ | — | |||
Supplemental disclosure of non-cash financing and investing activities: | |||||||
Common stock issued for conversion of debt | $ | 126,207 | $ | 41,800 | |||
Debt and accrued interest converted for common stock | $ | 85,234 | $ | — | |||
Derivative liability incurred for debt discount | $ | 443,482 | $ | — | |||
Derivative liability relieved upon conversion of related debt | $ | 52,542 | $ | — | |||
Beneficial conversion feature recognized | $ | — | $ | 128,500 |
Six Months Ended | |||||||
June 30, 2020 | June 30, 2019 | ||||||
Operating Activities: | |||||||
Net Loss | (1,470,202 | ) | 1,930,430 | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Stock-based compensation | 511,750 | 110,209 | |||||
Non-cash interest expense | — | 622,367 | |||||
Non-cash portion of gain on lawsuit judgement and legal settlement | — | (30,840) | |||||
(Gain) Loss on change in fair value of derivative liability | 357,713 | 195,063 | |||||
Loss on extinguishment of debt | — | (689,991) | |||||
Bad debt expense | — | 1,678 | |||||
Depreciation and amortization expense | 20,482 | 14,773 | |||||
Changes in operating assets and liabilities: | — | — | |||||
Accounts receivable | 6,738 | 12,029 | |||||
Inventory | — | (228,905) | |||||
Prepaid expenses and other current assets | (966,692 | ) | (238,945) | ||||
Other assets | 13,058 | 49,432 | |||||
Accounts payable and accrued liabilities | (12,922 | ) | 68,188 | ||||
Other payables & Stock related payables | 3,003,912 | — | |||||
Deferred revenue | (223,267 | ) | — | ||||
NET CASH (USED) IN OPERATING ACTIVITIES | (1,301,422 | ) | 2,045,372 | ||||
Financing Activities: | |||||||
Investments in intangible assets, net | (1,397,960 | ) | — | ||||
Acquisition of property and equipment | (1,828,820 | ) | — | ||||
Disposal of property and equipment | — | ||||||
NET CASH PROVIDED BY INVESTING ACTIVITIES | (3,226,720 | ) | — | ||||
Financing Activities: | |||||||
Proceeds from mezzanine Financing | 367,500 | ||||||
Assumption of both notes | 1,007,000 | ||||||
Increase of notes payable | 573,382 | (6424) | |||||
Proceeds from issuance of common stock | 201,523 | 1,139,173 | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 1,781,905 | 1,500,249 | |||||
INCREASE (DECREASE) IN CASH | (154,675 | ) | (545,123) | ||||
CASH AND RESTRICTED CASH - BEGINNING OF PERIOD | 123,455 | 613,686 | |||||
CASH AND RESTRICTED CASH- END OF PERIOD | $ | 31,245 | $ | 68,563 | |||
Supplemental cash flow information: | |||||||
Cash paid for interest | $ | — | $ | 10,387 | |||
Cash paid for taxes | $ | — | $ | — | |||
Supplemental disclosure of non-cash financing and investing activities: | |||||||
Common stock issued for conversion of debt | $ | 9,976 | $ | 188,870 | |||
Debt and accrued interest converted for common stock | $ | — | $ | 271,189 | |||
Beneficial conversion feature recognized as debt discount | $ | — | $ | 367,500 |
The Accompanying Notes are an Integral Part of the Consolidated Financial Statements.Statements
F-3 |
Rocky Mountain High Brands, Inc.
Consolidated Statements of Shareholders' Deficit for the Six Months Ended June 30, 2020
(Unaudited)
Common Stock | Preferred Stock F | Preferred Stock G | Preferred Stock H | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | APIC | Accumulated Deficit | Total RMHB Shareholders' Deficit | Noncontrolling Interests | Total Equity/(Deficit) | |||||||||||||||||||||||||||||||||||||||
Balance - December 31, 2019 | 137,914,630 | $ | 137,915 | 130 | $ | — | 10,000 | $ | 10 | — | $ | — | $ | 37,528,496 | $ | (40,285,145 | ) | $ | (2,618,724 | ) | $ | (3,627 | ) | $ | (2,622,351) | ||||||||||||||||||||||||||
Shares issued for cash | — | — | 200 | — | — | — | 11 | — | 211,000 | — | 211,000 | — | 211,000 | ||||||||||||||||||||||||||||||||||||||
Shares issued for compensation | 802,700 | 803 | — | — | — | — | — | — | 15,251 | — | 16,054 | — | 16,054 | ||||||||||||||||||||||||||||||||||||||
Series G preferred stock shares converted to common shares | 500,000 | 500 | — | — | (10,000 | ) | (10 | ) | — | — | — | — | 490 | — | 490 | ||||||||||||||||||||||||||||||||||||
Shares issued upon conversion of convertible notes | 12,437,084 | 12,437 | — | — | — | — | — | — | 195,963 | — | 208,400 | — | 208,400 | ||||||||||||||||||||||||||||||||||||||
Shares issued for payment of related party payables | 4,895,286 | 4,895 | — | — | — | — | — | — | 93,010 | — | 97,905 | — | 97,905 | ||||||||||||||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2020 | — | — | — | — | — | — | — | — | — | (979,622 | ) | (979,622 | ) | — | (979,622) | ||||||||||||||||||||||||||||||||||||
Balance - March 31, 2020 | 156,549,700 | $ | 156,500 | — | $ | — | — | $ | — | — | $ | — | $ | 38,043,720 | $ | (41,264,767 | ) | (3,064,497 | ) | $ | (3,627) | $ | (3,068,124) | ||||||||||||||||||||||||||||
Stock issued for services | 150,000 | 150 | — | — | — | — | — | — | 3,075 | — | 3,225 | — | 3,225 | ||||||||||||||||||||||||||||||||||||||
Stock issued for Professional services | 600,000 | 600 | — | — | — | — | — | — | 15,000 | — | 15,600 | — | 15,600 | ||||||||||||||||||||||||||||||||||||||
Shares issued for compensation | 22,250,000 | 22,250 | — | — | — | — | — | — | 489,500 | — | 511,750 | — | 511,750 | ||||||||||||||||||||||||||||||||||||||
Business of Raw Pharma | 27,000,000 | 27,000 | 513,000 | — | 540,000 | — | 540,000 | ||||||||||||||||||||||||||||||||||||||||||||
Shares issued upon conversion of convertible notes | 9,976,484 | 9,976 | — | — | — | — | — | — | 89,004 | — | 98,980 | — | 98,980 | ||||||||||||||||||||||||||||||||||||||
Stock issued for Prepaid services | 50,000,000 | 50,000 | — | — | — | — | — | — | 950,000 | — | 1,000,000 | — | 1,000,000 | ||||||||||||||||||||||||||||||||||||||
Shares issued for legal settlement | 17,500,000 | 17,500 | — | — | — | — | — | — | 370,000 | — | 387,500 | — | 387,500 | ||||||||||||||||||||||||||||||||||||||
Stock issued for marketing | 425,000 | 425 | — | — | — | — | — | — | 8,925 | — | 9,350 | — | 9,350 | ||||||||||||||||||||||||||||||||||||||
Net loss for the three months ended June 30, 2020 | — | — | — | — | — | — | — | — | — | (1,470,202 | ) | (1,470,202 | ) | — | (1,470,202) | ||||||||||||||||||||||||||||||||||||
Balance - June 30, 2020 | 284,451,184 | $ | 284,451 | — | $ | — | — | $ | — | — | $ | — | $ | 40,482,224 | $ | (42,734,969 | ) | $ | (1,968,294 | ) | $ | (3,627) | $ | (1,971,921) |
Rocky Mountain High Brands, Inc.
