☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Colorado
|
20-8980078
|
(State or other jurisdiction of
|
(I.R.S. Employer Identification No.)
|
Incorporation or organization)
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☒
|
Emerging growth company
|
☒
|
|
2019
|
2018
|
||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash
|
$
|
2,965
|
$
|
27,925
|
||||
Accounts Receivable, net
|
56,459
|
5,000
|
||||||
Inventory
|
29,786
|
11,888
|
||||||
Prepaid expenses and other assets
|
19,675
|
17,592
|
||||||
Total current assets
|
108,885
|
62,405
|
||||||
Property and equipment, net
|
2,767
|
3,773
|
||||||
Intangible assets, net
|
9,452
|
8,021
|
||||||
Notes receivable, related party
|
452,709
|
94,061
|
||||||
Total assets
|
$
|
573,813
|
$
|
168,260
|
||||
|
||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
LIABILITIES
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$
|
665,791
|
$
|
284,394
|
||||
Accrued expenses
|
437,388
|
82,044
|
||||||
Loans from related parties
|
32,021
|
490,970
|
||||||
Deferred revenue
|
192,500
|
150,000
|
||||||
Notes payable current, net of discount
|
274,282
|
-
|
||||||
Total current liabilities
|
1,601,982
|
1,007,408
|
||||||
Long-term loan from related party
|
48,240
|
-
|
||||||
Long-term notes payable
|
125,000
|
-
|
||||||
Total liabilities
|
1,775,222
|
1,007,408
|
||||||
|
||||||||
STOCKHOLDERS' DEFICIT
|
||||||||
Common stock, no par value, 100,000,000 shares authorized, 33,792,589 and 27,140,550 issued and outstanding,
respectively, at January 31, 2019 and 2018
|
-
|
-
|
||||||
Additional Paid in Capital
|
7,238,699
|
5,325,684
|
||||||
Retained deficit
|
(8,440,108
|
)
|
(6,164,832
|
)
|
||||
Total Stockholders' deficit
|
(1,201,409
|
)
|
(839,148
|
)
|
||||
Total liabilities and stockholders' deficit
|
$
|
573,813
|
$
|
168,260
|
|
2019
|
2018
|
||||||
|
||||||||
Consulting Services
|
$
|
136,537
|
$
|
263,500
|
||||
Cost of consulting services
|
(110,761
|
)
|
(233,529
|
)
|
||||
Gross profit
|
25,776
|
29,971
|
||||||
|
||||||||
Operating costs and expenses
|
||||||||
Rents and other occupancy
|
59,450
|
67,927
|
||||||
Compensation
|
744,128
|
523,805
|
||||||
Professional, legal and consulting
|
597,099
|
193,950
|
||||||
General and administrative
|
355,814
|
307,023
|
||||||
Depreciation and amortization
|
1,826
|
2,308
|
||||||
Total operating costs and expenses
|
1,758,317
|
1,095,013
|
||||||
|
||||||||
Other income (expense)
|
||||||||
Interest expense
|
(104,783
|
)
|
(1,016
|
)
|
||||
Other expenses
|
6,666
|
-
|
||||||
Loss on impairment of investment
|
(345,394
|
)
|
-
|
|||||
Loss on debt conversion
|
(80,502
|
)
|
-
|
|||||
Loss on investment in affiliate
|
(18,722
|
)
|
(24,159
|
)
|
||||
Total other income (expense)
|
(542,735
|
)
|
(25,175
|
)
|
||||
|
||||||||
Loss from continuing operations, before provision for taxes on income
|
(2,275,276
|
)
|
(1,090,217
|
)
|
||||
Provision for taxes on income
|
-
|
-
|
||||||
Loss from continuing operations, net of tax
|
(2,275,276
|
)
|
(1,090,217
|
)
|
||||
Income from discontinued operations
|
-
|
1,479,497
|
||||||
Net income (loss)
|
$
|
(2,275,276
|
)
|
$
|
389,280
|
|||
|
||||||||
Basic earnings and fully diluted income (loss) per common share
|
||||||||
Continuing operations
|
$
|
(0.08
|
)
|
$
|
(0.04
|
)
|
||
Discontinued operations
|
$
|
-
|
$
|
0.05
|
||||
|
||||||||
Basic and fully diluted weighted average number of shares outstanding
|
29,222,516
|
27,140,550
|
|
2019
|
2018
|
||||||
Cash flows from operating activities:
|
||||||||
Net Loss
|
$
|
(2,275,276
|
)
|
$
|
389,280
|
|||
Depreciation and Amortization
|
1,826
|
2,308
|
||||||
Accretion of debt discount
|
68,182
|
-
|
||||||
Loss on debt conversion
|
80,502
|
-
|
||||||
Loss on impairment of investment
|
345,394
|
-
|
||||||
Loss on investment in affiliates
|
18,722
|
24,159
|
||||||
Stock compensation
|
197,720
|
-
|
||||||
Shares and warrants issued for services
|
272,438
|
-
|
||||||
Changes in assets and liabilities:
|
||||||||
Accounts receivable
|
(51,459
|
)
|
(5,000
|
)
|
||||
Inventory
|
(17,898
|
)
|
(11,888
|
)
|
||||
Investments in affiliates
|
(364,116
|
)
|
15,000
|
|||||
Notes receivable, related party
|
(358,648
|
)
|
(94,061
|
)
|
||||
Deposits, prepaids and other
|
(2,083
|
)
|
(17,592
|
)
|
||||
Accounts payable
|
386,397
|
36,324
|
||||||
Accrued expenses
|
295,042
|
139,156
|
||||||
Deferred revenue
|
42,500
|
150,000
|
||||||
Net cash (used in) operating activities from continuing operations
|
(1,360,757
|
)
|
627,686
|
|||||
Net cash (used in) operating activities from discontinued operations
|
-
|
(1,047,215
|
)
|
|||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Purchase of fixed assets
|
-
|
(4,024
|
)
|
|||||
Investment in Intangible assets
|
(2,250
|
)
|
-
|
|||||
Net cash provided (used) by investing from continuing operations
|
(2,250
|
)
|
(4,024
|
)
|
||||
Net cash provided (used) by investing from discontinued operations
|
-
|
2,137,026
|
||||||
|
||||||||
Cash flow from financing:
|
||||||||
Proceeds from stock issuance
|
765,700
|
-
|
||||||
Proceeds from warrant exchange
|
49,650
|
-
|
||||||
Proceeds from debt
|
551,100
|
-
|
||||||
Proceeds from related party loans
|
171,597
|
181,263
|
||||||
Payment to related party loans
|
(200,000
|
)
|
-
|
|||||
Net cash from (used) by financing from continuing operations
|
1,338,047
|
181,263
|
||||||
Net cash from (used) by financing from discontinued operations
|
-
|
(2,000,000
|
)
|
|||||
Net cash flows
|
(24,960
|
)
|
(105,264
|
)
|
||||
Cash, beginning of period
|
27,925
|
133,189
|
||||||
Cash, end of period
|
$
|
2,965
|
$
|
27,925
|
||||
|
||||||||
Supplemental cash flow
|
||||||||
Cash paid for interest
|
$
|
20,079
|
$
|
171,736
|
||||
Non-cash transactions
|
||||||||
Shares issued in exchange for debt
|
402,508
|
-
|
||||||
Shares and warrants issued for services
|
272,438
|
-
|
||||||
Debt Discount
|
225,000
|
-
|
||||||
|
$
|
899,946
|
$
|
-
|
|
Common Stock
|
|||||||||||||||||||
|
Shares
|
Amount
|
Additional Capital in excess of par value
|
Accumulated Deficit
|
Total
|
|||||||||||||||
Balance, January 31, 2017
|
27,140,550
|
$
|
-
|
$
|
3,152,658
|
$
|
(5,578,692
|
)
|
$
|
(2,426,034
|
)
|
|||||||||
Gain from related party transaction
|
-
|
-
|
2,173,026
|
(975,420
|
)
|
1,197,606
|
||||||||||||||
Net income
|
-
|
-
|
-
|
389,280
|
389,280
|
|||||||||||||||
Balance, January 31, 2018
|
27,140,550
|
-
|
5,325,684
|
(6,164,832
|
)
|
(839,148
|
)
|
|||||||||||||
Private share offering
|
3,828,500
|
-
|
765,700
|
-
|
765,700
|
|||||||||||||||
Shares issued in exchange for debt
|
2,012,539
|
-
|
402,507
|
-
|
402,507
|
|||||||||||||||
Warrants issued for services
|
-
|
-
|
172,438
|
-
|
172,438
|
|||||||||||||||
Beneficial conversion feature on convertible debt
|
-
|
-
|
225,000
|
-
|
225,000
|
|||||||||||||||
Stock based compensation
|
-
|
-
|
197,720
|
-
|
197,720
|
|||||||||||||||
Shares issued for investment
|
500,000
|
-
|
100,000
|
-
|
100,000
|
|||||||||||||||
Warrants exchange for shares
|
311,000
|
-
|
49,650
|
-
|
49,650
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(2,275,276
|
)
|
(2,275,276
|
)
|
|||||||||||||
Balance, January 31, 2019
|
33,792,589
|
$
|
-
|
$
|
7,238,699
|
$
|
(8,440,108
|
)
|
$
|
(1,201,409
|
)
|
January 31,
|
||||||||
2019
|
2018
|
|||||||
Leasehold improvements
|
$
|
2,200
|
$
|
2,200
|
||||
Office equipment, furniture and fixtures
|
26,276
|
26,276
|
||||||
28,476
|
28,476
|
|||||||
Accumulated amortization and depreciation
|
(25,709
|
)
|
(24,703
|
)
|
||||
$
|
2,767
|
$
|
3,773
|
|||||
●
|
$25,000 within twenty-four (24) hours of execution of the BTS,
|
|||
●
|
$25,000 on or before November 1, 2018.
