10-Q 1 myhi0210form10q.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

Form 10-Q

 

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

 

For the quarterly period ended December 31, 2016

 

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

 

MOUNTAIN HIGH ACQUISITIONS CORP.

(Exact name of registrant as specified in its charter)

 

     
Colorado 333-175825 27-3515499
(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation)   Identification Number)

 

 

 

6501 E. Greenway Pkwy., Suite 103-412

Scottsdale, AZ 85254

 

 

 

(Address of principal executive offices)

 

(303) 358-3840
(Registrant’s Telephone Number)

 

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

 

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

 

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

 

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

 

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

 

As of February 14, 2016, there were 58,046,949 shares of the registrant’s $0.0001 par value common stock issued and outstanding.

 

   

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.

QUARTERLY REPORT

PERIOD ENDED DECEMBER 31, 2016

 

TABLE OF CONTENTS

 

      Page No.
    PART I - FINANCIAL INFORMATION  
Item 1.   Financial Statements 3
       
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations 12
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 15
       
Item 4T.   Controls and Procedures 15
       
    PART II - OTHER INFORMATION  
       
Item 1.   Legal Proceedings 16
       
Item1A.   Risk Factors 16
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 16
       
Item 3.   Defaults Upon Senior Securities 16
       
Item 4.   Mine Safety Disclosures 16
       
Item 5.   Other Information 16
       
Item 6.   Exhibits 16
       
    Signatures 17

 

Special Note Regarding Forward-Looking Statements

 

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

 

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

 

   

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

INDEX   F-1 
Consolidated Balance Sheets as of December 31, 2016 (Unaudited) and March 31, 2016
   

F-2

 
Consolidated Statement of Operations for the Three Months Ended December 31, 2016 and December 31, 2015 and the Nine Months ended December 31, 2016 and December 31, 2015 (Unaudited)   F-3 
Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2016 and December 31, 2015 (Unaudited)   F-4 
Notes to the Consolidated Financial Statements (Unaudited)   F-5 

 

 

 F-1 

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED BALANCE SHEETS
       
      Audited
   December 31,  March 31,
   2016  2016
           
ASSETS          
           
CURRENT ASSETS          
Cash and cash equivalents  $5,974   $34,988 
Prepaid expenses   40,000    —   
Inventory   —      59,296 
TOTAL CURRENT ASSETS   45,974    94,284 
TOTAL ASSETS  $45,974   $94,284 
           
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)       
           
CURRENT LIABILITIES          
Accounts payable  $98,073   $91,344 
Accrued payroll   —      37,500 
Notes payable, net Beneficial Conversion          
Feature fully recognized of $459,563   504,446    396,022 
Advances from Related Parties   16,100    16,100 
TOTAL CURRENT LIABILITIES   618,619    540,966 
           
COMMITMENTS AND CONTINGENCIES   —      —   
           
STOCKHOLDERS' EQUITY (DEFICIT):          
Preferred stock, $0.0001 par value; 250,000,000 shares authorized, nil shares issued and outstanding   —      —   
Common stock, $0.0001 par value; 250,000,000 shares authorized, 56,846,949 and 33,418,934 shares issued and outstanding as of December 31, 2016 and March 31, 2016 respectively   5,685    3,342 
Additional paid in capital   5,708,533    4,946,691 
Accumulated (deficit)   (6,286,863)   (5,396,715)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)   (572,645)   (446,682)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)  $45,974   $94,284 
           
           
The accompanying notes are an integral part of these consolidated financial statements

 

 F-2 

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 AND 2015
AND FOR THE  NINE MONTHS ENDED DECEMBER 31, 2016 AND 2015
(UNAUDITED)
             
             
   Three Months Ended  Nine Months Ended
   December 31  December 31
   2016  2015  2016  2015
             
Revenue  $641   $2,018   $16,374   $21,291 
Cost of revenue   303    1,050    4,135    1,088 
Gross profit   338    968    12,239    20,203 
                     