Consolidated Statements of Shareholders' Deficit for the Six Months Ended June 30, 2019
(Unaudited)
Common Stock | Preferred Stock F | Preferred Stock G | Preferred Stock H | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | APIC | Accumulated Deficit | Total RMHB Shareholders' Deficit | Noncontrolling Interests | Total Equity/(Deficit) | |||||||||||||||||||||||||||||||||||||||
Balance - December 31, 2018 | 94,580,869 | $ | 94,581 | — | $ | — | — | $ | — | — | $ | — | $ | 34,221,215 | $ | (35,018,351 | ) | (702,555 | ) | $ | — | $ | (702,555) | ||||||||||||||||||||||||||||
Shares issued for cash | 7,813,337 | 7,813 | — | — | — | — | — | — | 1,009,233 | — | 1,017,046 | — | 1,017,046 | ||||||||||||||||||||||||||||||||||||||
Shares issued for compensation | 25,403 | 25 | — | — | — | — | — | — | 3,976 | — | 4,001 | — | 4,001 | ||||||||||||||||||||||||||||||||||||||
Shares issued upon conversion of convertible notes | 1,750,000 | 1,750 | — | — | — | — | — | — | 169,592 | — | 171,342 | — | 171,342 | ||||||||||||||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2019 | — | — | — | — | — | — | — | — | — | (1,263,260 | ) | (1,263,260 | ) | — | (1,263,260) | ||||||||||||||||||||||||||||||||||||
Balance - March 31, 2019 | 104,169,609 | $ | 104,170 | — | $ | — | — | $ | — | — | $ | — | $ | 35,404,015 | $ | (36,281,611 | ) | $ | (773,426 | ) | $ | — | $ | (773,426) | |||||||||||||||||||||||||||
Shares issued for cash | 2,490,932 | 2,491 | — | — | — | — | — | — | 119,636 | — | 122,127 | — | 122,127 | ||||||||||||||||||||||||||||||||||||||
Shares issued upon conversion of convertible notes | 2,315,980 | 2,316 | — | — | — | — | — | — | 15,213 | — | 17,529 | — | 17,529 | ||||||||||||||||||||||||||||||||||||||
Stock option forfeiture | — | — | — | — | — | — | — | — | 7,530 | — | 7,530 | — | 7,530 | ||||||||||||||||||||||||||||||||||||||
Beneficial conversion feature recognized on convertible notes payable | — | — | — | — | — | — | — | — | 367,500 | — | 367,500 | — | 367,500 | ||||||||||||||||||||||||||||||||||||||
Fractional shares issued as a result of the reverse stock split | 3,470 | 3 | — | — | — | — | — | — | (3 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Net loss for the three months ended June 30, 2019 | — | — | — | — | — | — | — | — | — | (667,170 | ) | (667,170 | ) | — | (667,170) | ||||||||||||||||||||||||||||||||||||
Balance - June 30, 2019 | 108,979,991 | $ | 108,980 | — | $ | — | — | $ | — | — | $ | — | $ | 35,913,891 | $ | (36,948,781 | ) | $ | (925,910 | ) | $ | — | $ | (925,910) |
The Accompanying Notes are an Integral Part of the Consolidated Financial Statements
F-4 |
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, three wholly owned subsidiaries, two majority-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 that specializes in the developing, manufacturing, marketing, and distributing high-quality, health conscious, hemp oil and hemp extract-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. All products comply with federal regulations on hemp products and contain 0.0% tetrahydrocannabinol (“THC”), the psychoactive constituent of cannabis. Recently, through a newly created subsidiary of RMHB, Rocky Mountain Productions, Inc. (“RMPI”), the Company acquired a bottling and canning facility and is currently sellingnow also in the marketplacebusiness of canning both its own beverages as well as canning beverages for other customers. Furthermore, as a result of equipment included in the acquisition of the facility, RMHB is also in the business of bottling hand sanitizer. Because of the demand resulting with the COVID-19 pandemic, RMHB anticipates continuing in the bottling of hand sanitizer for the foreseeable future.
In March 2018, the Company launched the HEMPd brand with gummies, water soluble drops, capsules, tinctures, lotions, and salves. The Company introduced four flavors of CBD-infused waters in 12 oz. cans in November 2018.
In July 2018, the Company acquired the assets of BFIT Brands, LLC and formed a new subsidiary, FitWhey Brands Inc. FitWhey marketed a line-up of five water-based protein drinks that include caffeine and B vitamins. In August 2019, the Company suspended the production of FitWhey products.
On June 12, 2019, the Company organized Sweet Rock, LLC (“Sweet Rock”), a 51% owned company, with Sweet Ally, Inc. Sweet Rock will manufacture and market CBD-infused chocolate, hard candies, and baked goods.
On April 29, 2020, the Company formed Rocky Mountain Productions, Inc. (“RMPI”), a wholly owned Nevada corporation. On April 30, 2020, RMPI acquired Raw Pharma, LLC (“Raw Pharma”) for approximately $1,971,200, as adjusted by the Global Settlement Agreement, November 12, 2020. The company financed the acquisition by assuming bank debt, collateralized by equipment issuing common stock and cash payments. The facility has the capability to can and bottle products, including 12 oz. regular and sleek cans, 16 oz. cans, shots, and bottles.
The following shows the allocation of the purchase price for Raw Pharma, LLC to acquired intangible assets, assumed liabilities and proforma goodwill:
Total Purchase Price | 1,971,200 | ||
Production Equipment | 1,448,020 | ||
Leasehold Improvements | 380,000 | ||
Total Proforma Goodwill | $ | 143,180 |
F-5 |
Effective April 30, 2020, the company’s subsidiary, Rocky Mountain Productions, Inc acquired all the assets relating and used in the acquired business for cash and 31,700,000 shares of the company’s common stock. The results of operations since April 30, 2020, are included in financial statement. The Company will report in the Annual Report, the balance sheet for comparison purposes as required by agreement with the Securities and Exchange Commission.
During early 2019, the Company continued to market its lineup of fivenaturally flavored hemp-infused beveragesfunctional beverages.
The Company also bottles and 2oz. energy shots throughdistributes 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,Water.
On April 22, 2019, the reverse split of the Company’s stock, at a lineratio of purified, high-alkaline spring water sourced from Native American tribal landone share for every 20 shares, was effective. All common stock share and per share amounts in Oklahoma. this document reflects this reverse split.
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 SeptemberJune 30, 20172020, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended SeptemberJune 30, 20172020, 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/AForm 10-K for the year ended June 30, 2017December 31, 2019, filed with the SEC on October 12, 2017.July 9, 2020.
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-ownedwholly 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.
Cash
The Company maintains cash balances at various financial institutions. At times, these balances may exceed federally insured limits.
Restricted Cash
The Company classifies any cash that is legally restricted as to its withdrawal or usage as restricted cash.
The following table provides a reconciliation of cash and restricted cash reported on the consolidated balance sheets to the total of those same amounts shown in our consolidated statements of cash flows:
June 30, 2020 | December 31, 2019 | June 30, 2019 | December 31, 2018 | ||||||||||||
Cash | $ | 31,245 | $ | 53,606 | $ | 196,704 | $ | 147,386 | |||||||
Restricted cash | — | 14,474 | 80,751 | 466,300 | |||||||||||
Cash and restricted cash | $ | 31,245 | $ | 68,080 | $ | 277,455 | $ | 613,686 |
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.
F-7 |
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 shortshort- and long termlong-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:
Balance, June 30, 2017 | $ | 5,072,579 | |
Issued during the three months ended September 30, 2017 | $ | 443,482 | |
Exercises/Conversions | $ | (112,511) | |
Change in fair value recognized in operations | $ | (1,813,249) | |
Balance, September 30, 2017 | $ | 3,590,301 |
Balance, December 31, 2019 | $ | 413,678 | |
Issued during the three months ended June 30, 2020 | 357,719 | ||
Exercises/Conversions | — | ||
Change in fair value recognized in operations | — | ||
Balance, June 30, 2020 | $ | 771,391 |
The estimated fair value of the derivative instruments werewas valued using the Black-Scholes option pricing model, using the following assumptions as of September 30, 2017:March 31, 2020:
None | |||
Expected Volatility | |||
Expected |
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.assets, which generally range from three to five years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
F-8 |
Leases
On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended, which requires a lessee to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Upon adoption, the Company did not have any leases that would require recognition on its consolidated balance sheet.
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 SeptemberJune 30, 20172020, and September 30, 2016.2019.
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 areis 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.
F-9 |
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.
Revenue Recognition
The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” as amended. 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.
The following table represents sales by sales channel for each of the periods:
Three Months Ended | |||||||
June 30, 2020 | June 30, 2019 | ||||||
Online | $ | 20,195 | $ | 21,103 | |||
Private Label | 636,240 | — | |||||
Distributor | 12,224 | 1,421 | |||||
Retailer | 830 | 14,048 | |||||
Total | $ | 669,489 | $ | 36,572 |
All sales for all periods presented were to domestic customers, except private label sales of $80,194 for the three months ended June 30, 2020. These private label sales were to CBD Life, S.A. (“CBD Life”) of Mexico. All sales to CBD Life are delivered to Laredo, Texas, where the customer takes title.
Due to the nature of the Company’s revenue from contracts with customers, the Company does not have material contract assets or liabilities that fall under the scope of ASC 606.
The Company’s revenues accounted for under ASC 606, generally, do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.
F-10 |
In June 2020, the Company produced and delivered 146,880 cans of Rocket High, California Limonada, and California Te Negro branded product to CBD Life. In July 2020 the customer informed the Company that numerous cans of the delivered product were leaking. The Company agreed to replace the entire production run at its own expense and accrued related costs of $68,648 as of June 30, 2020. The production-related costs, including start-up costs and production overruns, were approximately $109,000. The customer has not requested, and the Company has not offered, any refund of the sales amount or to provide any other consideration to the customer. The $80,194 sales amount is included in sales for the three months ended June 30, 2020.
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.
Reclassifications
Certain reclassifications have been made to prior year consolidated financial statements to conform to classifications used in the current year.
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. TheAs of June 30, 2020, the Company has a shareholders’ deficit of $6,446,224$1,207,165 and an accumulated deficit of $25,469,361 as of September 30, 2017,$42,471,932 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 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, 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 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 through the EFA over the next two years.
The Company has historically funded its operations with sales of equity and debt securities. The COVID-19 pandemic of 2020 has added uncertainty into the financial markets that the Company relies on for its operating and investment funding. It is unclear how long, or to what extent, the pandemic will impact the Company in 2020 and beyond. On April 30, 2020, the Company purchased certain assets of Raw Pharma, LLC (“Raw Pharma”) and agreed to sublease Raw Pharma’s production facility. Management believes its Securities Purchase Agreement dated December 20, 2019, with GHS Investments, LLC (“GHS”), along with bridge financing from GHS or other sources, will provide sufficient funds to make up for any operating cash flows.
The Company’s business has been adversely affected by the instability, disruption, and quarantine restrictions caused by the recent COVID-19 pandemic. The COVID-19 pandemic may cause customers to suspend their decisions on ordering our products, make it impossible to attend or sponsor trade shows or other conferences in which our products are presented to distributors, customers and potential customers, for our customers to visit our physical location, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with purchases of goods, or commitments to develop new brands and private label products.
Significant disruptions to communications and travel, including travel restrictions and other protective quarantine measures against COVID-19 by governmental agencies, have increased the difficulty in delivering goods to our customers and could ultimately make such deliveries impossible. Travel restrictions and protective measures against COVID-19 could cause us to incur additional unexpected labor costs and expenses or could restrain our ability to retain the highly skilled personnel we need for our operations.