|
|||
●
|
500,000 shares of common stock in STWC
|
|||
●
|
500,000 common share purchase warrants
|
Trademarks
|
2019
|
2018
|
Gross carrying amount
|
$ 13,260
|
$ 11,010
|
Accumulated amortization
|
3,809
|
2,989
|
Net intangible assets
|
$ 9,451
|
$ 8,021
|
Discontinued Operations Income Statement
|
||
|
Year Ended January 31,
|
|
|
|
2018
|
Rental income from the Regulated Entities (Affiliates)
|
$
|
2,342,391
|
Total revenues
|
|
2,342,391
|
Operating costs and expenses
|
|
|
Reserve for amounts due from Regulated Entities (Affiliates)
|
|
657,402
|
Rents and other occupancy
|
|
1,762,858
|
Depreciation and amortization
|
|
146,150
|
Total operating costs and expenses
|
|
2,566,410
|
Loss from continuing operations
|
|
(224,019)
|
Other income and (expenses)
|
|
|
Interest expense
|
|
(171,636)
|
Gain on settlement and cancellation of leases
|
|
1,959,177
|
Gain on sale of assets
|
|
—
|
Income (loss) from discontinued operations
|
$
|
1,563,522
|
|
2019
|
2018
|
|
|
|
Hourly fee contracts
|
$ 3,749
|
$ -
|
Fixed fee contracts
|
96,000
|
263,500
|
Monthly contracts
|
36,788
|
-
|
|
$ 136,537
|
$ 263,500
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities.
|
For the Fiscal Year Ending January 31,
|
|
|||
2020
|
|
|
55,250
|
|
2021
|
|
|
56,250
|
|
2022
|
42,750
|
|||
Thereafter
|
|
|
—
|
|
Total minimum lease payments
|
|
$
|
154,250
|
|
Year Ended January 31
|
|||
2019
|
2018
|
||
Income tax expense (benefit):
|
|||
Current:
|
|||
Federal
|
$ (346,143)
|
$ 138,483
|
|
State
|
(76,361)
|
18,024
|
|
Deferred income tax expense (benefit):
|
(422,504)
|
156,507
|
|
Valuation allowance
|
422,504
|
(156,507)
|
|
Provision
|
$ -
|
$ -
|
2019
|
$ 431,100
|
2020
|
125,000
|
|
556,100
|
Less Debt discount
|
(156,818)
|
|
$ 399,282
|
|
|
Warrants
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Number of Warrants
|
|
Exercise Price
|
|
Wtgd Avg Calculation
|
|
Wtgd Avg Remining Life
|
Balance at 1/31/2017
|
|
2,224,700
|
|
$ 5.00
|
|
$ 11,123,500
|
|
2.00
|
|
|
|
|
|
|
|
|
|
Granted
|
|
-
|
|
-
|
|
$ -
|
|
|
Exercised
|
|
-
|
|
-
|
|
$ -
|
|
|
Cancelled
|
|
-
|
|
-
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1/31/2018
|
|
2,224,700
|
|
$ 5.00
|
|
$ 11,123,500
|
|
1.00
|
|
|
|
|
|
|
|
|
|
Granted
|
|
2,000,000
|
|
0.16
|
|
$ 322,000
|
|
|
Exercised
|
|
(311,000)
|
|
0.16
|
|
$ (49,650)
|
|
|
Cancelled
|
|
(2,013,700)
|
|
$ 5.00
|
|
$ (11,091,850)
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1/31/19
|
|
1,900,000
|
|
$ 0.16
|
|
$ 304,000
|
|
1.71
|
Expected term (years)
|
5
|
Risk-free interest rate
|
2.73%
|
Volatility
|
218%
|
Expected dividend yield
|
0.00%
|
Name |
|
Age |
|
Position |
Director Since |
Erin Phillips |
|
43 |
|
President, Chief Financial and Accounting Officer and a Director |
2014 |
Matthew D. Willer |
|
42 |
|
President |
|
Financial Statements Index:
|
Page
|
|
|
||
Report of Independent Registered Public Accounting firm
|
3 |
|
Consolidated Balance Sheets, January 31, 2019 and 2018
|
4 |
|
Statements of Operations, for the years ended January 31, 2019 and
2018
|
5 |
|
Statements of Cash Flows, for the years ended January 31, 2019 and
2018
|
6 |
|
Statement of Changes in Stockholders’ Equity (Deficit), for the
years ended January 31, 2019 and 2018
|
7 |
|
Notes to Financial Statements, January 31, 2019 and 2018
|
8 |
Incorporated by Reference
|
|||||||||||||
Exhibit Number
|
Exhibit Description
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
Filed Herewith
|
|||||||
3.1
|
Articles of Incorporation
|
X
|
|||||||||||
10.1
|
Convertible Promissory Note dated March 22, 2019 with Power Up
Lending Group
|
8-K
|
000-52825
|
99.1
|
4/12/19
|
||||||||
10.2
|
Stock Purchase Agreement dated March 22, 2019 with Power Up Lending
Group
|
8.K
|
000-52825
|
99.2
|
4/12/19
|
||||||||
10.3
|
Convertible Promissory Note dated February 13, 2019 with Power Up
Lending Group
|
8-K
|
000-52825
|
99.1
|
2/19/19
|
||||||||
10.4
|
Stock Purchase Agreement dated February 13, 2019 with Power Up
Lending Group
|
8.K
|
000-52825
|
99.2
|
2/19/19
|
||||||||
10.5
|
LLC Operating Agreement of Meridian A, LLC dated 1/7/19
|
8-K
|
000-52825
|
99.2
|
2/5/19
|
||||||||
10.6
|
15% Promissory Note dated December 7, 2018 to Richland Fund, LLC
|
8-K
|
000-52825
|
99.1
|
3/5/19
|
||||||||
10.7
|
Settlement Agreement dated November 15, 2018 with Headgate II, LLC
|
8-K
|
000-52825
|
99.1
|
12/12/18
|
||||||||
10.8
|
Investor Relations Consulting Agreement dated October 26, 2018 with
Hayden IR, LLC
|
8-K
|
000-52825
|
99.1
|
11/1/18
|
||||||||
10.9
|
Consulting Agreement dated November 1, 2018 with J Paul Consulting
Corp.
|
8-K
|
000-52825
|
99.2
|
11/1/18
|
||||||||
10.10
|
Master Services Agreement, Trademark Agreement, Management Agreement,
and Consulting Services Agreement, each dated June 16, 2017 with STWC Sorrento Valley, LLC
|
8-K
|
000-52825
|
99.1
|
10/24/18
|
||||||||
10.11
|
Master Services Agreement, Development Agreement, Trademark
Agreement, Management Agreement, and Consulting Services Agreement, each dated October 11, 2018 with 2600 Meridian, LLC
|
8-K
|
000-52825
|
99.2
|
10/24/18
|
||||||||
10.12
|
Master Services Agreement, Trademark Agreement, Management Agreement,
and Consulting Services Agreement, each dated October 11, 2018 with HWH Farms, LLC
|
8-K
|
000-52825
|
99.3
|
10/24/18
|
||||||||
10.13
|
Employment Agreement dated October 15, 2018 with Erin Phillips*
|
8-K
|
000-52825
|
99.1
|
10/22/18
|
||||||||
10.14
|
Employment Agreement dated October 15, 2018 with Jay Kotzker
|
8-K
|
000-52825
|
99.2
|
10/22/18
|
||||||||
10.15
|
Employment Agreement dated October 18, 2018 with Shawn Phillips
|
8-K
|
000-52825
|
99.3
|
10/22/18
|
||||||||
10.16
|
Exchange Agreement dated October 15, 2018 with Shawn Phillips
|
8-K
|
000-52825
|
99.4
|
10.22/18
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10.17
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Note Purchase and Security Agreement dated August 29, 2018 with
Richland Fund, LLC
|
8-K
|
000-52825
|
99.5
|
10/22/18
|
||||||||
10.18
|
Binding Term Sheet dated September 5, 2018 with HiLife Creative
|
8-K
|
000-52825
|
99.6
|
10/22/18
|
||||||||
10.19
|
Warrant to Purchase Common Stock dated _____ to Elizabeth Illa
|
8-K
|
000-52825
|
99.7
|
10/22/18
|
||||||||
10.20
|
Warrant to Purchase Common Stock dated _____ to Jason Kotzker
|
8-K
|
000-52825
|
99.8
|
10/22/18
|
||||||||
10.21
|
Warrant to Purchase Common Stock dated _____ to Jennifer Yunker
|
8-K
|
000-52825
|
99.9
|
10/22/18
|
||||||||
10.22
|
Lease Assignment dated January 31, 2018 with Kalyx Colorado 695 Bryant LLC
|
8-K
|
000-52825
|
99.1
|
6/19/18
|
||||||||
10.26
|
Assignment and Assumption Agreement dated April 6, 2018 with Green Acres Partners A, LLC, et al.