Impairment   55,161         55,161    2,300,000 
Director expense   162,000         162,000      
Selling, general and administrative expenses   185,935    45,536    375,361    320,045 
    403,096    45,536    592,522    2,620,045 
(Loss) from operations   (402,758)   (44,568)   (580,283)   (2,599,842)
                     
Interest Expense resulting from Beneficial Conversion Feature   (205,923)   —      (285,765)   —   
                     
Other income (expense)   (11,908)   (1,846)   (24,101)   (124,580)
                     
Net income (loss)  $(620,589)  $(46,414)  $(890,149)  $(2,724,422)
                     
Weighted average shares outstanding - basic and diluted   53,667,811    28,079,857    45,042,297    28,079,857 
                     
(Loss) per shares - basic and diluted  $(0.00)  $(0.00)  $(0.01)  $(0.10)
                     
                     
The accompanying notes are an integral part of these consolidated financial statements

 

 F-3 

 

 

MOUNTAIN HIGH ACQUISITIONS CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
DECEMBER 31, 2016 AND 2015
(UNAUDITED)
       
    December 31, 
   2016   2015 
           
CASH FLOWS FROM OPERATING ACTIVITIES          
Net (loss)  $(890,149)  $(2,724,422)
Adjustment to reconcile net loss to net          
Cash used in operating activities:          
Changes in:          
Impairment goodwill   —      2,300,000 
Inventory impairment   55,161      
Advances to Affiliate   2,500    50,000 
Beneficial Conversion Feature on Note payable   285,765    —   
Accounts payable   6,729    136 
Increase in Prepaid   (40,000)   —   
Director shares   162,000      
Inventory        (60,412)
Current liabilities   74,425    339,826 
Net cash used in operating activities   (343,569)   (94,872)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of GreenLife   —      2,669 
Disposition of Canna-Life   —      41,923 
Net cash provided (used) by investing activities   —      44,592 
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from conversion  of debt   393,921    50,500 
Extinguishment of convertible debt   (209,530)   —   
Proceeds from notes payable   130,164    —   
Net cash provided by financing activities   314,555    50,500 
           
NET DECREASE IN CASH AND CASH EQUIVALENTS   (29,014)   220 
           
CASH AND CASH EQUIVALENTS          
Beginning of the period   34,988    45 
End of the period  $5,974    265 
           
Supplemental disclosures of cash flow information          
Taxes paid  $—     $—   
Interest paid  $—     $—   
           
           
The accompanying notes are an integral part of these consolidated financial statements

 

 F-4 

 

Note 1 - Organization and Basis of Presentation

 

Organization and Line of Business

 

Mountain High Acquisitions Corp., formerly known as Wireless Attachments, Inc., (the “Company”) was incorporated under the laws of the State of Colorado on September 22, 2010. The Company was originally incorporated for the purpose of developing solar cloth membranes for outdoor active wear that covert sunlight into electrical power and that can be used for charging and/or operating mobile devices such as the iPod and the iPhone.

 

The Company is currently in the business of acquiring companies and technologies engaged in the development, production, sales and marketing of CBD related products

 

On April 30, 2015, the Company entered into a Sale and Purchase Agreement to sell Canna-Life Corporation (the "CL Agreement"), a wholly owned subsidiary, to Evolution Equities Corporation and Alan Smith.("Purchasers") Under the terms of the CL Agreement the Company sold 8,104,000 (100%) of its shares of Canna-Life and executed a note Payable for $80,000 to Evolutions Equities Corporation in exchange for the extinguishment of $490,416 of debt due to the Purchasers at March 31, 2015 and $1.00 cash.

 

On May 22, 2015 the Company completed the acquisition of Greenlife Botanix ("Greenlife") as detailed in the First Amendment to the Shareholder Agreement dated February 8, 2015. The Company issued 10,000,000 restricted shares of its common stock to the shareholders of Greenlife in exchange for their 100% interest in Greenlife. The shares were valued at the market value on the date of issuance, $0.23, $2,300,000. The amount paid for Greenlife was recorded as Goodwill due to the start up nature of and the minimal net assets of Greenlife at the time of acquisition. Due changes in anticipated acquisitions and the remarketing of the Greenlife product line, the Company evaluated the book value of the asset and elected to impair the goodwill value of Greenlife and expensed the $2,300,000 book value in the nine months ended December 31, 2015.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred a net loss of $890,149, has an accumulated deficit of $6,286,863 and a working capital deficit of $572,645 as of December 31, 2016. These conditions raise substantial doubt as to the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Management plans to continue to raise capital to fund the Company’s operations and believes that it can continue to raise equity or debt financing to support its operations until the Company is able to generate positive cash flow from operations.