The COVID-19 pandemic has added uncertainty to the financial markets that the Company relies on for its operating and investment funding. It has also negatively impacted the Company’s ability to meet its external financial reporting deadlines.
NOTE 4 – Inventory
As of September 30, 2017 and June 30, 2017, inventory consistedInventory consists of the following:
September 30, 2017 | June 30, 2017 | June 30, 2020 | December 31, 2019 | ||||||||||
Finished inventory | $ | 186,587 | $ | 216,711 | $ | 51,591 | $ | 160,763 | |||||
Raw materials and packaging | 8,776 | 7,984 | 98,349 | 77,272 | |||||||||
Total | $ | 195,363 | $ | 224,695 | $ | 149,940 | $ | 238,035 |
NOTE 5 – Prepaid Expenses and Other Current Assets
As of September 30, 2017 and June 30, 2017, prepaidPrepaid expenses and other current assets were as follows:consist of the following:
September 30, 2017 | June 30, 2017 | June 30, 2020 | December 31, 2019 | ||||||||||
Prepaid officers’ compensation | $ | 483,532 | $ | 521,916 | $ | — | $ | 143,233 | |||||
Prepaid directors’ compensation | 176,648 | 206,090 | |||||||||||
Prepaid marketing expenses | — | 19,250 | |||||||||||
Prepaid production | 12,500 | — | |||||||||||
Other prepaid expenses and current assets | 22,255 | 27,082 | 1,093,110 | 31,493 | |||||||||
Total | $ | 682,435 | $ | 774,338 | $ | 1,105,610 | $ | 174,726 |
NOTE 6 – Property and Equipment
As of September 30, 2017 and June 30, 2017, propertyProperty and equipment were as follows:consist of the following:
September 30, 2017 | June 30, 2017 | June 30, 2020 | December 31, 2019 | ||||||||||
Vehicles | $ | 29,598 | $ | 29,598 | $ | 14,687 | $ | 14,687 | |||||
Furniture and equipment | 42,055 | 41,042 | 2,101,920 | 45,322 | |||||||||
Personal computers | 2,379 | 3,315 | 16,667 | 17,901 | |||||||||
74,032 | 73,955 | 2,193,270 | 77,910 | ||||||||||
Less: accumulated depreciation | 30,302 | 25,822 | 57,257 | 58,568 | |||||||||
Total | $ | 43,730 | $ | 48,133 | $ | 2,136,017 | $ | 19,342 |
For the three months ended SeptemberJune 30, 20172020, and September 30, 2016,2019, depreciation expense was $4,584$2,933 and $11,659, respectively.
NOTE 7 – Convertible Notes Payable
As of September 30, 2017 and June 30, 2017, the Company’s convertible notes payable were as follows:
Interest Rates | Term | September 30, 2017 | June 30, 2017 | ||||||||||||
Convertible notes payable | 6% - 12% | 0 -2 year | $ | 1,310,000 | $ | 1,115,000 | |||||||||
Discount | (527,901 | ) | (381,747) | ||||||||||||
Total | $ | 782,099 | $ | 733,253 |
For the three months ended September 30, 2017 and September 30, 2016, interest expense on these notes, including amortization of the discount, was $124,584 and $29,089,$4,161, 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 $101,587 and $0 of interest expense for the three months ended September 30, 2017 and 2016, respectively, at the inception of the notes relating to the excess of derivative value over the face of the notes.
NOTE 7 – Intangible Assets
NOTE 8 – Note Payable-Other
On September 1, 2016, the Company purchased used office furniture and equipment from its landlord. The Company executed a note payable in the amountIntangible assets consist of $40,122 at an interest rate of 0% and with monthly payments of $1,115. 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 30, 2017 and June 30, 2017, respectively.capitalized software. For the three months ended SeptemberJune 30, 20172020, and September 30, 2016, interest2019, amortization expense on this note was $377$2,601 and $183,$2,601, respectively.
NOTE 8 – Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following:
June 30, 2020 | December 31, 2019 | ||||||
Accounts payable | $ | 458,904 | $ | 440,788 | |||
Accrued compensation | — | 51,500 | |||||
Common stock payable | 396,850 | 417,850 | |||||
Other accrued expenses | 406,986 | 233,079 | |||||
Total | $ | 1,262,740 | $ | 1,143,217 |
NOTE 9 – Related Party Convertible Notes Payable
As of September 30, 2017 and June 30, 2017, the Company’s related party convertibleConvertible notes payable were as follows:consists of the following:
Interest Rate | Term | September 30, 2017 | June 30, 2017 | Interest Rates |
Term | Conversion Rates | June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||
Related party convertible notes payable | 6% | 6 mos. - 1 year | $ | 563,450 | $ | 493,450 | ||||||||||||||||||||||||||
GHS Investments, LLC (fixed conversion) | 10% | .3 - .75 years | $ | 0.01 | $ | 849,208 | $ | 1,035,750 | ||||||||||||||||||||||||
Eagle Equities, LLC | 8% | 1.3 – 1.5 years | (a) | 298,750 | — | |||||||||||||||||||||||||||
LSW Holdings, LLC (variable conversion) | 6% | — | (b) | 179,000 | 179,000 | |||||||||||||||||||||||||||
Discount | (124,618 | ) | (227,203) | (345,048 | ) | (205,800) | ||||||||||||||||||||||||||
Total | $ | 438,832 | $ | 266,247 | $ | 981,910 | $ | 1,008,950 |
(a) | Fixed conversion rate for the first 180 days ($0.03 as of March 31, 2020). 40% discount on the lowest closing bid price during the 20 trading days prior to conversion after 180 days. | |
(b) | 50% discount on the average of the 3 lowest closing bid prices during the 10 trading days prior to conversion ($0.019). |
For the three months ended SeptemberJune 30, 20172020, and 2016,2019, interest expense on these notes, including amortization of the discount, was $191,826$135,671 and $82,934,$293,189, respectively.
As of June 30, 2020, and December 31, 2019, the Company’s derivate liability related to its convertible note’s payable was $728,976 and $403,971, respectively.
All tangible and intangible assets of the Company are pledged as security.
F-13 |
NOTE 10 – Notes Payable
Notes payable consist of the following:
Interest Rate |
Term | June 30, 2020 | December 31, 2019 | ||||||||||||
Notes payable | 0% | Due | $ | 603,382 | $ | 30,000 |
As of June 30, 2020, and December 31, 2019, notes payable includes two non-interest-bearing notes totaling $30,000 that originated prior to the Company’s 2014 bankruptcy proceedings.
NOTE 11 – Deferred Revenue
In December 2017, the Company executed a three-year Master Manufacturing Agreement (“MMA”) with CBD Alimentos SA de CV (“CBD-Alimentos”), a Mexican food and beverage distributor. Under the agreement (as amended), CBD Alimentos, through its sister company, CBD Life, is our exclusive distributor in Mexico for all our CBD-infused energy and functional beverages. In turn, we are CBD Life’s exclusive supplier of such products. The beverages supplied to CBD Life are private label products made to order for CBD Life. On December 24, 2018, the Company received its first purchase order under the MMA. The purchase order is for a total of 2,000,000 cans, consisting of three flavors: Rocket High Energy Drink, California Black Tea (Te Negro), and California Lemonade (Limonada) to be delivered to CBD Life’s facility in Laredo, Texas. Each flavor consists of a sugar and sugar-free version. Based on the pricing the Company agreed to, the total of the purchase order is $932,600. In December 2018, the Company received a deposit of $466,300 to begin the procurement process for packaging (aluminum can bodies, lids, labels) and raw materials (CBD and other ingredients), co-packing services, and the Company’s contracted margin of $.05 per can. During 2019 the Company ordered, received and paid for packaging and raw materials and contracted for co-packing services with Optimus Fulfill, a Coppell, Texas-based beverage processor. The contract with Optimus Fulfill required the Company to make deposits of $156,000 to secure the co-packing services. These deposits were made in January 2019. Subsequent to the Company’s payment of the deposits, Optimus Fulfill filed for bankruptcy protection. The Company received a total of $20,000 in refunds in 2019 and was forced to secure another co-packer. The lengthy lead time associated with procuring co-packing services coupled with the normal lead times for packaging and raw materials pushed the production schedule into the last quarter of 2019. Additionally, a change in Mexico’s Presidential administration resulted in additional scrutiny of CBD Life’s permits in November 2019. Once these hurdles were cleared, production began in December 2019 with an initial run of 38,400 cans with a selling price of $20,375, and production-related costs of $64,526, including start-up costs and production overruns. In January 2020, the Company received an additional deposit of $97,060 from CBD Life to help restore the lost deposit with Optimus Fulfill. The Company procured additional packaging and raw materials and restarted production in March 2020, with a total of 146,880 cans produced and delivered in that month. The revenue recorded in June 2020 was $80,194.
In accordance with the MMA, RMHB opened a separate operating bank account for all deposits made by CBD Life. CBD Life is required to always maintain a positive cash balance in the account. The Company has determined thatfull unilateral authority to disburse funds from the conversion feature embeddedbank account to vendors, suppliers, co-packers, and the Company solely for the purposes of production, other administrative costs, and the Company’s margin on the sale. During 2019 the Company transferred $80,000 ($.04 per can ordered) from the CBD Life restricted bank account to its corporate account in certainaccordance with the terms of the notes referred to above that contain a potential variable conversion amount constitutes a derivative which has been bifurcatedMMA. As of June 30, 2020, and December 31, 2019, the balances in the separate operating bank account were $27,645 and $14,474, respectively, and are included in restricted cash on the Company’s balance sheet.