|
8-K
|
000-52825
|
99.2
|
6/19/18
|
||||||||
10.27
|
Loan Agreement with Green Acres Partners A, LLC dated April 6, 2018 with Green Acres Partners A, LLC
|
8-K
|
000-52825
|
99.3
|
6/19/18
|
||||||||
10.28
|
Commercial Real Estate Lease dated October 1, 2017 with Timothy Riopelle
|
8-K
|
000-52825
|
99.4
|
6/19/18
|
||||||||
10.29
|
Master Services Agreement, Trademark Agreement, Management Agreement, and Consulting Services Agreement, each dated January 1, 2018 with COPR Enterprises,
LLC
|
8-K
|
000-52825
|
99.5
|
6/19/18
|
||||||||
10.30
|
Form of Master Services Agreement
|
8-K
|
000-52825
|
99.6
|
6/19/18
|
||||||||
10.31
|
Advisor Agreement dated July 1, 2018, with Matthew Willer
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X
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21
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Subsidiaries
|
X
|
|||||||||||
31.1
|
|
Rule 13a-14(d) Certification by Principal Executive Officer
|
X
|
||||||||||
31.2
|
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Rule 13a-14(d) Certification by Principal Financial Officer
|
X
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||||||||||
32.1
|
|
Section 1350 Certification of Principal Executive and Financial Officer
|
|
|
|
X | |||||||
101.INS
|
|
XBRL Instance Document
|
10-K
|
000-52825
|
101.INS
|
4/30/19
|
|||||||
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
10-K
|
000-52825
|
101.SCH
|
4/30/19
|
|||||||
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
10-K
|
000-52825
|
101.CAL
|
4/30/19
|
|||||||
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
10-K
|
000-52825
|
101.DEF
|
4/30/19
|
|||||||
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
10-K
|
000-52825
|
101.LAB
|
4/30/19
|
|||||||
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
10-K
|
000-52825
|
101.PRE
|
4/30/19
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or cause such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have
significant role in the registrant's internal control over financial reporting.
|
e)
|
designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
|
f)
|
designed such internal control over financial reporting, or cause such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
|
g)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
h)
|
disclosed in this report any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
|
c)
|
all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
d)
|
any fraud, whether or not material, that involves management or other employees who have
significant role in the registrant's internal control over financial reporting.
|
5.
|
The classes of shares and number of shares of each class that the corporation is authorized to issue are as
follows.
|
7.
|
(Caution: Leave blank if the document does not have a delayed effective date.
Stating a delayed effective date has significant legal consequences. Read instructions before entering a date.)
|
1.
|
All shares of common stock shall share equally in dividends. Subject to the applicable
provisions of the laws of this State, the Board of Directors of the Corporation may, from time to time, declare and the Corporation may pay dividends in cash, property, or its own shares, except when the Corporation is insolvent or when the
payment thereof would render the Corporation insolvent or when the declaration or payment thereof would be contrary to any restrictions contained in this Certificate of Incorporation. When any dividend is paid or any other distribution is
made, in whole or in part, from sources other than unreserved and unrestricted earned surplus, such dividend or distribution shall be identified as such, and the source and amount per share paid from each source shall be disclosed to the
stockholder receiving the same concurrently with the distribution thereof and to all other stockholders not later than six months after the end of the Corporation's fiscal year during which such distribution was made.
|
2.
|
All shares of common stock shall share equally in distributions in partial liquidation.
Subject to the applicable provisions of the laws of this State, the Board of Directors of the Corporation may distribute, from time to time, to its stockholders in partial liquidation, out of stated capital or capital surplus of the
Corporation, a portion of its assets in cash or property, except when the Corporation is insolvent or when such distribution would render the Corporation insolvent. Each such distribution, when made, shall be identified as a distribution in
partial liquidation, out of stated capital or capital surplus, and the source and amount per share paid from each source shall be disclosed to all stockholders of the Corporation concurrently with the distribution thereof. Any such
distribution may be made by the Board of Directors from stated capital without the affirmative vote of any stockholders of the Corporation.
|
b. The designations, powers, rights, preferences, qualifications, restrictions and limitations of the preferred stock shall be established
from time to time by the Corporation's Board of
Directors, in accordance with Colorado law.
|
c. i) Cumulative voting shall not be allowed in elections of directors or for any purpose.
|
ii)
|
No holders of shares of capital stock of the Corporation shall be entitled, as such, to any preemptive or
preferential right to subscribe to any unissued stock or any other securities which the Corporation may now or hereafter be authorized to issue. The Board of Directors of the Corporation, however, in its discretion by resolution, may
determine that any unissued securities of the Corporation shall be offered for subscription solely to the holders of common stock of the Corporation, or solely to the holders of any class or classes of such stock, which the Corporation may
now or hereafter be authorized to issue, in such proportions based on stock ownership as said board in its discretion may determine.
|
iii)
|
The Board of Directors may restrict the transfer of any of the Corporation's stock issued by giving the
Corporation or any stockholder "first right of refusal to purchase" the stock, by making the stock redeemable, or by restricting the transfer of the stock under such terms and in such manner as the directors may deem necessary and as are
not inconsistent with the laws of this State. Any stock so restricted must carry a conspicuous legend noting the restriction and the place where such restriction may be found in the records of the Corporation.
|
iv)
|
The judgment of the Board of Directors as to the adequacy of any consideration received or to be received for
any shares, options, or any other securities which the Corporation at any time may be authorized to issue or sell or otherwise dispose of shall be conclusive in the absence of fraud, subject to the provisions of these Articles of
Incorporation and any applicable law.
|
d. Any action required or permited by the Colorado Business Corporation Act to be taken at a shareholders’ meeting may be taken without a
meeting if the shareholders holding
shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting, at
which all of the shares entitled to vote thereon
were present and voted, consent to such action in writing. |
a.
|
Annual budget for operations
|
b.
|
Joint venture relationships and general business development, including acquisition review and joint venture
relationships
|
c.
|
Acquisition and development strategy for national footprint
|
CONDENSED CONSOLIDATED BALANCE SHEETS - Parenthetical - $ / shares |
Jan. 31, 2019 |
Jan. 31, 2018 |
---|---|---|
Details | ||
Common Stock, Par or Stated Value Per Share | $ 0 | $ 0 |
Common Stock, Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock, Shares, Issued | 33,792,589 | 27,140,550 |
Common Stock, Shares, Outstanding | 33,792,589 | 27,140,550 |
Note 1 - Organization |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Notes | |
Note 1 - Organization | Note 1 Organization
STWC HOLDINGS, INC., through its wholly-owned subsidiary, Strainwise, Inc., (identified in these footnotes as STWC we us or the Company) provides branding marketing, administrative, accounting, financial and compliance services (Fulfillment Services) to entities in the cannabis retail and production industry. The Company originally incorporated in the State of Utah on April 25, 2007, and redomiciled to Colorado by merging into a Colorado corporation incorporated on June 7, 2016. Strainwise, Inc. was originally was incorporated in the state of Colorado as a limited liability company on June 8, 2012, and subsequently converted to a Colorado corporation on January 16, 2014.
On December 13, 2018, the Company invested in Meridian A, LLC which owns a CBD retail store located in Oklahoma. The companys Chief executive office is the managing member of the entity and STWC Holdings, Inc. owns 75% of the legal entity. In accordance with Accounting Standards Codification 810 Consolidation, the Company has consolidated the entity. |
Note 2 - Summary of significant accounting policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 2 - Summary of significant accounting policies | Note 2 Summary of significant accounting policies
Basis of presentation - The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The Company has elected a fiscal year ending on January 31. All intercompany balances and transactions have been eliminated in the consolidated financial statements.
Going Concern and Managements Plan - Our Consolidated Financial Statements as of and for the year ended January 31, 2019 were prepared on the basis of a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. Accordingly, they do not give effect to adjustments that could be necessary should we be required to liquidate assets.
Our ability to continue as a going concern and raise capital for specific strategic initiatives could also depend on obtaining adequate capital to fund operating losses until it becomes profitable. We can give no assurances that any additional capital that it is able to obtain, if any, will be sufficient to meet its needs, or that any such financing will be obtainable on acceptable terms.
Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following: those related to revenue recognition, allowance for doubtful accounts and notes receivable and unbilled services, lives and recoverability of equipment and other long-lived assets, realization of deferred tax assets, valuation of equity-based transactions, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements.
Cash and cash equivalents the company considers all cash in banks, money market funds, and certificates of deposit with a maturity of less than three months to be cash equivalents. During the year-ended January 31, 2019 the Company was able to obtain a corporate bank account at a major financial institution. Cash balances may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. For the years presented no balances exceeded the federally insured limits.
Prepaid expenses and other assets Prepaid expenses and other current assets consist of various payments the Company has made in advance for goods or services to be received in the future. As of January 31, 2019, prepaid expenses was comprised of advance payments made to third parties for general expenses. Prepaid general expenses are amortized over the applicable periods which approximate the life of the contract or service period.