 

 

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). The accompanying consolidated financial statements have been presented in United States Dollars ($ or “USD”). The fiscal year end is March 31.

 

Principles of Consolidation

 

The accounts of the Company and its wholly owned subsidiary GreenLife Botanix are included in the accompanying consolidated financial statements. All intercompany balances and transactions were eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. It is possible that accounting estimates and assumptions may be material to the Company due to the levels of subjectivity and judgment involved.

 

 F-5 

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

 

Revenue Recognition

 

In accordance with the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin No. 104, Revenue Recognition, the Company will recognize revenue when it is realized or realizable and earned. The Company must meet all of the following four criteria under SAB 104 to recognize revenue:

 

  • Persuasive evidence of an arrangement exists
  • Delivery has occurred
  • The sales price is fixed or determinable
  • Collection is reasonably assured

Inventories

 

Inventories consisting of cosmetic products are stated at the lower of cost or market. Cost is determined using the first-in, first-out method and are adjusted to actual cost quarterly based on a physical count. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

 

Intangible Assets

 

The Company accounts for intangibles in accordance with ASC 350, Intangible-Goodwill and Other. The Company evaluates intangibles, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of intangibles is tested by comparing the carrying amount to the fair value. The fair values are estimated using undiscounted projected net cash flows. If the carrying amount exceeds its fair value, intangibles are considered impaired and a second step is performed to measure the amount of impairment loss, if any. The Company evaluates the impairment of intangibles as of the end of each fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. These circumstances include:

 

a significant decrease in the market value of an asset;
a significant adverse change in the extent or manner in which an asset is used; or
an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations. The open tax years are 2011, 2012, 2013, 2014, 2015and 2016.

 

The Company has no tax positions at December 31, 2016, or March 31, 2016, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

 

 F-6 

 

Basic and Diluted Loss Per Share

 

Earnings per share is calculated in accordance with the ASC Topic 260, Earnings Per Share. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. There were 604,000 warrants outstanding at December 31, 2016, which were excluded from the diluted loss per share calculation as their inclusion would be anti-dilutive.

 

Recent Accounting Pronouncements

 

Recent authoritative guidance issued by the FASB (including technical corrections to the FASB Accounting Standards Codification), the American Institute of Certified Public Accountants, and the SEC, did not, or are not expected to have a material effect on the Company’s consolidated financial statements.

 

 

Note 3 – Advances from Stockholder

 

Alan Smith, the Company’s Chief Executive officer and a director, has advanced money to fund the Company’s operations. The amount due to this shareholder at December 31, 2016 and March 31, 2016 was a 5% convertible note payable of $16,232 and $15,001, respectively. The $16,100 Advances from related parties refers to an unsecured advance by the President of GreenLife Botanix, Brent McMahon. Mr. McMahon is not an officer or Director of the Company. Mr. McMahon is a shareholder in MYHI.

 

 

Note 4 – Equity

Common Stock

 

The Company has authorized 250,000,000 shares of common stock with a par value of $0.0001 per share and 250,000,000 shares of preferred stock with a par value of $0.0001 per share.

 

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

 

During March 2015, the Company sold 420,000 restricted shares of common stock through a private placement at $0.15 per share. These shares were issued on April 14, 2015

 

During the year ended March 31, 2016 the Company issued 336,667 restricted shares through a private placement at $0.15 per share.

 

On May 22, 2015, the Company issued 10,000,000 restricted shares to the shareholders of Greenlife Botanix pursuant to closing the Share Exchange Agreement dated February 8, 2015. The shares were valued at the fair market trading value, $0.23, on the closing date.