F-14 |
A summary rolls forward of the Deferred Revenue balance from the noteDecember 28, 2018 (receipt of first deposit) until June 30, 2020, is as follows:
December 28, 2018, deposit received | $ | 466,300 | ||
December 2019 delivery | (20,375) | |||
Balance as of December 31, 2019 | $ | 445,925 | ||
January 30, 2020, deposit received | 97,060 | |||
June 2020 deliveries | 32,289 | |||
Balance as of June 30, 2020 | $ | 462,791 |
In July 2020 CBD Life informed the Company that numerous cans of the delivered product were leaking. The Company has agreed to replace the production run at its own expense and recordedaccrued related cost of $68,648 as a derivative liability, with a corresponding discount recordedof June 30, 2020. The production-related costs, including start-up costs and production overruns, were approximately $109,000. The Company has not agreed to refund the sales amount or provide any other consideration 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, 2017 and 2016, respectively, at the inception of the notes relating to the excess of derivative value over the face of the notes.customer.
NOTE 1012 – Shareholders’ Deficit
Common Stock
As of September 30, 2017 and June 30, 20172020, the Company has 950,000,0001,000,000,000 shares of common stock authorized.authorized and 284,451,184 shares issued and outstanding. On October 31, 2017April 22, 2019, the authorization was increased to 4,000,000,000.Company effected a 1-for-20 reverse stock split. All common share amounts in this report reflect this stock split.
During the three months ended SeptemberJune 30, 20172020, the Company issued 6,740,92818,635,070 shares of common stock, including 6,240,92812,437,084 shares for convertible notes payable conversions, 4,895,286 shares for amounts due to a board member, 802,700 shares for compensation, and 500,000 shares for cash.
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.Series G Preferred Stock conversions.
Preferred Stock
The Company has 20,000,000 shares of preferred stock authorized as of SeptemberJune 30, 2017,2020, of which 10,000,00012,801,154 are specifically designated to a series of preferred stock and 10,000,0007,198,846 remain undesignated.
Series A Preferred Stock
The Company has 1,000,000 shares of Series A Preferred Stock authorized anddesignated, of which none were outstanding as of September 30, 2017 and June 30, 2017.2020 and December 31, 2019. LSW Holdings LLC (“LSW”),was 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, hashad the authority to direct voting and investment decisions with regard to its holdings in the company. See Note 16 – Subsequent Events.
Company. On July 5, 2017, theOctober 26, 2018, these shares were ruled void ab initio by a District Court in Dallas County, Texas. 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 1,200cancelled these 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 Stockeffective that changed the voting rights back to 400 votes from 1,200 for every share of Series A Preferred Stock.date.
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, 2017 and June 30, 2017.2020, and December 31, 2019.
F-15 |
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, 2017 and June 30, 2017. The shares are2020, and December 31, 2019. Series 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 502.5 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, 2020, and June 30, 2017.December 31, 2019. Series D Preferred Stock is a non-voting, non-interest bearingnon-interest-bearing convertible preferred stock. Each Series D preferred share is convertible to 1005 shares of common stock.
Series E Preferred Stock
On September 19, 2017, the BoardThe Company has 789,474 shares of Directors approved a new Series E Preferred Stock.Stock designated, of which none were outstanding as of March 31, 2020, and December 31, 2019. Holders of Series E Preferred Stock are entitled to cast 2,000100 votes per share of Series E Preferred Stock on any proposal to increase our authorized capital stock, with no other voting rights. Each share of 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 789,47420 shares of common stock.
WarrantsSeries F Preferred Stock
On December 20, 2019, the Board of Directors designated 1,680 shares of Series F Preferred Stock. On that same day, the Company sold 130 shares of Series F Preferred Stock to GHS Investments, LLC ("GHS") in accordance with a Securities Purchase Agreement with GHS. The Series F Preferred Stock has a par value of $.001, stated value of $1,200, accrues dividends at 12%, is convertible to common stock based on a 20-day trailing volume weighted average low share price, and is senior to other preferred stock. During the three months ended September 30, 2017March 31, 2020, the Company granted no common stock warrants, nonesold 200 shares of Series F Preferred Stock to GHS. As of June 30, 2020, and December 31, 2019, there were exercised,330 and 1,187,500 were cancelled.130 shares issued and outstanding, respectively.
OptionsSeries G Preferred Stock
DuringOn December 20, 2019, the three months ended September 30, 2017Board of Directors designated 10,000 shares of Series G Preferred Stock. On that same day, the Company granted 650,000 options10,000 shares of Series G Preferred Stock to purchaseCharles Smith, a Board member, and Chief Operating Officer of the Company, in exchange for $10,000 owed to Mr. Smith in compensation. The Series G Preferred Stock has a par value of $.001, is non-interest and non-dividend earning, and each share is convertible to 50 shares of common stock. No optionsThe holder of Series G Preferred Stock has the right to cast 20,000 votes for every one share of Series G Preferred Stock on any and all proposals to amend the Company’s Articles of Incorporation to increase the authorized capital stock of the Company. Mr. Smith exercised that right in December 2019 and the Series G Preferred Shares were exercised or cancelled.converted to common stock on March 20, 2020. As of June 30, 2020, there were no shares of Series G Preferred Stock issued and outstanding.
Series H Preferred Stock
NOTE 11– Concentrations
DuringOn February 25, 2020, the three months ended SeptemberBoard of Directors designated 5,000 shares of Series H Preferred Stock. The Board amended the designation on April 7, 2020. The Series H Preferred Stock has a par value of $.001, stated value of $1,200, accrues dividends at 12%, and is convertible to common stock based on a 20-day trailing volume weighted average low share price. As of June 30, 2017, the Company’s two largest customers accounted for approximately 18%2020, there were 11 shares outstanding. As of December 31, 2019, there were no shares issued 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% of sales, respectively.outstanding.
Warrants
During the three months ended June 30, 2020, and 2019 the Company granted no common stock warrants, none were exercised, and none were forfeited. As of June 30, 2020, and December 31, 2019, there were 607,500 warrants outstanding. Exercise prices range from $.02 to $.40 per share.
Options
During the three months ended June 30, 2020, the Company did not grant any options to purchase the Company’s common stock and there were no exercises or forfeitures of such options.
During the three months ended June 30, 2019, the Company granted 500,000 options to purchase common stock to an employee. There were no exercises or forfeitures during that period.
As of June 30, 2020, and December 31, 2019, there were no options outstanding.
NOTE 1213– Noncontrolling Interests
In July 2019, the Company invested $500 in Sweet Rock, LLC, a Michigan limited liability company. The Company owns 51% and Sweet Ally, Inc. (“Sweet Ally”) invested $495 and owns 49%. The Company consolidates the financial statements of Sweet Rock and accounts for Sweet Ally’s ownership as a noncontrolling interest. During the three months ended June 30, 2020, Sweet Rock recorded no revenue or expenses.
NOTE 14– Concentrations
During the three months ended June 30, 2020, the Company’s two largest customers accounted for approximately 71% and 12% of sales, respectively. During the three months ended June 30, 2019, the Company’s two largest customers accounted for approximately 17% and 2% of sales, respectively.
NOTE 15 – Income Taxes
The reconciliation of income tax benefit at the U.S. statutory rate of 34%21% to the Company’s effective rate for the periods presented is as follows:
Three Months Ended | Three Months Ended | ||||||||||
September 30, 2017 | September 30, 2016 | June 30, 2020 | June 30, 2019 | ||||||||
U.S federal statutory rate | (34%) | (34%) | |||||||||
U.S. federal statutory rate | (21 | %) | (21 | %) | |||||||
State income tax, net of federal benefit | (0.0%) | (0.0%) | (0.0 | %) | (0.0 | %) | |||||
Increase in valuation allowance | 34% | 34% | 21 | % | 21 | % | |||||
Income tax provision (benefit) | 0.0% | 0.0% | 0.0 | % | 0.0 | % |
The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of September 30, 2017 and June 30, 2017 are as follows:2020, and December 31, 2019, are:
June 30, 2020 | December 31, 2019 | ||||||||||||
Deferred Tax Assets | September 30, 2017 | June 30, 2017 | |||||||||||
Net Operating Losses | $ | 4,700,000 | $ | 4,482,000 | $ | 4,700,000 | $ | 4,620,000 | |||||
Less: Valuation Allowance | $ | (4,700,000) | $ | (4,482,000) | $ | (4,700,000 | ) | $ | (4,620,000) | ||||
Deferred Tax Assets - Net | — | — | |||||||||||
Deferred Tax Assets – Net | — | — |
F-17 |
As of SeptemberJune 30, 2017,2020, the Company had approximately $13,900,000$22,000,000 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.
NOTE 13 – CommitmentsOn 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 June 30, 2020, and 2019.
Office LeaseThe 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, 2020. This expense is attributable to the Company being in a net deferred tax asset position at the time of remeasurement. As the company maintains fully valuation allowance, this amount can be seen on the rate reconciliation as an adjustment to deferred tax asset and corresponding valuation allowance.
NOTE 16 – Commitments
The Company hasexecuted a three-year lease for corporate office space.space effective September 1, 2016. The lease commenced on September 1, 2016 withincluded monthly payments of $7,715 in year one, $7,972 in year two, and $8,229 in year three.three plus common area maintenance. The lease is beingwas accounted for on a straight-line basis over its term.
On September 5, 2019, the Company executed a six-month extension of its corporate office lease at $8,065 per month plus common area maintenance. The lease expired on February 29, 2020.
