EXHIBIT 3.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the Fiscal Year Ended March 31, 2020
☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from _________ to ________
Commission File Number: 000-55704
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Right on Brands, Inc. |
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(Exact name of registrant as specified in its charter) |
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Nevada |
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45-1994478 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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12608 Forestgate Drive Dallas, TX |
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75243 |
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(Address of principal executive offices) |
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(Zip code) |
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(214) 736-7252 (Registrant's telephone number, including area code) |
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Securities registered under Section 12(b) of the Act: Not Applicable |
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None |
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N/A |
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(Title of each class) |
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(Name of Exchange on which registered) |
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value of $0.001
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 every Interactive Data File required to be submitted 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). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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(Do not check if a smaller reporting company) |
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. Approximately $752,000 as of June 30, 2020, based on the closing sale price of $0.0003 per share on that date.
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 5,261,244,194 as of March 31, 2021.
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Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements." These forward-looking statements generally are identified by the words "believes," "project," "expects," "anticipates," "estimates," "intends," "strategy," "plan," "may," "will," "would," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Overview
Our business is conducted through our wholly-owned subsidiaries, Humbly Hemp, Endo Brands, and Humble Water Company. Humbly Hemp sells and markets a line of hemp enhanced snack foods. Humble Water Company is in a partnership with Springhill Water Co. to develop a line of High Alkaline, Natural Mineral Water, and a bottling and packaging facility. Endo Brands creates and markets a line of CBD consumer products and through ENDO Labs creates white label products and formulations for CBD brands. As of Fall 2019, in order to form a more efficient corporate structure, Humbly Hemp, Inc. has been merged into Right On Brands, Inc. Right on Brands creates lasting brands with emerging functional ingredients, and our focus right now is industrial hemp, hemp derived cannabinoids, and high alkaline water.
PRODUCT LINE
HUMBLY HEMP
Humbly Hemp Snack Bar
The Humbly Hemp Snack Bar is a first of its kind hemp powered superfood bar. Our bar is certified vegan, and gluten free. We manufacture in an allergen free facility so NO Soy, and NO-GMO's. From the research we have done with the current products on the market, we believe that it is one of the best bars on the market.
Flavors:
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· Brownie Walnut · Chocolate Chip Cookie Dough · Peanut Butter & Honey |
· Peanut Butter Chocolate Chip · Salted Almond Chocolate
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Humbly Hemp Sparkling Tea
Our Sparkling Teas are made with Black Tea, Ginseng Root Extract and Ashwaghanda Root Extract and naturally flavored for a clean crisp taste.
Flavors:
· Peach Mango
· Raspberry Hibiscus
· Watermelon
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ENDO BRANDS:
Endo Water:
ENDO Water is one of a kind wellness drink as “structured water” is one of the biggest wants in the health and wellness market. ENDO Water is created to "Fuel Mind and Body" targeted to increase the performance of the Endo-Cannabanoid System. The endocannabinoid system (ECS) is a group of endogenous cannabinoid receptors located in the mammalian brain and throughout the central and peripheral nervous systems, consisting of neuromodulatory lipids and their receptors. Our water is lightly flavored, almost an essence, and infused with CBD (Cannabidiol). CBD is a NON PHSYCOACTIVE derivative of Cannabis. Our proprietary blend is Sugar Free, Naturally Flavored, has a high PH level and has emulsified CBD for increased bioavailability.
ENDO Drops:
The easiest and most effective way to get your daily CBD supplementation. These daily drops are blended with amazing essential oils for a great taste. You can take them either directly or mix them into your favorite beverage.
ENDO Ease:
Topical Pain relief product, it is our Endo Select Hemp Oil infused with an easy pump distribution cap.
ENDO Tokes:
This is a pre-rolled CBD flower that comes in the shape of a cigarette. The product is however, tobacco free and has less than 0.30% THC so it won’t get you high, but it is a quick delivery system for CBD.