Tenant improvements and office equipment Tenant improvements and office equipment are recorded at cost and are depreciated under straight line methods over each item's estimated useful life. Management reviews the Companys tenant improvements and office equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations.
Tenant improvements and office equipment, net of accumulated amortization and depreciation are comprised of the following:
Tenant improvements are amortized over the term of the lease, and office equipment is depreciated over its useful lives, which has been deemed by management to be three years. Amortization and depreciation expense related to tenant improvements and office equipment for the fiscal years ended January 31, 2019 and 2018 was $1,006 and $1,576, respectively.
Income taxes The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Investment in Unconsolidated Entity The Company has a significant and non-controlling investment in several entities. The Company accounts for its investment using the equity method based on the ownership interest and ability to exert significant influence. Accordingly, investments are recorded at cost, and adjustments to the carrying amount of the investment are recognized in the period incurred. The Companys share of the earnings or losses are reported in the other income and expense section of the income statement.
The Company acquired a 50% interest in Sentinel Strainwise, LLC (SSL) in June 2015 for $25,000. In accordance with Accounting Standard Codification 810-10, Consolidation-Overall, management evaluated the fair value of the Companys investment in SLL and determined that there is no value as of January 31, 2018. The entity was non-operational in the year-ended January 31, 2018 and fully dissolved in the year-ended January 31, 2019.
On September 5, 2018, the Company entered into a Binding Term Sheet (BTS) with Michael Hornbeck for the acquisition of an interest in a yet to be established joint-venture entity that will hold the intellectual property assets related to HiLife Creative (et. al.) Pursuant to the BTS, the Company agreed to pay $120,000 overall consideration, payable as follows:
STWC will also assume approximately $70,000 in debt owned by Hornbeck to various creditors. The $70,000.00 assumed by STWC will be paid to Hornbeck or his assigns pursuant to a yet to be executed promissory note with a maturity date of January 31, 2019.
The joint-venture entity was established September 10, 2018 as Volume 2, LLC and was 51% owned by STWC and 49% by Michael Hornbeck. Notwithstanding the foregoing, the BTS called for Hornbeck to retain all control of and manage the day-to-day operations of Volume 2, LLC and draw a salary of $6,000 per month. The Company recognized an impairment on the investment effective day one as the entity is not able to funds its operations. Loss on impairment of $345,394 was recognized in other expense for the year-ended January 31, 2019. The Company recognized its share of the Volume 2s losses of $18,722 in other expense for the year-ended January 31, 2019. The consideration payment due November 1, 2018 has not been paid.
During the year-ended January 31, 2019 the Company invested in 2600 Meridian, LLC as a 25% owner. The Company also loaned $29,368 to the entity during 2018. The loans are reflected on the balance sheet in notes receivable, related party.
Long-Lived Assets In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
Beneficial Conversion Feature - If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (BCF). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Trademarks Trademarks and other intangible assets are stated at cost and are amortized using the straight-line method over fifteen years. Amortization expense for the years ended January 31, 2019 and 2018 was $820 and $732, respectively.
Discontinued Operations During November 2017, the Company settled all remaining operations related to its rental activities with regulated entities. As a consequence of the disposition, the operating results and the assets and liabilities of the discontinued operations, which formerly comprised the rental operations, are presented separately in the Company's financial statements. Summarized financial information for the discontinued rental business is shown below. Prior period balances have been reclassified to present the operations of the rental business as a discontinued operation. No amounts related to discontinued operations remained on the balance sheet as of January 31, 2018. There was no discontinued operations activity during the year ended January 31, 2019.
Comprehensive Income (Loss) Comprehensive income is defined as all changes in stockholders equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. Since the Companys inception there have been no differences between the Companys comprehensive loss and net loss.
Net income per share of common stock - We present earnings per share (EPS) in accordance with ASC 260 Earnings per Share, which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.
Convertible notes, outstanding options and warrants underlying 4,150,000 and 2,224,700 shares, shares respectively, at January 31, 2109 and 2018 do not assume conversion, exercise or contingent exercise in the computation of diluted loss per share because the effect would be anti-dilutive.
Revenue Recognition
Effective February 1, 2018, the Company adopted ASC 606 Revenue from Contracts with Customers using the modified retrospective method. There was no adjustment required upon transition. Under ASC 606, the Company recognizes revenue applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
Consulting Services
We generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for an hourly fee; or, (2) on a fixed fee basis; or (3) a monthly fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services for hourly or fixed fee contracts.
For hourly based service contracts, we recognize revenue over time as services are performed and customers simultaneously consume such services. Any advances or retainers received from clients for hourly services are reflected in the Deferred revenue liability account until we recognize revenues as we incur and charge billable hours.
Our fixed fee basis engagements are recognized at a point in time. Generally, our fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement as a whole. Although fees are typically collected in advance and the services provided have no alternative use to the Company, there is not a specific enforceable right to payment for the cost of services provided plus a reasonable profit margin. Accordingly, advances received at contract inception are reflected in the Deferred revenue liability account until the end of the contract when revenue is recognized and the customer takes control of the deliverable. These engagements do not generally exceed a one-year term.
Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. During the year ended January 31, 2019 we have refunded approximately $26,251 of advances or retainers from fixed fee and hourly engagements that terminated prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided.
Certain of our fixed fee contracts assisting customers with license applications include a success fee which is earned if the customer is awarded a license. We exclude such variable consideration from the transaction price and recognize the revenue when and if the license is awarded as the uncertainty of the application process creates a probability of significant revenue reversal.
Our monthly fee arrangements are billed on a monthly basis in arrears for a variety of services and are recognized over time as the customers simultaneously consume such services.
The revenue by contract type for the periods ending January 31, 2019 and 2018 are listed in the table below:
Deferred revenue as of January 31, 2019 and 2018 was $192,500 and $150,000, respectively. The Company is unable to determine timing for revenue recognition at this time for its deferred revenue due to state regulation changes.
Reclassifications- Certain account reclassifications have been made to prior period balances to reflect the current periods presentation format; such reclassifications had no impact on the Companys consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Companys consolidated balance sheets.
Stock-Based Compensation The Company records equity instruments at their fair value on the measurement date by utilizing the Black-Scholes option-pricing model. Stock Compensation for all share-based payments, is recognized as an expense over the requisite service period.
Significant assumptions utilized in determining the fair value of our stock options included the volatility rate, estimated term of the options, risk-free interest rate and forfeiture rate. The term of the options was assumed to be five years. The risk-free interest rate was determined utilizing the treasury rate with a maturity equal to the estimated term of the option grant. Finally, management assumed a 0% forfeiture rate in fiscal year 2018.
Non-employee share-based compensation charges generally are immediately vested and have no future performance requirements by the non-employee and the total share-based compensation charge is recorded in the period of the measurement date.
Recently Issued Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and ensure that there are proper controls in place to ascertain that the Companys financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below:
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases ("ASU 2016-02"). The guidance in this new standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to the current accounting and eliminates the current real estate-specific provisions for all entities. The guidance also modifies the classification criteria and the accounting for sales-type and direct financing leases for lessors. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company adopted the standard effective February 1, 2019 by recording an immaterial transition adjustment and right of use assets and lease liabilities of approximately $150,000.
In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which among other things, these amendments require the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of the pronouncement.
In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify certain disclosure requirements of fair value measurements and are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is in the process of evaluation the impact of the pronouncement. |
Note 3 - Going concern |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Notes | |
Note 3 - Going concern | Note 3 Going concern:
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Since inception, we have not achieved profitable operations, and have cumulative losses through January 31, 2019 of $8.4 million. The Companys losses to date raise substantial doubt about the Companys ability to continue as a going concern. The Companys ability to continue as a going concern is dependent upon the Companys achieving a sustainable level of profitability. The Company intends to continue financing its future development activities and its working capital needs largely from the private sale of the Companys securities, with additional funding from other traditional financing sources, including convertible term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. However, the financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Note 4 - Fair value of financial instruments |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Notes | |
Note 4 - Fair value of financial instruments | Note 4 Fair value of financial instruments
The carrying amounts of cash and current liabilities approximate fair value because of the short maturity of these items. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. We do not hold or issue financial instruments for trading purposes, nor do we utilize derivative instruments in the management of the Companys interest rate market risks.
The FASB Codification clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability
Level 3 Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. |
Note 5 - Commitments and contingencies |
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Notes | |||||||||||||||||||||||||||||||
Note 5 - Commitments and contingencies | Note 5 Commitments and contingencies
The Company entered into a lease agreement with an affiliate for the Companys corporate office needs, consisting of 4,000 square feet of office space. The lease is for a 5-year period ending October 31, 2021. This lease to the Company is on the same terms and conditions as is the direct lease between the affiliate and the independent lessor.
During the years ended January 31, 2019 and 2018, rent expense was $59,450 and $67,927, respectively.
As of January 31, 2019, future minimum lease payments are as follows:
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Note 6 - Note Receivable |
12 Months Ended |
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Jan. 31, 2019 | |
Notes | |
Note 6 - Note Receivable | Note 6 Notes Receivable
The Company has management and licensing agreements with a private entity in Puerto Rico 39% owned by Erin Phillips to operate four dispensaries and one cultivation operation in Puerto Rico. In conjunction with these agreements, the Company as begun providing funds to operate the Puerto Rico operations, which will be evidenced by a promissory note. The terms have not been finalized on this note and currently there is no specified terms to the agreement. Through January 31, 2019 the Company has advanced $280,607 related to the note.