On February 28, 2020, the Company executed a second six-month extension of its corporate office lease. The lease includes new, smaller space within the same office building at a monthly payment of $3,549 per month plus common area maintenance.
On January 18, 2018, WFLC entered into a 12-month office use agreement for office space in Denver, Colorado. Monthly payments were $91. The lease automatically renews for 12 months each January. Monthly payments are $122.
Other Leases
The Company rents storage space from various third parties on a month-to-month basis.
NOTE 14 – Legal Proceedings
Please refer to our Annual Report on Form 10-K/A filed October 12, 2017 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
NOTE 17 – Legal Proceedings
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,
RMHB filed suit against Lyonpride for fraud and for declaratory relief with respect to a contract between the parties. RMHB seeks monetary damages against said Defendant.
134thJudicial United States District Court Northern District of Dallas County, Texas. Filed June 26, 2017.Texas, 3:18-cv-00045-C, now Lyonpride Music LLC v Rocky Mountain High Brands, Inc. v Statewide Beverage Company, Inc., Before the American Arbitration Association, 01-18-0003-1428.
RMHBThe parties have settled the matter and the settlement documents have been signed by the parties. This matter has filed suit for breach of contract, common law fraud and declaratory relief.been concluded.
Los Angeles Superior Court, BC669367, filed July 24, 2017. Statewide Beverage Company, Inc. v. Rocky Mountain High Brands, Inc.
Statewide filed a breach of contract claim, dealing with the same fact issues in the above case of RMHB v Statewide. RMHB still has not been served in this case.
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.
RMHB is seekingThe Company sought the return of the Series A Preferred stock and common stockStock (“Series A”) issued to certain defendants or later obtained by certain other defendants for little or no consideration paid to the Company. RMHB alleges the Company’sJerry Grisaffi (“Grisaffi”), RMHB’s former Chairman of the BoardBoard. The Company further alleged, among other things, that Grisaffi breached his fiduciary duty to the Company by issuing these Series A shares to himselfhimself. On August 30, 2018, the Trial Court in the 192nd District Court of Dallas County, Texas entered a final judgment in the Company’s favor and others.
against Grisaffi in the amount of $3,500,000 for fraud, breach of fiduciary duty, and conversion with respect to the Series A preferred stock. The Court further voided ab initio the Series A Preferred Shares. The Court further ruled that Grisaffi take nothing by his counterclaims in the case.
NOTE 15 – AcquisitionsIn The Court of Appeals For The Fifth District Of Texas Dallas, Texas, Jerry Grisaffi, Appellant v. Rocky Mountain High Brands, Inc, f/k/a Republic of Texas Brands, Inc., Appellee, No. 05-18-01020-CV.
Grisaffi appealed the Judgment described above. The Court of Appeals affirmed in part and reversed in part the Judgment and remanded it to the trial court for the purpose of the Company electing its remedy. The Company has elected its remedy of the $3,500,000 judgment against Grisaffi. Grisaffi has again appealed this matter. On November 19, 2019, Grisaffi filed a chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Texas, Case No. 19-33855-sgj. The Company has filed an Adversary Proceeding to deny Grisaffi the ability to discharge the judgment. A Motion for Summary Judgment on the Adversary Proceeding has been filed and is set for hearing. The Chapter 11 case has been converted by the Bankruptcy Court to a Chapter 7 case. The Trustee who has been appointed is actively conducting proceedings to locate assets of Grisaffi.
Dallas County Texas, Case Number DC-18-13491. Rocky Mountain High Brands, Inc. f/k/a Republic of Texas Brands, Inc. Plaintiff, vs. 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.
This Final Judgment against Lily Li and LSW Holdings, LLC is final for all purposes and was not appealed. The Company plans to outsource the collection of this Judgment. Other than collection of the Judgment this matter has been finalized.
Rocky Mountain High WaterBrands, Inc. v La Dolce Vita Trust and Christine Guthrie, In Her Capacity as Trustee, In The 382nd District Court of Rockwall County, Texas, Cause No. 1-18-1608.
This is a case whereby the Company LLCis attempting to collect on the Judgment obtained against Grisaffi. More specifically the Company is requesting the Court to order the La Dolce Vita Trust to turnover fraudulently transferred assets and for additional relief necessary to enforce the Company’s judgment against Grisaffi. The case has been stayed, and the Company will seek an order from the Bankruptcy Court to continue in this case or will work in conjunction with the Trustee appointed in the Chapter 7 case on this matter.
In July 2016, 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 500,000 sharesChet – 5 Broadcasting, Inc. v Rocky Mountain High Brands, Inc., Supreme Court of the Company’s common stock exercisable at $.03 per share over a three-year period beginning July 27, 2016.State of New York, County of Ulster, Case No. 18-4416.
The agreement grantsparties have settled this matter and the Company an exclusive right to develop land adjacent tosettlement documents have been signed by the spring for commercial purposes as agreed to by both parties. Additionally, the CompanyThis matter has agreed to grow hemp for experimental or commercial purposes on the land within three years.been concluded.
On November 12, 2016, the agreement with the Poafpybitty Family was amended to give 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 included in other assets. The Company is obtaining an outside valuation of 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.
NOTE 1618 – Other (Income)/Expenses
Loss on Extinguishment of Debt
For the three months ended June 30, 2020, the Company recorded no loss on extinguishment of debt . The Company recorded a gain on the extinguishment of debt of $689,991 related to the change in the market value of the Company’s common stock during the three months ended June 30, 2019
Gain (Loss) on Change in Fair Value of Derivative Liability
For the three months ended June 30, 2020, the Company recorded a loss on the change in fair value of derivative liability of $15,894 compared to a gain of $390,520 for the three months ended June 30, 2019. In 2020 the loss resulted from the change in the convertibility of two convertible notes payable that were made in February and March 2020 and increase in the valuation of the related derivative liability based on the change in the market value of the Company’s common stock. The gain in 2019 was due to the decrease in the market value of the Company’s common stock between January 1, 2019, and June 30, 2019.
NOTE 19 – Subsequent Events
Between OctoberApril 1 2017 and November 13, 2017September 8, 2020, the Company issued 103,389,474133,183,537 shares of common stock, including 27,000,000 for the acquisition of which 52,000,000 werethe assets of Raw Pharma, 21,925,000 for debtlegal settlements, 9,976,484 for convertible notes payable conversions, 45,000,000 were22,000,000 for a legal settlement,director and 6,389,474 wereemployee compensation, 51,000,000 for services rendered.payments to vendors, and 1,282,053 for cash.
Between April 1 and September 8, 2020, holders of convertible notes payable converted $98,742 of outstanding principal.
On October 6, 2017April 7, 2020, the Company executed a Releasethree-year consulting agreement with Eagle Processing & Distribution, Inc. (“EPD”). Under the agreement, EPD is to provide outsourced services related to sales and Settlement Agreementdistribution, marketing, social media, and website maintenance, logistics and order fulfillment, production, inventory management, customer service, risk management, and assistance with Roy Meadows (“Meadows Settlement”) regardingobtaining financing. EPD was granted 50,000,000 shares of common stock as compensation for the litigation between the parties. As partfirst eight months of the Meadows Settlement,contract with compensation for the Company agreedremainder of the contract to issue 45 millionbe negotiated prior to the end of the initial eight months. On June 30, 2020, EPD returned 25,000,000 common shares of the Company’s common stock, including 20 millionpreviously issued 50,000,000 shares issued immediately and 25 million shares to be issued uponpending the effectivenessexecution 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 backamendment 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 toApril 7, 2020, consulting agreement. These common shares based on a formula with a discount to market price. Mr. Meadows released the Company from all claimshave not been cancelled 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.are included in shares outstanding.
On October 12, 2017April 21, 2020, the Company executed an Equity Financing Agreementfiled a Registration on Form S-8 to register 600,000 shares of common stock issued to a vendor as compensation for services provided.
On April 29, 2020, the Company formed Rocky Mountain Productions, Inc. (“EFA”RMPI”) with GHS. Under the agreement, GHS has committed to purchase up $12 million, a wholly owned Nevada corporation. On April 30, 2020, RMPI purchased certain of the Company’sassets of Raw Pharma, LLC (“Raw Pharma”) including machinery, equipment, and fixtures. The facility has the capability to can and bottle product, including 12 oz. regular and sleek cans, 16 oz. cans, shots, and bottles. The purchase price for the assets consists of a combination of $1,750,000 in cash, 27,000,000 shares of common stock, over a 24-month period at a 20% discount offand the market price, as definedassumption or refinancing of Raw Pharma’s bank debts secured by equipment in the agreement.amount of $1,007,000. The agreement containsCompany is also assuming the lease of Raw Pharma’s 20,000 square foot facility and certain restrictions onequipment leases. The Company assumed no other liabilities in the timingtransaction. In March and April 2020, the Company produced and delivered 146,880 and 149,760, respectively, cans of beverage to CBD Life. In July 2020 CBD Life informed the Company that numerous cans of the stock purchasesdelivered product were leaking. The Company has agreed to replace the production run at its own expense and requiresaccrued related cost of $68,648 as of March 31, 2020. The production-related costs, including start-up costs and production overruns, were approximately $109,000 in June 2020. The Company has not agreed to refund the sales amount or provide any other consideration to the customer. The Company has investigated the cause of the leaking cans and is in the process of remediating the equipment issues it believes caused the packaging failures. Management believes the manufacturing issues will be resolved and the plant will be able to resume all production by September 15, 2020. Management has also held discussions with the prior owners of Raw Pharma (where the product was produced prior to our acquisition) and is negotiating an agreement to compensate the Company for losses related 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.equipment issues.