 

The Company issued 353,600 restricted shares to a vendor in lieu of payment of $35,360 that was owed to the vendor at March 31, 2015.

 

Pursuant to agreements with potential investors; Alan Smith, CEO and a Director, retired 2,000,000 shares of MYHI. The share retirement was valued at par $0.0001 per share.

 

During the nine months ended December 31, 2016, the Company converted $313,921 of Notes Payable into 20,928,015 shares of common stock at $0.015 per share per the conversion agreements.

 

On November 1, 2016, the Board of Directors reviewed the share position of the officers and Directors of the Company and granted Richard Stifel, CFO and a Director, 2,500,000 restricted shares of MYHI stock at $.0001 per share. The value of the shares was $164,500 and the Company recorded an expense of $162,000 for shares in lieu of compensation in the three months ended December 31, 2016.

 

 F-7 

 

Warrants

 

The following table summarizes the warrant activity:

 

         Weighted   
      Weighted  Average   
      Average  Remaining  Aggregate
   Number of  Exercise  Contractual  Intrinsic
   Warrants  Price $  Life (in years)  Value $
 Outstanding, March 31, 2015    904,000   $4.50           
 Exercised     —                  
 Forfeited/Canceled    (300,000)               
 Outstanding, December 31, 2016    604,000   $4.75    .18      
 Exercisable, December 31, 2016    604,000   $4.75    .18   $0.00 

 

The number and weighted average exercise prices of all warrants outstanding as of December 31, 2016, are as follows:

 

      Warrants Outstanding and Exercisable 
           Weighted    Weighted 
           Average    Average 
 Exercise    Number    Exercise    Remaining 
 Price $    of Warrants    Price $    Life (Years) 
 4.75    604,000    4.75    .18 
      604,000           

 

 

Note 5 – Income Taxes

 

The Company accounts for income taxes using the asset and liability approach in accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributable to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

 

The Company has federal net operating loss carryforwards of approximately $4,071,140, expiring in various years through 2037. The tax benefit of these net operating losses has been offset by a full allowance for realization. The use of the net operating loss carryfowards may be limited due to the change in control.

 

Income tax expense (benefit) consists of the following for the nine months ended December 31, 2016: 

 

Current taxes  $—   
Deferred taxes   1,457,971 
Less: valuation allowance   (1,457,971)
Net income tax provision  $—   

 

The Company’s effective tax rate differs from the high statutory rate for the period ended December 31, 2016, due to the following (expressed as a percentage of pre-tax income): 

 

Federal taxes at statutory rate  $34.0%
State taxes, net of federal tax benefit   5.0%
Valuation allowance   (39.0)%
Effective income tax rate  $0.0%

 

 F-8 

 

As of December 31, 2016, the components of these temporary differences and the deferred tax asset were as follows:

 

Deferred Tax assets:     
     Net operating loss carryforward  $2,519,223 
     Less: valuation allowance   (2,519,223)
Net deferred tax assets  $—   

 

 

Note 6 – Commitments and Contingencies

 

None

 

 

Note 7 - Notes Payable

 

During the Quarter ended December 31, 2016 the Company issued notes payable to private parties and converted some of these Notes Payable into restricted common stock. Each note had interest rates of 3%-5% and had a conversion provision allowing the holder to convert the note into shares of the Company at a discount. The discount varied from 70% of the trading value at the conversion date to the lower of 80% of the share value on the conversion date or $0.015, this is referred to as the Beneficial Conversion Feature, "BCF". Due to the fact that the notes could be converted immediately or any time thereafter, there is no amortization of expense, so the Company has elected to record an expense in the current year for the difference between the "BCF and the share value on the date the note was executed, This resulted in an expense of $285,765 for the nine months ended December 31, 2016 and an aggregate expense of $459,563 to date through December 31, 2016. During the three months ended December 31, 2016, the Company converted $151,290 of existing Notes Payable into 10,086,000 of common stock. During the three months ended December 31, 2016, the Company also issued $44,364 of additional convertible Notes Payable.