The Company has management and licensing agreements with two private entities in Oklahoma. STWC has a 25% ownership in 2600 Meridian LLC, and an option to acquire 25% interest in HWH Farms, LLC. In conjunction with these agreements, the Company has begun providing funds for start-up and development costs, which will be evidenced by a promissory note. The terms have not been finalized on these notes and currently there is no specified terms to the agreement. Through January 31, 2019 the Company has advanced $29,368 to 2600 Meridian, LLC and $141,388 to HWH Farms, LLC related to the notes. |
Note 7 - Income Taxes |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jan. 31, 2019 | |||||||||||||||||||||||||||||||||||||
Notes | |||||||||||||||||||||||||||||||||||||
Note 7 - Income Taxes | Note 7 Income Taxes
The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the accounting bases and the tax bases of the Companys assets and liabilities. The deferred tax assets and liabilities are computed using enacted tax rates in effect for the year in which the temporary differences are expected to reverse.
ASC 740, Income Taxes provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized. The components of the income tax provision are as follows:
The enactment of the Tax Cuts and Jobs Act reduced the Federal corporate tax rate from 35% to 21%.
We have a net operating loss carryforward for financial statement reporting purposes of $8,440,108 and $6,164,832 from the years ended January 31, 2019 and 2018, respectively.
The net deferred tax assets for 2018 and 2017 were fully offset by a 100% valuation allowance. |
Note 8 - Notes Payable |
12 Months Ended | ||||||||||
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Jan. 31, 2019 | |||||||||||
Notes | |||||||||||
Note 8 - Notes Payable | Note 8 Notes Payable
Note purchase and security agreement On August 29, 2018, the Company entered into a Note Purchase and Security Agreement with Richland Fund, LLC., a Delaware limited liability company. Pursuant to the Agreement, Richland agreed to purchase Convertible Promissory Notes of the Company in the aggregate principal amount of $225,000, funded in three tranches, (i) $100,000.00 (the "First Note"), (ii) $67,000.00 (the "Second Note"), and (iii) the balance of $58,000.00 (the "Third Note"). The Notes bear 12% interest per annum, with the last payment under the Notes due December 15, 2020. The Notes are secured by all assets of the Company and guarantees from Shawn and Erin Phillips.
The Notes are convertible into common stock of the Company. The conversion price will be equal to the lower of (i) $0.15 cents per share (ii) or the average of the closing bid price of the Company's common stock taken over the three trading days prior to conversion or (iii) upon any issuance by the Company of common stock, or a security that is convertible into common stock, at a price lower than a net receipt to the Company of $0.15 per share, at such price that shall be at the same discount ratio as on the Funding Date. The conversion price of the Notes will be further subject to proportional adjustment for stock splits, reverse stock splits or combinations of shares, stock dividends, and the like. There are penalties for failure to timely deliver conversion shares. The company recognized a beneficial conversion feature on the notes as a discount and additional paid in capital of $225,000. The company has recognized $68,182 in interest expense for the amortization of the debt discount.
In connection with the funding agreement, the Company agreed to form and organize a subsidiary. The Company and lender are in discussions regarding the assets to be held in the subsidiary, nothing has been finalized as of the issuance date.
Loan Agreement On April 6, 2018, the Company entered into a loan agreement with Green Acres Partners A, LLC, (the lender) whereby the lender agreed to loan to the Company $205,000. The loan proceeds are to be used specifically for the capital needs of two related party projects in San Diego, California. The interest rate on the notes is 12% per annum and monthly interest payments are due the first day beginning no later than August 1, 2019, thereafter the Company shall pay interest and principal on 60% of the Companys ownership percentage of the available profits from the San Diego projects. The loan is personally guaranteed by Shawn Phillips.
Secured Promissory Note On December 7, 2018, the Company entered into a 15% Secured Promissory Note with Richland Fund, LLC, (the lender) whereby the lender agreed to loan to the Company $126,100. If any interest payment remains unpaid and the lender has not declared the entire principal and unpaid accrued interest due and payable, the interest rate on that amount only will be increased to 20% per annum, until the past due interest amount is paid in full. The note originally matured on March 7, 2019 but was extended to a maturity date of August 1, 2019.
The table below indicates the mandatory principal payments under the notes payable
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Note 9 - Equity |
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Note 9 - Equity | Note 9 - Equity
Warrants On August 29, 2018 the Company issued Richland Fund, LLC warrants to purchase 100,000 shares of the Company's common stock. Richland Fund, LLC exercised the warrants on October 3, 2018 for $18,000.
On October 15, 2018, the Company issued warrants to purchase 1,900,000 shares of its common stock to three individuals in exchange for services, respectively. The warrants all carry two-year terms and an exercise price of $0.16 per share. Forty percent of each warrant may be exercised pursuant to a cashless exercise formula.
The company entered into a consulting arrangement with J Paul Consulting during the period. As compensation for services, JPCC will receive warrants to purchase up to 150,000 shares of our common stock. The three-year Warrants shall vest according to the following schedule: (i) 50,000 two months from the November 1, 2018 (the "First Tranche"); (ii) 50,000 four months from the November 1, 2018 (the "Second Tranche"); and (iii) 3, 50,000 six months from the November 1, 2018 (the "Third Tranche"). The exercise price for the Warrants is $0.80 per share for the First Tranche, $1.00 for the Second Tranche, and $1.25 for the Third Tranche. The term of the Consulting Agreement is for six months beginning on November 1, 2018. The warrants have not been granted as of the issuance date.
Stock Options The Company granted 250,000 stock options during the period. The Company has recognized stock compensation expense of $197,720 for the period ended January 31, 2019.
The company entered into a consulting arrangement with Hayden & Tysadco during the period. As compensation for their services, we the Company issued a total of 25,000 shares which vest at a schedule of 10,000 shares on November 1, 2018, 7,500 shares on the 120th day from November 1, 2018, and 7,500 shares on the 180thday from November 1, 2018, subject to the IR Agreement being in effect as of each applicable vesting date. Shares issued for services are recognized in other expense in the period earned.
The Company accounts for unit-based compensation using the Black-Scholes model to estimate the fair value of unit-based awards at the date of grant. The Black-Scholes model requires the use of highly subjective assumptions, including value of the enterprise, expected life, expected volatility, and expected risk-free rate of return. Other reasonable assumptions could provide differing results. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, expected time to a liquidity event, exercise patterns, and post-vesting forfeitures. The Company estimates volatility based on the historical volatility of comparable companys common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black-Scholes model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent term equal to the expected life of the award. The Company uses historical data to estimate pre-vesting option forfeitures and record unit-based compensation for those awards that are expected to vest. The Company adjusts unit-based compensation for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate is recognized in the period the forfeiture estimate is changed.
The assumptions used in the fair value calculations are as follows for the period ended January 31, 2019:
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Note 10 - Related Party |
12 Months Ended |
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Jan. 31, 2019 | |
Notes | |
Note 10 - Related Party | Note 10 Related Party
The Company has entered into separate management and licensing contracts with STWC Sorrento Valley, LLC which is partially owned by the Company's CEO, Erin Phillips. Ms. Phillips owns 27.5% of the STWC Sorrento Valley, LLC. Ms. Phillips allocated $200,000 of the Green Acres note to fund the related project in California as directed by the note agreement which reduced the liability to Ms. Phillips for loan advances received as of January 31, 2019.
The Company manages its cash flow by utilizing related party loans. During the year ended January 31, 2019 and 2018 the company borrowed $171,597 and $181,263, respectively, from related parties to fund operations. The loans do not carry any interest. The Company converted an accrued expense to a related party to a note payable in the amount of $60,300. The note has a maturity of May 2020, $48,240 is reflected in Long-term loan to related party on the balance sheet. As of January 31, 2019, and 2018, the Company reflected current loans payable to related parties of $32,021 and $490,970, respectively. |
Note 11 - Subsequent Events |
12 Months Ended |
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Jan. 31, 2019 | |
Notes | |
Note 11 - Subsequent Events | Note 11 Subsequent Events
GAAP requires an entity to disclose events that occur after the balance sheet date but before financial statements are issued or are available to be issued (subsequent events) as well as the date through which an entity has evaluated subsequent events. There are two types of subsequent events. The first type consists of events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, (recognized subsequent events). The second type consists of events that provide evidence about conditions that did not exist at the date of the balance sheet but arose subsequent to that date (non-recognized subsequent events).
Power Up
On February 13, 2019, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. ("Power Up") pursuant to which Power Up agreed to purchase a convertible promissory note in the face amount of $103,000. On February 15, 2019, the Company issued the Note. The Note matures on February 13, 2020, and bears interest at 12% per annum, increasing to 22% after maturity.
On March 18, 2019, STWC Holdings, Inc., entered into the second tranche of the potential $1,000,000 funding with Power Up. The Company entered into a second Securities Purchase Agreement pursuant to which Power Up agreed to purchase a convertible promissory note in the face amount of $53,000. On March 18, 2019, the Company issued the Note. The Note matures on March 18, 2020, and bears interest at 12% per annum, increasing to 22% after maturity.