On April 29, 2020, the Company executed a $150,100 loan agreement with Comerica Bank under the Paycheck Protection Program (“PPP”) of the Small Business Administration (“SBA”). The loan bears interest at 1% and is due on April 29, 2022. If the Company meets certain PPP qualifications the loan will be forgiven by the SBA. Otherwise, monthly loan payments will commence November 1, 2020.
On May 12, 2020, the Company executed a Settlement Agreement and Release with Texas Wellness Center (“TWC”), a subsidiary of GL Brands, Inc., related to the 200,000 can production run the Company ran for TWC in September 2019. Pursuant to the Settlement Agreement the Company agreed to issue 17,500,000 shares of common stock, with a market value of $367,500, on the settlement date. As of December 31, 2019, the Company reversed the $322,000 previously recorded in September 2019, recorded a common stock payable of $367,500 and accrued a $15,000 payment made to TWC in January 2020 to assist with TWC’s customer service-related issues. The companies mutually released each other from all other liabilities, including a $75,000 account payable to TWC for CBD used in the manufacturing of the beverages. The companies further agreed that if RMHB files a lawsuit seeking damages against its can vendor, it would pay TWC 30% of any net recovery. RMHB is not required to take any further action.
On May 20, 2020, the Company executed a Release and Settlement Agreement with CHET-5 Broadcasting, Inc. (“CHET-5”) related to a breach of contract lawsuit filed by CHET-5 related to an advertising contract between the Company and CHET-5. The Company agreed to pay CHET-5 $9,000 in cash and 425,000 shares of common stock in exchange for full mutual releases.
On September 9, 2020, the Company issued 420 shares of Series F Preferred Stock to GHS Investments, LLC in exchange for the maturity date extensions on three convertible notes payable and to waive any breaches related to the Company’s delinquent first and second quarter 2020 financial statement filings.
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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-ownedwholly owned subsidiaries, two majority-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 ofthe developing, manufacturing, marketing, and distributing high-quality, health conscious, hemp-infusedhemp oil and hemp extract-infused products that span various categories including beverage, food, fitness, skin care, and beverage products. The Company currentlymore. RMHB also markets a lineup of five naturally flavored hemp-infused beverages (Citrus Energy, Black Tea, Mango Energy and Lemonade) and a low-calorie hemp-infused Coconut Lime Energy drink. The Company also offers hemp-infused 2oz. Mango Energy Shots and Mixed Berry Energy Shots. In August 2016 the Company launched Eagle Spirit Spring Water, a line of naturally high alkaline spring water.
After developingwater as part of our brand portfolio. All products comply with federal regulations on hemp products and contain 0.0% tetrahydrocannabinol (“THC”), the beverage products,psychoactive constituent of cannabis. Recently, through a newly created subsidiary of 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,Rocky Mountain Productions, Inc., the Company acquired a bottling and canning facility and is now also produced energy shots and Relaxation Brownies.
In September 2016,in the Company bottledbusiness of canning both 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) “Bagown beverages as well as canning beverages for other customers. Furthermore, as a result of equipment included in a Box.”
In March and April 2017, the Company completed additional production runsacquisition of its more popular hemp-infused beverages, Citrus Energy and Mango Energy.
In August 2017, the Company sold its remaining inventoryfacility, RMHB is also in the business of Smarterita wine-based beverages. There are currently no plans to resume productionbottling hand sanitizer. Because of this alcoholic beverage.the demand resulting with the COVID-19 pandemic, RMHB anticipates continuing in the bottling of hand sanitizer for the foreseeable future.
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Current Product OfferingsIn March 2018, the Company launched the HEMPd brand with gummies, water soluble drops, capsules, tinctures, lotions, and salves. The Company introduced four flavors of HEMPd CBD-infused waters in 12 oz. cans in November 2018 and sold those beverages in carbonated and non-carbonated offerings in 2019.
Under itsIn July 2018, the Company acquired the assets of BFIT Brands, LLC and formed a new subsidiary, FitWhey Brands LLC. FitWhey marketed a line-up of five water-based protein drinks that include caffeine and B vitamins. In August 2019 management determined the Company would suspend the production of FitWhey branded products until it develops a related hemp or CBD-infused product.
On June 12, 2019, the Company organized Sweet Rock, LLC (“Sweet Rock”), a 51% owned company, with Sweet Ally, Inc. Sweet Rock will manufacture and market CBD-infused chocolates, hard candies, and baked goods for distribution in the United States.
On April 29, 2020, the Company formed Rocky Mountain High Brands name,Productions, Inc. (“RMPI”), a wholly owned Nevada corporation. On April 30, 2020, RMPI purchased certain assets of Raw Pharma, LLC (“Raw Pharma”) including machinery, equipment, and fixtures. The facility has the Company currently markets a lineup of five hemp-infusedcapability to can and bottle products, including 12 oz. regular and sleek cans, 16 oz. beverages including:
bottles.
The Company isRMHB 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 distributorsbottles 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 marketsdistributes 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.under the name Eagle Spirit Spring Water.
Strategic Update and Planned Product OfferingsRMHB has entered into the business of producing National Brand Equivalent (NBE) products. RMHB is currently finalizing the production process for the filling of Pediatric Electrolyte drink under the Great Choice brand, which brand was licensed by RMHB.
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 segmentResults of the functional beverage market. Functional beverages, or beverages that convey health benefits, are the fastest growing segment within the beverage market.Operations
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 SeptemberJune 30, 20172020, Compared to Three Months Ended SeptemberJune 30, 20162019
Financial Summary
The Company’s sales for the three months ended SeptemberJune 30, 20172020, were $41,002$669,489 compared to $295,587sales of $36,572 for the three months ended SeptemberJune 30, 2016.2019.
The Company’s net loss for the three months ended June 30, 2020, was 1,207,165 compared to a net loss of $667,170 for the three months ended June 30, 2019.
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The Company’s net income for the three months ended September 30, 2017 was $685,272 compared to a net loss of $730,277 for the three months ended September 30, 2016.
Sales
For the three months ended SeptemberJune 30, 20172020, sales were $41,002$669,489 compared to $295,587sales of $36,572 for the three months ended SeptemberJune 30, 2016, a decrease2019, an increase of $254,585$632,917 or 86%1.73%. The sales decreaseincrease was driven by the lacksale of funding forprivate label beverages to CBD Life. The increase was partially offset by a reduction in sales of HEMPd branded products as the Company sold off inventory production, directin anticipation of a change in suppliers and lower Eagle Spirit Water sales support, and advertising and promotion of the Company’s products. Inin 2020. For the three months ended SeptemberJune 30, 20172020, sales consisted of approximately 57%70% private label sales, 18% online sales, 11% distributor sales, 33%and 1% direct to retailer sales, and 10%compared to approximately 80% online sales, compared to 95%2% distributor sales, and 5% online18% direct to retailer sales for the three months ended SeptemberJune 30, 2016.2019.
Cost of Sales
For the three months ended SeptemberJune 30, 2017,2020, cost of sales was $43,800$624,209 or 107%.93% of sales, compared to $90,020$38,855 or 31%1.06% of sales for the three months ended SeptemberJune 30, 2016, a decrease2019, an increase of $46,220$141,350 or 51%187%. Cost of sales decreasedThe increase in 20172020 was primarily due to the decreaseaccrual of additional production costs related to CBD Life, our private label customer. In July 2020, the customer informed the Company that numerous cans of the delivered product were leaking. The Company agreed to replace the entire production run at its own expense. As of June 30, 2020, the Company established an accrual of $68,648 for the estimated production costs with a corresponding increase in sales, butcost of sales. The Company also incurred start-up costs and production overruns related to CBD Life that increased as a percentagethe related cost of sales to approximately $109,000, resulting in 2017 as a result of lower net selling prices asnegative gross margin. Additionally in 2020, the Company sells its remaining hemp-infused beveragesold off HEMPd inventory in anticipation of supplier changes and shots inventories.the resulting promotions caused a deterioration in gross margin.
Operating Expenses
For the three months ended SeptemberJune 30, 2017,2020, operating expenses were $661,069$1,096,091 or 1,612%1.63% of sales, compared to $1,182,089$858,831 or 400%2.35% of sales for the three months ended SeptemberJune 30, 2016.2019. Areas in which the Company experienced materialsignificant changes in operating expenses are discussed below.
General and Administrative
For the three months ended SeptemberJune 30, 2017,2020, general and administrative expenses were $604,751$1,094,09169 or 1,475%1.63% of sales, compared to $864,549$696,846 or 293%19.05% of sales for the three months ended SeptemberJune 30, 2016.2019, a increase of $397,282 or 59%. The decrease in general and administrative expenses in 20172020 was primarily driven by management’s efforts to reduce expenses as a result of the Company’s lack of funding. The increase decreases in generalcompensation and administrative expenses as a percentage of sales is due to lower sales in 2017.legal expenses.
Advertising and Marketing
For the three months ended SeptemberJune 30, 2017,2020, advertising and marketing expenses were $56,318$1,963 or 137%.3% of sales, compared to $317,540$158,985 or 107%4.34% of sales for the three months ended SeptemberJune 30, 2016.2019, a decrease of $157,022 or 23%. The decrease in advertising and marketing expenses in 20172020 was primarily driven by management’s effortsdue to reduce expenses as a result of the Company’s lack of funding. Also,reduction in 2016online advertising and outside marketing consultant and agency fees. Additionally, the Company incurred significant promotionalincurs no advertising or marketing expenses related to a large sale to a distributor. There was no comparable sale in 2017. The increase in advertising and marketing expenses as a percentage of sales is due to lower sales in 2017.private label sales.