 

 

Note 8 - Related Party Transactions

 

On November 1, 2016, the Board of Directors reviewed the share position of the officers and Directors of the Company and granted Richard Stifel, CFO and a Director, 2,500,000 restricted shares of MYHI stock at $.0001 per share. The value of the shares was $164,500 and the Company recorded an expense of $162,000 for shares in lieu of compensation in the three months ended December 31, 2016.

 

 

Note 9 – Subsequent Events

 

On January 24, 2017, the Company issued convertible notes payable of $115,000 to various holders. The notes have a one year term with 5% interest. The notes may be converted at any time during the term of the note. The conversion price per share shall be the lesser of $0.03 per share or 80% of the lowest closing bid price of the common stock in the 15 days prior to conversion.

 

On January 21, 2017, two officers and Directors of the Company each converted $9,000.00, of principal amount of convertible notes, a total of $18,000.00 into an aggregate of 1,200,000 shares of restricted common stock, pursuant to the terms of each of their convertible notes payable from the Company.

 

 F-9 

 

 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

 

FORWARD-LOOKING STATEMENTS

 

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

 

RESULTS OF OPERATIONS

 

Working Capital

 

  

As of December 31,

2016

Total Current Assets  $45,974 
Total Current Liabilities   618,619 
Working Capital (Deficit)  $(572,645)

 

Cash Flows

 

  

Nine months

Ended December 31,

2016

Cash Flows from (used in) Operating Activities  $(343,569)
Cash Flows from (used in) Investing Activities   0 
Cash Flows from (used in) Financing Activities   314,555 
Net Increase (decrease) in Cash during period  $(29,014)

 

Operating Revenues

 

During the three months ended December 31, 2016, the Company recorded sales of $641 compared to $2,018 for the three months ended December 31, 2015.

 

Sales for the nine months ended December 31, 2016 were $16,374 compared to $21,291 for the nine months ended December 31, 2015

 

The sales were for cosmetics and were sold on net 30 day terms or cash. Cost of Goods Sold are at the lower of cost or market.

 

Due the lack of sales of the product and limited financing available to market the product, the Company has elected to impair the inventory value of $55,161 in the three months ended December 31, 2016.

 

Operating Expenses and Net Loss

 

Three Months Ended December 31, 2016 Compared to Three Months Ended December 31, 2015

 

The net loss for the three months ended December 31, 2016 was $620,589, compared to a net loss of $46,414 for the three months ended December 31, 2015.

 

The net loss for the three months ended December 31, 2016 consisted of consulting and subcontractor fees of $159,200, a $162,000 Director expense associated with shares issued in lieu of salary, impairment of the inventory of $55,161(see above), professional fees of $5,421, $205,923 for beneficial interest expense on convertible notes payable and interest of $11,908.

 

The loss for the three months ended December 31, 2015 consisted of $6,567 for legal and accounting, $8,000 for contract labor and other operating expenses of $31,847.

 

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Nine Months Ended December 31, 2016 Compared to Nine Months Ended December 31, 2015

 

The net loss for the nine months ended December 31, 2016 was $890,149, compared to a loss of $2,724,422 for the nine months ended December 31, 2015.

 

The loss for the nine months ended December 31, 2016 consisted of consulting fees of $244,200, professional fees of $48,142, web site development of $15,000, Director expense in lieu of salary of $162,000, rent of $20,000, beneficial interest on convertible note of $285,765 and interest of $24,101.

 

The loss for the nine months ended December 31, 2015 consisted of the impairment of Goodwill incurred from the purchase of GreenLife of $2,300,000, $87,500 for accrued payroll related costs, $76,190 for legal and accounting and $51,062 for contract labor. Other Income (Expense) included a gain on the sale of Canna-Life of $48,473, a loss on the rescission of the Freedom Seed and Feed transaction of $88,145, a loss on extinguishment of debt of $53,040, a loss on the acquisition of GreenLife of $27,029 and interest expense on notes payable of $4,838.

 

Liquidity and Capital Resources

 

At December 31, 2016, the Company’s cash balance and total assets were $5,974 and $45,974, respectively.