Under the Note, Power Up may convert all or a portion of the outstanding principal of the Note into shares of common stock of the Company beginning on the date which is 180 days from the date of the Note, at a price equal to 61% of the lowest trading price during the 20 trading day period ending on the last complete trading date prior to the date of conversion; provided, however, that Power Up may not convert the Note to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company's issued and outstanding Common Stock.
If the Company prepays the Note within 30 days of the date of the Note, the Company must pay all of the principal at a cash redemption premium of 110%; if the prepayment is made between the 31st day and the 60th day after the date of the Note, then the redemption premium is 115%; if the prepayment is made from the 61st to the 90th day after date of the Note, then the redemption premium is 120%; if the prepayment is made from the 91st to the 120th day after the date of the Note, then the redemption premium is 125%; if the prepayment is made from the 121st to the 150th day after the date of the Note, then the redemption premium is 130%; and if the prepayment is made from the 151st to the 180th day after the date of the Note, then the redemption premium is 135%. The Note cannot be prepaid after the 180th day following the date of the Note.
The Company is required to reserve for issuance upon conversion of the Note, six times the number of shares that would be issuable upon full conversion of the Note, assuming the 4.99% limitation were not in effect. In connection with the Note, the Company has caused its transfer agent to reserve initially 1,494,276 shares of Common Stock. The Company received a net amount of $150,000, with $6,000 paid for Power Up's legal and due diligence expenses.
Employment Agreement
On October 15, 2018, the Company entered into an Employment Agreement with Jay Kotzker ("Mr. Kotzker"). On March 6, 2019, Mr. Kotzker resigned and his position with the Company and his Employment Agreement was terminated by mutual consent of the parties.
On February 1, 2019, STWC Holdings, Inc., a Colorado corporation dba Strainwise (herein referred to as "we," "our," "us," "STWC" and the "Company") entered into an Executive Employment Agreement (the "Willer Employment Agreement") with Matthew Willer ("Mr. Willer"). Pursuant to the Willer Employment Agreement, Mr. Willer agreed to serve as the Company's President for a term commencing on February 1, 2019 and continuing until terminated by either party. Mr. Willer will receive a base salary of $150,000 per year. If the Agreement is terminated by Mr. Willer with "good reason" or by the Company without "cause," Mr. Willer will be entitled to severance pay equal to his base salary for three months. The Willer Employment Agreement otherwise contains standard terms and conditions.
General Counsel
On April 3, 2019, the Company engaged Ms. Jean Gonnell as general counsel. Ms. Gonnell, a well-known cannabis attorney, will oversee all legal, regulatory compliance, M&A, government relations and lobbying functions as part of STWC's continued commitment to growth and expansion in the industry.
Joint Venture
On April 11, 2019, the Company announced a joint venture with Dana Ress of Denver's RedPoint Solutions, for the development of a software package customized for the cannabis industry. Under the joint venture, STWC and Ress will work together to develop an efficient and scalable software platform that will be the first comprehensive management system for the cannabis industry. The Supergrower platform, a SaaS product, is designed to operate across all standalone software, aggregating data, performing analytics and providing valuable insights to customers via customizable reports and dashboards. The web-based software will be built upon the long-proven Salesforce platform providing powerful workflow and CRM functionality to the marijuana operator. Furthermore, Supergrower is built as an out-of-the-box solution that can also be customized to whatever extent an operator needs. |
Note 2 - Summary of significant accounting policies: Basis of Presentation (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Basis of Presentation | Basis of presentation - The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The |
Note 2 - Summary of significant accounting policies: Going Concern (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Going Concern | Going Concern and Managements Plan - Our Consolidated Financial Statements as of and for the year ended January 31, 2019 were prepared on the basis of a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business. Accordingly, they do not give effect to adjustments that could be necessary should we be required to liquidate assets.
Our ability to continue as a going concern and raise capital for specific strategic initiatives could also depend on obtaining adequate capital to fund operating losses until it becomes profitable. We can give no assurances that any additional capital that it is able to obtain, if any, will be sufficient to meet its needs, or that any such financing will be obtainable on acceptable terms. |
Note 2 - Summary of significant accounting policies: Use of estimates (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the period they are deemed to be necessary. Significant estimates made in the accompanying financial statements include but are not limited to following: those related to revenue recognition, allowance for doubtful accounts and notes receivable and unbilled services, lives and recoverability of equipment and other long-lived assets, realization of deferred tax assets, valuation of equity-based transactions, contingencies and litigation. The Company is subject to uncertainties, such as the impact of future events, economic, environmental and political factors, and changes in the business climate; therefore, actual results may differ from those estimates. When no estimate in a given range is deemed to be better than any other when estimating contingent liabilities, the low end of the range is accrued. Accordingly, the accounting estimates used in the preparation of the Company's financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company's operating environment changes. Changes in estimates are made when circumstances warrant. Such changes and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. |
Note 2 - Summary of significant accounting policies: Cash and cash equivalents (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Cash and cash equivalents | Cash and cash equivalents the company considers all cash in banks, money market funds, and certificates of deposit with a maturity of less than three months to be cash equivalents. During the year-ended January 31, 2019 the Company was able to obtain a corporate bank account at a major financial institution. Cash balances may exceed federally insured limits. Management believes the financial risk associated with these balances is minimal and has not experienced any losses to date. For the years presented no balances exceeded the federally insured limits. |
Note 2 - Summary of significant accounting policies: Prepaid expenses and other assets (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Prepaid expenses and other assets | Prepaid expenses and other assets Prepaid expenses and other current assets consist of various payments the Company has made in advance for goods or services to be received in the future. As of January 31, 2019, prepaid expenses was comprised of advance payments made to third parties for general expenses. Prepaid general expenses are amortized over the applicable periods which approximate the life of the contract or service period. |
Note 2 - Summary of significant accounting policies: Tenant improvements and office equipment (Policies) |
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Tenant improvements and office equipment | Tenant improvements and office equipment Tenant improvements and office equipment are recorded at cost and are depreciated under straight line methods over each item's estimated useful life. Management reviews the Companys tenant improvements and office equipment for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Maintenance and repairs of property and equipment are charged to operations. Major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is included in operations.
Tenant improvements and office equipment, net of accumulated amortization and depreciation are comprised of the following:
Tenant improvements are amortized over the term of the lease, and office equipment is depreciated over its useful lives, which has been deemed by management to be three years. Amortization and depreciation expense related to tenant improvements and office equipment for the fiscal years ended January 31, 2019 and 2018 was $1,006 and $1,576, respectively. |
Note 2 - Summary of significant accounting policies: Income taxes (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Income taxes | Income taxes The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. |
Note 2 - Summary of significant accounting policies: Investment in Unconsolidated Entity (Policies) |
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Policies | |||||||||||||
Investment in Unconsolidated Entity | Investment in Unconsolidated Entity The Company has a significant and non-controlling investment in several entities. The Company accounts for its investment using the equity method based on the ownership interest and ability to exert significant influence. Accordingly, investments are recorded at cost, and adjustments to the carrying amount of the investment are recognized in the period incurred. The Companys share of the earnings or losses are reported in the other income and expense section of the income statement.
The Company acquired a 50% interest in Sentinel Strainwise, LLC (SSL) in June 2015 for $25,000. In accordance with Accounting Standard Codification 810-10, Consolidation-Overall, management evaluated the fair value of the Companys investment in SLL and determined that there is no value as of January 31, 2018. The entity was non-operational in the year-ended January 31, 2018 and fully dissolved in the year-ended January 31, 2019.
On September 5, 2018, the Company entered into a Binding Term Sheet (BTS) with Michael Hornbeck for the acquisition of an interest in a yet to be established joint-venture entity that will hold the intellectual property assets related to HiLife Creative (et. al.) Pursuant to the BTS, the Company agreed to pay $120,000 overall consideration, payable as follows:
STWC will also assume approximately $70,000 in debt owned by Hornbeck to various creditors. The $70,000.00 assumed by STWC will be paid to Hornbeck or his assigns pursuant to a yet to be executed promissory note with a maturity date of January 31, 2019.
The joint-venture entity was established September 10, 2018 as Volume 2, LLC and was 51% owned by STWC and 49% by Michael Hornbeck. Notwithstanding the foregoing, the BTS called for Hornbeck to retain all control of and manage the day-to-day operations of Volume 2, LLC and draw a salary of $6,000 per month. The Company recognized an impairment on the investment effective day one as the entity is not able to funds its operations. Loss on impairment of $345,394 was recognized in other expense for the year-ended January 31, 2019. The Company recognized its share of the Volume 2s losses of $18,722 in other expense for the year-ended January 31, 2019. The consideration payment due November 1, 2018 has not been paid.