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Competition & our Advantages
In the market we are going to occupy, we face four major competitors:
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Manitoba Hemp Foods: Based in Canada, Manitoba looks to be the industry leader in this market. They have been selling hemp products since 1998 and have created a strong brand. They carry Hemp Hearts, Hemp Heart Bars, Hemp protein smoothies, Hemp protein powder, and Hemp oil. |
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Evo Hemp: Evo is a boulder based Hemp bar company. They are one of the newer hemp brands in the market. They only offer bars in their product line. |
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Nutiva: Nutiva is an organic superfood brand. They offer a wide range of products with, chia, red palm, coconut, and hemp. All of their products are non GMO, and USDA organic. |
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Naturally Splendid: Naturally Splendid is a multifaceted biotechnology company developing, commercializing, producing, selling, and licensing an entirely new generation of hemp-derived, high quality, nutrient-dense Omega foods, nutritional food enhancers, and related products. |
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CBD MD: CBD MD is a manufacturer of CBD infused products. CBD MD has a full line of CBD infused products. |
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Our Potential Advantages
Our brands offer a new take on hemp products. Humbly Hemp snacks are positions to bring hemp into the daily routine of the "everyman". Our branding and market position take the stigma and fear out of hemp, creating an approachable product for anyone to enjoy. ENDO Brands advantage in the market is our unique formulation, price point, high quality. We are one of the first in the CBD industry to have a testable, full spectrum CBD water product. Our in-house formulation allows us to create our proprietary CBD ingredient and infuse our products at a fraction of the cost of other brands.
Marketing, Sales, and Distribution Strategies
Marketing Plan
Multi-Channel Marketing: We promote through multiple channels to build brand awareness for our initial products.
Online Marketing: We tailor an online marketing campaign to attract the two market segments mentioned earlier in the target market segment. This position will assure that we are promoting to the most viable group of consumers. However, most major online platform do not allow the advertising of CBD infused products for sale so we are limited in what we can promote.
Instagram: Our goal on IG for our brands is to build an obsessed fan base and an engaged community. Hemp education is a vital part of these channels, we will utilize this channel to show the “lifestyle” using our products as well as unique info on our products and drive traffic to our stores.
Twitter: We will use Twitter to inform our customers and investors about the company and to drive traffic to our website that will convert into purchases.
Facebook: Facebook has gone from being a publishing channel for brands, to now a landing page of brand identity. We will utilize Facebook as a cornerstone of our online identity. We will be careful about being "too promotional" and we will be aiming for content that people will share.
Consumer Outreach & Education: The most important factor in the marketing of our products will be consumer education on the benefits of hemp and CBD.
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Sales Plan
Retail Distribution: Our partnership with distributors across the country will give us a leg up on the competition. The ability to get our products into distributors having access to so many retail locations is a big win for our brands. We are currently focusing on the South, the South-East and the Mid-West, but we plan on moving towards the North-East and West in the near future.
Online Sales: Our website is extremely easy to use. We worked with our website designers to ensure that our marketplace is both beautiful and functional. We currently have the following websites: EndoBrands.com / HumblyHemp.com / EndoTokes.com.
Manufacturing and Distribution
Humbly Hemp
The Humbly Hemp Snack Bar are produced by a world class co packer.
Endo Water
We are currently having our proprietary recipe manufactured and packed at a world class facility. We are looking to bring on a second manufacturer soon so that we are able to produce our product as dictated by location of demand and save on freight costs.
Humble Water Co.
Our partnership in Montana with the Springhill Water Co. allows us in the future to sell natural water directly from the source in Cut Bank, Montana, at the foothills of Glacier National Park. We are looking to build our own bottling facility on site to bring untouched-by-hands bottled natural water to our current distribution channels.
Joint Venture with Centre Manufacturing, Inc.
Effective June 19, 2018, we formed a new company, Endo & Centre Venture, LLC ("Endo & Centre"), for the purposes of carrying out a joint venture with Centre Manufacturing, Inc. ("Centre Manufacturing"), a food and beverage manufacturer owned by our President, Ashok Patel. Through Endo & Centre, we plan to pursue the manufacture, marketing, and sales of private label food and beverages. Centre Manufacturing will carry out the product manufacturing and, through our subsidiary Endo Brands, Inc., we will focus on marketing and sales of private-label food and beverage products. The joint venture with Centre Manufacturing is governed by the Operating Agreement for Endo & Centre. Our subsidiary, Endo Brands, Inc., owns 51% of Endo & Centre, and Centre Manufacturing owns a 49% membership interest. Profits and losses for the company will be shared on a 50/50 basis.
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Risks Related to Our Company and Business
If we do not obtain additional financing, our business development plans will be delayed and we may not achieve profitable operations.