Other (Income) Expense
Interest Expense
For the three months ended September 30, 2017, interest expense was $464,110, compared to $234,519 for the three months ended September 30, 2016. The increase in interest expense, which includes the amortization of the discount on convertible debt and interest on Series C Preferred Stock, was due to increased debt in 2017.
Gain on Change in Fair Value of Derivative Liability
For the three months ended September 30, 2017, the Company recorded a gain on the change in fair value of derivative liability of $1,813,249 compared to a gain of $480,764 for the three months ended September 30, 2016. In both periods, 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.
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Income Taxes
Other (Income) Expense
Interest Expense
For the three months ended SeptemberJune 30, 20172020, interest expense was $119,525, compared to $339,368 for the three months ended March 31, 2019, a decrease of $219,843. The decrease in interest expense, which includes the amortization of the discount on convertible debt, and Septemberthe excess of the beneficial conversion feature on certain convertible notes payable, was due to decreased debt activity in 2020.
Loss on Extinguishment of Debt
For the three months ended June 30, 2016,2020, the Company recorded a loss on extinguishment of debt of $37,429 related to the amendment and settlement of convertible notes payable. There $689,991 extinguishment of debt during the three months ended June 30, 2019.
Gain on Change in Fair Value of Derivative Liability
For the three months ended June 30, 2020, the Company recorded a loss on the change in fair value of derivative liability of $37,429 compared to a loss of $390,520 for the three months ended June 30, 2019. In 2020 the loss resulted from the change in the convertibility of two convertible notes payable that were made in February and March 2020 and increase in the valuation of the related derivative liability based on the change in the market value of the Company’s common stock. The gain in 2019 was due to the decrease in the market value of the Company’s common stock between January 1, 2019, and March 31, 2019.
Income Taxes
For the three months ended June 30, 2020, and 2019 the Company recorded no income tax provision due to a full valuation allowance provided on deferred tax assets resulting from net operating losses.
Net Loss Attributable to Noncontrolling Interests
For the three months ended June 30, 2020, the Company recorded no income or loss attributable to noncontrolling interests as there was no activity in its 51%-owned subsidiary, Sweet Rock. There were no noncontrolling interests in 2019.
Liquidity and Capital Resources
As of SeptemberJune 30, 2017,2020, the Company had working capital of ($3,300,316). The Company had current assets of $898,721,$1,215,178, consisting of cash and restricted cash of $19,266,$31,245, accounts receivable (net) of $1,657,$0, inventory of $195,363,$149,940, and prepaid expenses and other current assets of $682,435.$1,033,993. As of September 30, 2017, we March 31, 2020, the Company had current liabilities of $7,490,931,$4,515,494, consisting of accounts payable and accrued liabilities of $547,137, related party$1,100,928, convertible notes payable (net) of $438,832, convertible notes payable (net) of $782,099, other$1,033,776, notes payable of $23,164, redemption value of Series C Preferred Stock of $1,661,424,$30,000, accrued interest of $447,974,$90,551, deferred revenue of $445,925, and derivative liability of $3,590,301. During the three months ended September 30, 2017, the Company received proceeds of $8,500 related to private offering stock sales of 500,000 shares of common stock.$413,678.
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Cash flows from operating activities
Net cash used in operating activities during the three months ended SeptemberJune 30, 20172020, was $396,930$1,720,087 compared to $566,056$2,045,372 used during the three months ended September 30, 2016.March 31, 2019. The change was principally driven by management’s efforts to conserve cash during 2017.the reduced net loss and increase in accounts payable in 2020.
Cash flows from investing activities
Net cash used inprovided by investing activities was $1,549,025 during the three months ended June 30, 2020. This represents the Company’s proceeds from the sale of miscellaneous office furnishings. There were no cash flows from investing activities during the three months ended SeptemberJune 30, 2017 was $1,013 compared to $41,409 during the three months ended September 30, 2016. In 2017 the Company made 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 $1,635.2019.
Cash flows from financing activities
Net cash provided by financing activities during the three months ended SeptemberJune 30, 20172020, was $325,534$3,717,947 compared to $505,210$1,500,249 during the three months ended SeptemberJune 30, 2016. In 2017,2019. During the three months ended March 31, 2020, the Company received proceeds of $220,000 were$275,000 from the issuance of convertible notes payable compared to $220,000 in 2016. The Company also issued $100,000 in related party notes payable inand $211,000 from the issuance of preferred stock. During the three months ended SeptemberJune 30, 2017 compared to $35,000 in 2016. In 20162019, the Company issued a note payable for $35,960 related to the purchase of office furniture and equipment. Repayments on that note were $2,966 during the three months ended September 30, 2017. In 2017 there werereceived proceeds of $8,500 from the issuance of common stock compared to $214,250 in 2016.of $1,139,173 and paid $6,424 on notes payable.
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 currently convertible to common stock at a fixed prices ranging from $0.01 to $0.024,$0.03 or at discountsa discount to market price ranging from 20% to(as defined in the agreements) of 50%, or combinations thereof.. As of SeptemberJune 30, 20172020, the Company had total notes payable outstanding of $1,244,095 (net$1,607,158, less a discount of discount).$332,857.
On July 28, 2017,weexecuted an agreement with Eagle Equities, LLC (“Eagle Equities”)Known Trends and Uncertainties Expected to sell up to $500,000 in convertible notes to Eagle Equities. On that same date,weissuedHave 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 basedMaterial Impact 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.Revenues
On October 12, 2017We expect our revenues to increase materially during the Company executed an Equity Financing Agreement (“EFA”) with GHS Investments LLC (“GHS”). Under the agreement, GHS has committedremainder of 2020 and in 2021, primarily due to purchase up $12 millionanticipated sales 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 purchaseshand sanitizer. Wealso expect revenue growth from our HEMPd branded CBD-infused flavored waters 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.other HEMPd branded products.
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$1,500,000 to be between $2,000,000 and $5,000,000.$2,000,000. We plan to utilize the EFASPA executed with GHS in October 2017June 2018, as well as bridge financing, to raise the required capital.
Off Balance Sheet Arrangements
As of SeptemberJune 30, 2017,2020, there are no off balanceoff-balance sheet arrangements.
Going Concern
WeThe accompanying financial statements have experienced recurring losses from operations and to date, we have not been able to produce sufficient sales to become cash flow positive and profitableprepared on a consistent basis. The successgoing concern basis, which contemplates the realization of our business plan duringassets and the next 12 monthssatisfaction of liabilities in the normal course of business. As of June 30, 2020, the Company has a shareholders’ deficit of $1,709,064 and beyond will be contingent upon generating sufficient revenue to cover our costsan accumulated deficit of operations and/or upon obtaining additional financing. For these reasons, our auditor$42,471,932 and has raisedgenerated operating losses since inception. These factors, among others, raise substantial doubt about ourthe ability of the Company 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 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, 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.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, oftencontinuation as a result of the needgoing concern is dependent upon its ability to make estimates about the effect of matters that are inherently uncertain. We do not believe that the following accounting policies currently fit this definition:generate revenues and its ability to continue raising capital.
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.
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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 policyhistorically funded its operations with sales of reservingequity and debt securities. The COVID-19 pandemic of 2020 has added uncertainty into the financial markets that the Company relies on for uncollectible accounts based onits operating and investment funding. It is unclear how long, or to what extent, the best estimatepandemic will impact the Company in 2020 and beyond. On April 30, 2020, the Company purchased certain assets of the amount of probable credit losses in our existing accounts receivable. We extend creditRaw Pharma, LLC (“Raw Pharma”) and agreed to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateralsublease Raw Pharma’s production facility. Management believes its Securities Purchase Agreement dated December 20, 2019, with GHS Investments, LLC (“GHS”), along with bridge financing from GHS or other securitysources, will provide sufficient funds to support accounts receivable and perform ongoing credit evaluations of customers and maintain an allowancemake up 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.any operating cash flows.
The estimated fair valueCompany’s business has been adversely affected by the instability, disruption, and quarantine restrictions caused by the recent COVID-19 pandemic. The COVID-19 pandemic may cause customers to suspend their decisions on ordering our products, make it impossible to attend or sponsor trade shows or other conferences in which our products are presented to distributors, customers and potential customers, for our customers to visit our physical location, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with purchases of certain financial instruments, including cashgoods, or commitments to develop new brands 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.private label products.
ASC 820 defines fair value asSignificant disruptions to communications and travel, including travel restrictions and other protective quarantine measures against COVID-19 by governmental agencies, have increased the exchange price that would be receiveddifficulty in delivering goods to our customers and could ultimately make such deliveries impossible. Travel restrictions and protective measures against COVID-19 could cause us to incur additional unexpected labor costs and expenses or could restrain our ability to retain the highly skilled personnel we need 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.our operations.
The change inCOVID-19 pandemic has added uncertainty to the Level 3 financial instrument is as follows:
Balance, June 30, 2017 | $ | 5,072,579 | |
Issued during the three months ended September 30, 2017 | $ | 443,482 | |
Exercises/Conversions | $ | (112,511) | |
Change in fair value recognized in operations | $ | (1,813,249) | |
Balance, September 30, 2017 | $ | 3,590,301 |
The estimated fair value ofmarkets that the derivative instruments were valued usingCompany relies on for its operating and investment funding. It has also negatively impacted 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.Company’s ability to meet its external financial reporting deadlines.
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, 2017 and September 30, 2016.
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.
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 SeptemberJune 30, 2017.2020. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Michael Welch,David Seeberger, and our Chief Financial Officer, Jens Mielke. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of SeptemberJune 30, 2017,2020, 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, 2017.2020.