During the year-ended January 31, 2019 the Company invested in 2600 Meridian, LLC as a 25% owner. The Company also loaned $29,368 to the entity during 2018. The loans are reflected on the balance sheet in notes receivable, related party. |
Note 2 - Summary of significant accounting policies: Long-Lived Assets (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Long-Lived Assets | Long-Lived Assets In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value. |
Note 2 - Summary of significant accounting policies: Beneficial Conversion Feature (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Beneficial Conversion Feature | Beneficial Conversion Feature - If the conversion features of conventional convertible debt provide for a rate of conversion that is below market value at issuance, this feature is characterized as a beneficial conversion feature (BCF). A BCF is recorded by the Company as a debt discount pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 470-20 Debt with Conversion and Other Options. In those circumstances, the convertible debt is recorded net of the discount related to the BCF, and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method. |
Note 2 - Summary of significant accounting policies: Trademarks (Policies) |
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Jan. 31, 2019 | |||||||||||||
Policies | |||||||||||||
Trademarks | Trademarks Trademarks and other intangible assets are stated at cost and are amortized using the straight-line method over fifteen years. Amortization expense for the years ended January 31, 2019 and 2018 was $820 and $732, respectively.
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Note 2 - Summary of significant accounting policies: Discontinued Operations (Policies) |
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Policies | |||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Discontinued Operations During November 2017, the Company settled all remaining operations related to its rental activities with regulated entities. As a consequence of the disposition, the operating results and the assets and liabilities of the discontinued operations, which formerly comprised the rental operations, are presented separately in the Company's financial statements. Summarized financial information for the discontinued rental business is shown below. Prior period balances have been reclassified to present the operations of the rental business as a discontinued operation. No amounts related to discontinued operations remained on the balance sheet as of January 31, 2018. There was no discontinued operations activity during the year ended January 31, 2019.
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Note 2 - Summary of significant accounting policies: Comprehensive Income (Loss) (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income is defined as all changes in stockholders equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive income includes net income or loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. Since the Companys inception there have been no differences between the Companys comprehensive loss and net loss. |
Note 2 - Summary of significant accounting policies: Net income per share of common stock (Policies) |
12 Months Ended |
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Jan. 31, 2019 | |
Policies | |
Net income per share of common stock | Net income per share of common stock - We present earnings per share (EPS) in accordance with ASC 260 Earnings per Share, which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings per share of common stock is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period.
Convertible notes, outstanding options and warrants underlying 4,150,000 and 2,224,700 shares, shares respectively, at January 31, 2109 and 2018 do not assume conversion, exercise or contingent exercise in the computation of diluted loss per share because the effect would be anti-dilutive. |
Note 2 - Summary of significant accounting policies: Revenue Recognition (Policies) |
12 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | ||||||||||||||||
Policies | ||||||||||||||||
Revenue Recognition | Revenue Recognition
Effective February 1, 2018, the Company adopted ASC 606 Revenue from Contracts with Customers using the modified retrospective method. There was no adjustment required upon transition. Under ASC 606, the Company recognizes revenue applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
Consulting Services
We generate revenues from professional services consulting agreements. These arrangements are generally entered into: (1) on an hourly basis for an hourly fee; or, (2) on a fixed fee basis; or (3) a monthly fee basis. Generally, we require a complete or partial prepayment or retainer prior to performing services for hourly or fixed fee contracts.
For hourly based service contracts, we recognize revenue over time as services are performed and customers simultaneously consume such services. Any advances or retainers received from clients for hourly services are reflected in the Deferred revenue liability account until we recognize revenues as we incur and charge billable hours.
Our fixed fee basis engagements are recognized at a point in time. Generally, our fixed fee arrangements are for completion of a final deliverable or act which is significant to the arrangement as a whole. Although fees are typically collected in advance and the services provided have no alternative use to the Company, there is not a specific enforceable right to payment for the cost of services provided plus a reasonable profit margin. Accordingly, advances received at contract inception are reflected in the Deferred revenue liability account until the end of the contract when revenue is recognized and the customer takes control of the deliverable. These engagements do not generally exceed a one-year term.
Revenue recognition is affected by a number of factors that change the estimated amount of work required to complete the deliverable, such as changes in scope, timing, awaiting notification of license award from local government, and the level of client involvement. Losses, if any, on fixed-fee engagements are recognized in the period in which the loss first becomes probable and reasonably estimable. During the year ended January 31, 2019 we have refunded approximately $26,251 of advances or retainers from fixed fee and hourly engagements that terminated prior to completion. We believe if an engagement terminates prior to completion, we can recover the costs incurred related to the services provided.
Certain of our fixed fee contracts assisting customers with license applications include a success fee which is earned if the customer is awarded a license. We exclude such variable consideration from the transaction price and recognize the revenue when and if the license is awarded as the uncertainty of the application process creates a probability of significant revenue reversal.
Our monthly fee arrangements are billed on a monthly basis in arrears for a variety of services and are recognized over time as the customers simultaneously consume such services.
The revenue by contract type for the periods ending January 31, 2019 and 2018 are listed in the table below:
Deferred revenue as of January 31, 2019 and 2018 was $192,500 and $150,000, respectively. The Company is unable to determine timing for revenue recognition at this time for its deferred revenue due to state regulation changes.
|
Note 2 - Summary of significant accounting policies: Reclassifications (Policies) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Policies | |
Reclassifications | Reclassifications- Certain account reclassifications have been made to prior period balances to reflect the current periods presentation format; such reclassifications had no impact on the Companys consolidated statements of operations or consolidated statements of cash flows and had no material impact on the Companys consolidated balance sheets. |
Note 2 - Summary of significant accounting policies: Stock-Based Compensation (Policies) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Policies | |
Stock-Based Compensation | Stock-Based Compensation The Company records equity instruments at their fair value on the measurement date by utilizing the Black-Scholes option-pricing model. Stock Compensation for all share-based payments, is recognized as an expense over the requisite service period.
Significant assumptions utilized in determining the fair value of our stock options included the volatility rate, estimated term of the options, risk-free interest rate and forfeiture rate. The term of the options was assumed to be five years. The risk-free interest rate was determined utilizing the treasury rate with a maturity equal to the estimated term of the option grant. Finally, management assumed a 0% forfeiture rate in fiscal year 2018.
Non-employee share-based compensation charges generally are immediately vested and have no future performance requirements by the non-employee and the total share-based compensation charge is recorded in the period of the measurement date. |
Note 2 - Summary of significant accounting policies: Recently Issued Accounting Pronouncements (Policies) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Policies | |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and ensure that there are proper controls in place to ascertain that the Companys financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below:
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases ("ASU 2016-02"). The guidance in this new standard requires lessees to put most leases on their balance sheets but recognize expenses on their income statements in a manner similar to the current accounting and eliminates the current real estate-specific provisions for all entities. The guidance also modifies the classification criteria and the accounting for sales-type and direct financing leases for lessors. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The Company adopted the standard effective February 1, 2019 by recording an immaterial transition adjustment and right of use assets and lease liabilities of approximately $150,000.
In July 2016, the FASB issued ASU No. 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which among other things, these amendments require the measurement of all expected credit losses of financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 is effective for periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company is in the process of evaluating the impact of the pronouncement.