 

At December 31, 2016, the Company had total liabilities of $529,298, consisting of $120,677 in accounts payable, $392,521 in notes payable, and $16,100 in advances from a related party.  

 

As at December 31, 2016, the Company had a working capital deficit of $483,324.    

 

Cashflow used in Operating Activities

 

During the nine month period ended December 31, 2016, the Company used $343,569 of cash for operating activities compared to cash used for operating activities of $94,872 for the nine months ended December 31, 2015.

 

Cash used for operations for the nine months ended December 31, 2016. consisted of a loss of $892,149 offset by a $55,161 increase in inventory impairment and non cash expenses of $285,765 for beneficial interests and an increase in accrued liabilities of $74,425 and $162,000 for shares issued in lieu of salary.

 

Cash used for operations for the nine months ended December 31, 2015 was due to the operating loss of $2,724,422 and the acquisition of $60,412 of inventory, offset by $2,300,000 for Goodwill impairment, the conversion of the advances of $50,000, loss on extinguishment of debt of $53,040, accrued payroll of $87,500 and an increase in current liabilities of $199,286.

 

Cashflow used in Investing Activities

 

There were no investing activities for the nine months ended December 31, 2016

 

During the nine month period ended December 31, 2015, the Company acquired GreenLife Botanix for a net increase of $2,669 related to the GreenLife purchase and sold Canna-Life for a net gain of $41,984.

 

Cashflow from Financing Activities

 

During the nine months ended December 31, 2016, the Company received $130,164 from the issue of convertible Notes Payable, $393,921 from the conversion of debt to stock and a decrease in extinguishment of debt of $209,530, for a net cash increase of $314,555 from financing activities.

 

During the nine months ended December 31, 2015 the Company received cash from financing activities from the private placement of restricted stock in the amount of $50,500.

 

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Going Concern

 

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

 

Off-Balance Sheet Arrangements

 

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

 

Future Financings

 

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

 

Critical Accounting Policies

 

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

 

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

 

Contractual Obligations

 

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

 

Recently Issued Accounting Pronouncements

 

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

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

ITEM 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

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

 

Based on an evaluation as of our most recent fiscal year end our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2016 to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. Our management has concluded that, as of December 31, 2016, our internal control over financial reporting is effective.

 

Changes in Internal Control and Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2016, that occurred during our third fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  

 

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

 

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PART II—OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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

 

ITEM 1A. RISK FACTORS

 

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

 

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

 

Quarterly Issuances:

 

None

 

Subsequent Issuances:

 

None

 

ITEM 3. Defaults Upon Senior Securities

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

 

Exhibit

Number

  Description of Exhibit  Filing
 31.01  Certification of Principal Executive Officer Pursuant to Rule 13a-14  Filed herewith.
 31.02  Certification of Principal Financial Officer Pursuant to Rule 13a-14  Filed herewith.
 32.01  CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act  Filed herewith.
 101.INS*  XBRL Instance Document  Filed herewith.
 101.SCH*  XBRL Taxonomy Extension Schema Document  Filed herewith.
 101.CAL*  XBRL Taxonomy Extension Calculation Linkbase Document  Filed herewith.
 101.LAB*  XBRL Taxonomy Extension Labels Linkbase Document  Filed herewith.
 101.PRE*  XBRL Taxonomy Extension Presentation Linkbase Document  Filed herewith.
 101.DEF*  XBRL Taxonomy Extension Definition Linkbase Document  Filed herewith.

 

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

 

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SIGNATURES

 

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

 

  

  MOUNTAIN HIGH ACQUISITIONS CORP.
   
   
Dated:  February 13, 2017 /s/ Alan Smith          
  By: Alan Smith
  Its: President, CEO, Treasurer and Director

 

 

 

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

 

 

Dated:  February 13, 2017 /s/ Alan Smith          
  Alan Smith
  Its: President, CEO, Treasurer and Director
   
Dated:  February 13, 2017 /s/ Richard G. Stifel          
  Richard G. Stifel
  Its: CFO, Secretary and Director

 

 

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