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
Please refer to our Annual Report on Form 10-K/A10-K filed October 12, 2017July 9, 2020, for information regarding our pending legal proceedings. The following represents an updateThere are no updates to the itemsinformation disclosed in that filing: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
RMHB filed suit against Lyonpride for fraud and for declaratory relief with respect to a contract between the parties. RMHB seeks monetary damages against said Defendant.
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 filed a breach of contract claim, dealing with the same fact issues in the above case of RMHB v Statewide. RMHB still has not been served in this case.
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.
RMHB is seeking the return of Series A Preferred stock and common stock issued to certain defendants or later obtained by certain other defendants for little or no consideration paid to the Company. RMHB alleges the Company’s former Chairman of the Board breached his fiduciary duty to the Company by issuing these shares to himself and others.
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 JanuaryJune 1, 20172020 and November 13, 2017:September 2, 2020:
Date | Name | Shares Issued | Issue Price | Description | Exemption | ||||||||||
1/3/2017 | Louis G. Walz | 588,236 | 0.0170 | Shares Sold | Rule 506 | ||||||||||
1/3/2017 | Ruth Kerico | 500,000 | 0.0200 | Shares Sold | Rule 506 | ||||||||||
1/3/2017 | Bruce Wunsch | 100,000 | 0.0170 | Services Rendered | Section 4(2) | ||||||||||
1/3/2017 | Eagle Manufacturing Solutions | 491,176 | 0.0170 | Services Rendered | Section 4(2) | ||||||||||
1/3/2017 | Patricia Ann Wright | 150,000 | 0.0170 | Services Rendered | Section 4(2) | ||||||||||
1/3/2017 | Eason Wright | 500,000 | 0.0170 | Services Rendered | Section 4(2) | ||||||||||
1/3/2017 | John Jay Saldi | 100,000 | 0.0170 | Services Rendered | Section 4(2) | ||||||||||
1/3/2017 | Earl Pontillo | 250,000 | 0.0200 | Shares Sold | Rule 506 | ||||||||||
1/3/2017 | Ann M. Wieringa | 900,000 | 0.0170 | Shares Sold | Rule 506 | ||||||||||
1/4/2017 | Ann M. Wieringa | 900,000 | 0.0170 | Shares Sold | Rule 506 | ||||||||||
1/4/2017 | Vista Capital Investments | 10,000,000 | 0.0200 | Shares Sold | Rule 506 | ||||||||||
1/6/2017 | Eagle Manufacturing Solutions | 1,588,236 | 0.0170 | Shares Sold | Rule 506 | ||||||||||
1/6/2017 | Leroy Wheeler | 185,185 | 0.0270 | Shares Sold | Rule 506 | ||||||||||
1/6/2017 | David Economon | 200,000 | 0.0170 | Shares Sold | Rule 506 | ||||||||||
1/6/2017 | Robert & Kimberly Payne | 200,000 | 0.0250 | Shares Sold | Rule 506 | ||||||||||
1/6/2017 | Tammie L. Borders | 200,000 | 0.0250 | Shares Sold | Rule 506 | ||||||||||
1/6/2017 | Fred and Linda Borders | 600,000 | 0.0250 | Shares Sold | Rule 506 | ||||||||||
1/12/2017 | ValueCorp Trading Company | 1,000,000 | 0.0200 | Shares Sold | Rule 506 | ||||||||||
1/17/2017 | John R Anderson | 166,667 | 0.0300 | Shares Sold | Rule 506 | ||||||||||
1/17/2017 | Muleshoe Ranch | 166,667 | 0.0300 | Shares Sold | Rule 506 | ||||||||||
1/17/2017 | Steve Gill (Shelving Exchange) | 166,667 | 0.0300 | Shares Sold | Rule 506 | ||||||||||
1/18/2017 | David Economon | 350,000 | 0.0200 | Shares Sold | Rule 506 | ||||||||||
1/20/2017 | Howard Bruckner | 200,000 | 0.0500 | Shares Sold | Rule 506 | ||||||||||
1/20/2017 | Brooks Goodson | 300,000 | 0.0500 | Shares Sold | Rule 506 | ||||||||||
1/20/2017 | Robert & Kimberly Payne | 100,000 | 0.0500 | Shares Sold | Rule 506 | ||||||||||
1/23/2017 | Ronnie Neu | 555,556 | 0.0270 | Shares Sold | Rule 506 | ||||||||||
1/23/2017 | Patricia Ann Wright | 285,714 | 0.0350 | Shares Sold | Rule 506 | ||||||||||
1/23/2017 | Crackerjack Classic LLC | 1,500,000 | 0.0010 | Exercise of Warrants | Rule 506 | ||||||||||
1/24/2017 | Arthur Rezac | 100,000 | 0.0500 | Shares Sold | Rule 506 | ||||||||||
1/27/2017 | Patrick Dennehy | 100,000 | 0.0500 | Shares Sold | Rule 506 | ||||||||||
2/1/2017 | William Penz | 200,000 | 0.0500 | Shares Sold | Rule 506 | ||||||||||
2/15/2017 | Yael Moyal | 2,571,429 | 0.0350 | Shares Sold | Rule 506 | ||||||||||
2/17/2017 | Richard B Main | 222,222 | 0.0450 | Shares Sold | Rule 506 | ||||||||||
2/22/2017 | Lily Li | 10,000,000 | 0.1150 | Services Rendered | Section 4(2) | ||||||||||
2/24/2017 | Thomas O. Layman | 200,000 | 0.0500 | Shares Sold | Rule 506 | ||||||||||
2/27/2017 | Allred, Wilcox, & Hartley PLLC | 181,600 | 0.0840 | Services Rendered | Section 4(2) | ||||||||||
2/27/2017 | Yeal Moyal | 1,285,714 | 0.0350 | Shares Sold | Rule 506 | ||||||||||
2/27/2017 | Kathy Fernandez | 100,000 | 0.0200 | Shares Sold | Rule 506 | ||||||||||
2/27/2017 | Mark Ussery | 100,000 | 0.1100 | Services Rendered | Section 4(2) | ||||||||||
2/27/2017 | Terry Niedecken | 100,000 | 0.1100 | Services Rendered | Section 4(2) | ||||||||||
3/1/2017 | Kathy Fernandez | 505,096 | 0.0100 | Note Payable Conversion | Rule 506 | ||||||||||
3/27/2017 | EPIC Group One | 11,000,000 | 0.0850 | Services Rendered | Section 4(2) | ||||||||||
3/31/2017 | Jens Mielke | 357,143 | 0.0420 | Services Rendered | Section 4(2) | ||||||||||
3/31/2017 | Michael Welch | 206,044 | 0.0420 | Services Rendered | Section 4(2) | ||||||||||
3/31/2017 | David Seeberger | 137,363 | 0.0420 | Services Rendered | Section 4(2) | ||||||||||
4/7/2017 | Small Cap Voice | 300,000 | 0.0877 | Services Rendered | Section 4(2) | ||||||||||
6/29/2017 | Morris Rafi | 1,534,089 | 0.0349 | Note Payable Conversion | Rule 506 | ||||||||||
8/23/2017 | Universal Consulting LLC | 3,147,288 | 0.0100 | Note Payable Conversion | Rule 506 | ||||||||||
9/15/2017 | Homie Doroodian | 3,093,640 | 0.0177 | Note Payable Conversion | Rule 506 | ||||||||||
10/13/2017 | GHS Investments LLC | 24,000,000 | 0.0108 | Note Payable Conversion | Rule 506 | ||||||||||
10/18/2017 | Roy Meadows | 20,000,000 | 0.0216 | Note Payable Conversion | Rule 506 | ||||||||||
10/31/2017 | Michael Welch | 789,474 | 0.0196 | Services Rendered | Section 4(2) | ||||||||||
11/1/2017 | Roy Meadows | 25,000,000 | 0.0201 | Note Payable Conversion | Rule 506 | ||||||||||
11/3/2017 | Metexas Georgatos | 750,000 | 0.0186 | Services Rendered | Section 4(2) | ||||||||||
11/3/2017 | Eduardo Cabrera | 2,250,000 | 0.0186 | Services Rendered | Section 4(2) | ||||||||||
11/3/2017 | Wellington Shields Holdings LLC | 2,000,000 | 0.0186 | Services Rendered | Section 4(2) | ||||||||||
11/6/2017 | Small Cap Voice | 600,000 | 0.0168 | Services Rendered | Section 4(2) | ||||||||||
11/9/2017 | GHS Investments LLC | 28,000,000 | 0.0162 | Note Payable Conversion | Rule 506 |
Date | Name | Shares Issued | Issue Price | Description | Exemption |
7/15/2020 | Brian Rose | 854,701 | $ 0.0234 | Shares Sold | Rule 506 |
7/21/2020 | Charles Smith | 213,676 | $ 0.0234 | Shares Sold | Rule 506 |
7/28/2020 | Lyon Pride Media, LLC | 4,000,000 | $ 0.02905 | Legal Settlement | Rule 506 |
8/17/2020 | Winton Morrison | 213,676 | $ 0.0234 | Shares Sold | Rule 506 |
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Exhibit Number | Description of Exhibit |
31.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101 | Materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
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, 2017August 20, 2021
By:/s/ Michael WelchDavid Seeberger
Michael WelchDavid Seeberger
Title: Chairman of the Board of Directors, President and Chief Executive Officer
Date: November 14, 2017August 20, 2021
By:/s/ Jens MielkeCharles Smith
Jens MielkeCharles Smith
Title: Chairman and Chief Operating Officer
Date: August 20, 2021
By: /s/ Wally Stock
Wally Stock
Title: Chief Financial Officer