In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update modify certain disclosure requirements of fair value measurements and are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is in the process of evaluation the impact of the pronouncement. |
Note 11 - Subsequent Events: Subsequent Events, Policy (Policies) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Policies | |
Subsequent Events, Policy | GAAP requires an entity to disclose events that occur after the balance sheet date but before financial statements are issued or are available to be issued (subsequent events) as well as the date through which an entity has evaluated subsequent events. There are two types of subsequent events. The first type consists of events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, (recognized subsequent events). The second type consists of events that provide evidence about conditions that did not exist at the date of the balance sheet but arose subsequent to that date (non-recognized subsequent events). |
Note 2 - Summary of significant accounting policies: Tenant improvements and office equipment: Schedule of Tenant Improvements and Office Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||
Tables/Schedules | |||||||||||||||||||||||||||||||||||||||||||
Schedule of Tenant Improvements and Office Equipment |
|
Note 2 - Summary of significant accounting policies: Trademarks: Schedule of Trademarks and other intangible assets (Tables) |
12 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | |||||||||||||
Tables/Schedules | |||||||||||||
Schedule of Trademarks and other intangible assets |
|
Note 2 - Summary of significant accounting policies: Discontinued Operations: Schedule of Discontinued Rental Business (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Tables/Schedules | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Discontinued Rental Business |
|
Note 2 - Summary of significant accounting policies: Revenue Recognition: Schedule of revenue by contract type (Tables) |
12 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | ||||||||||||||||
Tables/Schedules | ||||||||||||||||
Schedule of revenue by contract type |
|
Note 5 - Commitments and contingencies: Schedule of future minimum lease payments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | |||||||||||||||||||||||||||||||
Tables/Schedules | |||||||||||||||||||||||||||||||
Schedule of future minimum lease payments |
|
Note 7 - Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | |||||||||||||||||||||||||||||||||||||
Tables/Schedules | |||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) |
|
Note 8 - Notes Payable: Schedule of mandatory principal payments under notes payable (Tables) |
12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | |||||||||||
Tables/Schedules | |||||||||||
Schedule of mandatory principal payments under notes payable |
|
Note 9 - Equity: Schedule of Warrant Activity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tables/Schedules | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warrant Activity |
|
Note 9 - Equity: Schedule of assumptions used in fair value calculations (Tables) |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Jan. 31, 2019 | |||||||||
Tables/Schedules | |||||||||
Schedule of assumptions used in fair value calculations |
|
Note 1 - Organization (Details) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Details | |
Entity Incorporation, State Country Name | Colorado |
Entity Incorporation, Date of Incorporation | Jan. 16, 2014 |
Note 2 - Summary of significant accounting policies: Tenant improvements and office equipment: Schedule of Tenant Improvements and Office Equipment (Details) - USD ($) |
Jan. 31, 2019 |
Jan. 31, 2018 |
---|---|---|
Details | ||
Leasehold improvements | $ 2,200 | $ 2,200 |
Office equipment, furniture and fixtures | 26,276 | 26,276 |
Property, Plant and Equipment, Gross | 28,476 | 28,476 |
Accumulated amortization and depreciation | (25,709) | (24,703) |
Property and equipment, net | $ 2,767 | $ 3,773 |
Note 2 - Summary of significant accounting policies: Tenant improvements and office equipment (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2019 |
Jan. 31, 2018 |
|
Details | ||
Depreciation, Depletion and Amortization | $ 1,006 | $ 1,576 |
Note 2 - Summary of significant accounting policies: Trademarks (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2019 |
Jan. 31, 2018 |
|
Details | ||
Amortization of Intangible Assets | $ 820 | $ 732 |
Note 2 - Summary of significant accounting policies: Trademarks: Schedule of Trademarks and other intangible assets (Details) - USD ($) |
Jan. 31, 2019 |
Jan. 31, 2018 |
---|---|---|
Details | ||
Gross carrying amount | $ 13,260 | $ 11,010 |
Accumulated amortization | 3,809 | 2,989 |
Net intangible assets | $ 9,451 | $ 8,021 |
Note 2 - Summary of significant accounting policies: Discontinued Operations: Schedule of Discontinued Rental Business (Details) |
12 Months Ended |
---|---|
Jan. 31, 2018
USD ($)
| |
Details | |
Rental income from the Regulated Entities (Affiliates) | $ 2,342,391 |
Total revenues | 2,342,391 |
Operating costs and expenses | |
Reserve for amounts due from Regulated Entities (Affiliates) | 657,402 |
Rents and other occupancy | 1,762,858 |
Depreciation and amortization | 146,150 |
Total operating costs and expenses | 2,566,410 |
Operating (loss)/income from discontinued operations | (224,019) |
Interest expense | (171,636) |
Gain on settlement and cancellation of leases | 1,959,177 |
Gain on sale of assets | 0 |
Loss from discontinued operations | $ 1,563,522 |
Note 2 - Summary of significant accounting policies: Revenue Recognition: Schedule of revenue by contract type (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2019 |
Jan. 31, 2018 |
|
Details | ||
Hourly fee contracts | $ 3,749 | $ 0 |
Fixed fee contracts | 96,000 | 263,500 |
Monthly fee contracts | 36,788 | 0 |
Total Revenue | $ 136,537 | $ 263,500 |
Note 5 - Commitments and contingencies (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2019 |
Jan. 31, 2018 |
|
Details | ||
Rents and other occupancy | $ 59,450 | $ 67,927 |
Note 5 - Commitments and contingencies: Schedule of future minimum lease payments (Details) |
Jan. 31, 2019
USD ($)
|
---|---|
Details | |
Operating Leases, Future Minimum Payments Receivable, Current | $ 55,250 |
Operating Leases, Future Minimum Payments Receivable, in Two Years | 56,250 |
Operating Leases, Future Minimum Payments Receivable, in Three Years | 42,750 |
Operating Leases, Future Minimum Payments Receivable, Thereafter | 0 |
Operating Leases, Future Minimum Payments Receivable | $ 154,250 |
Note 6 - Note Receivable (Details) |
Jan. 31, 2019
USD ($)
|
---|---|
Private entity in Puerto Rico 39% owned by Erin Phillips | |
Advances to Affiliate | $ 280,607 |
Two private entities in Oklahoma | |
Advances to Affiliate | $ 29,368 |
Note 7 - Income Taxes: Schedule of Components of Income Tax Expense (Benefit) (Details) - USD ($) |
Jan. 31, 2019 |
Jan. 31, 2018 |
---|---|---|
Details | ||
Federal | $ (346,143) | $ 138,483 |
State | (76,361) | 18,024 |
Deferred income tax expense (benefit): | (422,504) | 156,507 |
Valuation allowance | 422,504 | (156,507) |
Provision | $ 0 | $ 0 |
Note 7 - Income Taxes (Details) - USD ($) |
Jan. 31, 2019 |
Jan. 31, 2018 |
---|---|---|
Details | ||
Operating Loss Carryforwards | $ 8,440,108 | $ 6,164,832 |
Note 8 - Notes Payable: Schedule of mandatory principal payments under notes payable (Details) |
Jan. 31, 2019
USD ($)
|
---|---|
Details | |
Long-term Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months | $ 431,100 |
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Two | 125,000 |
Long-term debt, future repayments | 556,100 |
Long-term debt, discount | (156,818) |
Long-term debt, future repayments, net | $ 399,282 |
Note 9 - Equity: Warrants (Details) |
12 Months Ended |
---|---|
Jan. 31, 2019
$ / shares
| |
Equity Transaction 1 | |
Sale of Stock, Transaction Date | Aug. 29, 2018 |
Sale of Stock, Description of Transaction | Company issued Richland Fund, LLC warrants to purchase 100,000 shares of the Company's common stock |
Equity Transaction 2 | |
Sale of Stock, Transaction Date | Oct. 15, 2018 |
Sale of Stock, Description of Transaction | Company issued warrants to purchase 1,900,000 shares of its common stock to three individuals in exchange for services |
Sale of Stock, Price Per Share | $ 0.16 |
Equity Transaction 3 | |
Sale of Stock, Description of Transaction | JPCC will receive warrants to purchase up to 150,000 shares of our common stock |
Note 9 - Equity: Stock Options (Details) |
12 Months Ended |
---|---|
Jan. 31, 2019
USD ($)
shares
| |
Stock based compensation, Amount | $ 197,720 |
Equity Transaction 4 | |
Sale of Stock, Description of Transaction | Company granted 250,000 stock options during the period |
Stock based compensation, Amount | $ 197,720 |
Equity Transaction 5 | |
Sale of Stock, Description of Transaction | Company issued a total of 25,000 shares |
Shares, Issued | shares | 25,000 |
Note 9 - Equity (Details) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Details | |
Fair Value Measurement Technique | Black-Scholes model |
Note 9 - Equity: Schedule of assumptions used in fair value calculations (Details) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Details | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term | 5 years |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate | 2.73% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 218.00% |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% |
Note 10 - Related Party (Details) - To Related Party - USD ($) |
12 Months Ended | |
---|---|---|
Jan. 31, 2019 |
Jan. 31, 2018 |
|
Proceeds from Loans | $ 171,597 | $ 181,263 |
Debt Instrument, Interest Rate, Stated Percentage | 0.00% | |
Long-term loan to related party on the balance sheet | $ 48,240 | |
Long-term Debt | $ 32,021 | $ 490,970 |
Minimum | ||
Debt Instrument, Maturity Date | May 01, 2020 | |
Maximum | ||
Debt Instrument, Maturity Date | May 31, 2020 |
Note 11 - Subsequent Events: Power Up (Details) |
12 Months Ended |
---|---|
Jan. 31, 2019
USD ($)
| |
Event 1 | |
Subsequent Event, Date | Feb. 13, 2019 |
Subsequent Event, Description | Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. |
Debt Instrument, Issuer | Company |
Debt Instrument, Description | convertible promissory note |
Debt Instrument, Face Amount | $ 103,000 |
Debt Instrument, Issuance Date | Feb. 15, 2019 |
Debt Instrument, Maturity Date | Feb. 13, 2020 |
Debt Instrument, Interest Rate, Stated Percentage | 12.00% |
Event 2 | |
Subsequent Event, Date | Mar. 18, 2019 |
Subsequent Event, Description | STWC Holdings, Inc., entered into the second tranche of the potential $1,000,000 funding with Power Up |
Debt Instrument, Issuer | Company |
Debt Instrument, Description | convertible promissory note |
Debt Instrument, Face Amount | $ 53,000 |
Debt Instrument, Issuance Date | Mar. 18, 2019 |
Debt Instrument, Maturity Date | Mar. 18, 2020 |
Debt Instrument, Interest Rate, Stated Percentage | 12.00% |
Note 11 - Subsequent Events: Employment Agreement (Details) |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Event 3 | |
Subsequent Event, Date | Oct. 15, 2018 |
Subsequent Event, Description | Company entered into an Employment Agreement with Jay Kotzker ('Mr. Kotzker') |
Event 4 | |
Subsequent Event, Description | STWC Holdings, Inc., a Colorado corporation dba Strainwise (herein referred to as 'we,' 'our,' 'us,' 'STWC' and the 'Company') entered into an Executive Employment Agreement (the 'Willer Employment Agreement') with Matthew Willer ('Mr. Willer') |
Note 11 - Subsequent Events: General Counsel (Details) - Event 5 |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Subsequent Event, Date | Apr. 03, 2019 |
Subsequent Event, Description | Company engaged Ms. Jean Gonnell as general counsel |
Note 11 - Subsequent Events: Joint Venture (Details) - Event 6 |
12 Months Ended |
---|---|
Jan. 31, 2019 | |
Subsequent Event, Date | Apr. 11, 2019 |
Subsequent Event, Description | Company announced a joint venture with Dana Ress of Denver's RedPoint Solutions, for the development of a software package customized for the cannabis industry |
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