We will require significant additional capital to execute on our business development plans. We intend to seek additional funds through private placements of our common stock or other securities as well as public sale of our stock to the public. Our business plan calls for incurring expenses for the purchase of products, website maintenance, and expenses for salary, legal, and administration. If no additional financing is secured, we may have to significantly curtail our plan of operations. If that is the case, our business will not grow as desired. Our ability to raise additional financing is unknown. We do not have any formal commitments or arrangements for the advancement of funds. Consequently, there can be no assurance that we will be able to obtain access to capital as and when needed or, if so, that the terms of any available financing will be commercially reasonable. If we are unable to raise suitable financing, our business development plans may be delayed and we may be unable to achieve profitable operations.
Since we have limited operating history and limited revenues to date, we may be unable to achieve or maintain profitability. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a newer enterprise.
We have limited financial resources and have generated limited revenues to date in our business. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by an emerging growth company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history and lack a track record of consistent revenues, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to fully meet our expenses and totally support our anticipated activities.
Our ability to continue as a business and implement our business plan will depend on our ability to raise sufficient funds. There is no assurance that any debt or equity offerings will be successful or that we will remain in business or be able to implement our business plan if the offerings are not successful.
If we are unable to develop a reliable systems for outside manufacturing and fulfillment, our ability to grow our business and achieve profitability will be severely adversely affected.
We have hired Dr. Ashok Patel to be our President. His experience in natural oils will allow us to make a breadth of amazing products. However, if he ends his relationship with the Company we may not be able to produce any new products in the future. We have our Endo Water bottled at one facility. If this facility does not continue to work with us in the future, we may be unable to produce any more product. We rely upon one company to produce the Humbly Hemp Snack Bar and some of our additional products. Our ability to grow our business and customer base will depend upon smoothly functioning relationships with our manufacturing and fulfillment partners and our ability to integrate their roles with our marketing and customer service operations. If we are unable to smoothly integrate these third party operations into our business, or if we are unable to establish and maintain strong relationships with these key outside parties, our ability to successfully deliver quality products to our customer in a timely manner will be adversely affected, and our ability to achieve profitability will be severely impaired.
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If we are unable to successfully market our products or our products do not perform as expected, our business and financial condition will be adversely affected.
We are subject to the risks generally associated with new product introductions and applications, including lack of market acceptance and failure of products to perform as expected. There can be no assurance that we will be successful in marketing our products to the public. Our success will depend on our ability to grow our wholesale distribution network and to develop additional sales channels on cost-effective terms. Our marketing efforts may not be sufficient to generate significant and ongoing sales. Further, if our products do not perform as expected by consumers, either in terms of flavor or perceived performance, our ability to expand our product distribution and grow overall sales will be severely impaired.
Because consumer preferences change frequently, if we fail to innovate, our business and financial condition will be adversely affected.
As a result of changing consumer preferences, most new products are successfully marketed for a limited period of time. Even if our products show early signs of promise, there can be no assurance that our products will continue to be popular for an extended period of time. Our success will be dependent upon our ability to address the changing needs and tastes of the consumer market. Our failure to innovate over time and to adjust to consumer preferences on a regular basis could cause us to fail to achieve and sustain ongoing market acceptance could have a material adverse effect on our financial condition and results of operations.
Because of pressures from competitors with more resources, we may fail to implement our business strategy profitably.
The market for our products is intensely competitive and we expect competition to increase in the future. We will compete with larger and more established companies that have longer operating histories, greater name recognition, access to larger customer bases and distribution networks, and significantly greater financial, technical and marketing resources than we do. As a result, they may be able to adapt more quickly to changes in customer preferences and to devote greater resources to the promotion and sale of their products than we will. In addition, they may have more firmly established financial, manufacturing, distribution, and sales relationships in the industry. Therefore, we cannot be sure that we will be able to successfully implement our business strategy in the face of such competition. If we cannot compete effectively, we may experience future price reductions, reduced gross margins and loss of market share, any of which will materially adversely affect our business, operating results and financial condition.
If we are unable to manage growth, our operations could be adversely affected.
Our progress is expected to require the full utilization of our management, financial and other resources, which to date has occurred with limited working capital. Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage sales, management, and technical personnel. There can be no assurance that management will be able to manage growth effectively.
If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our products. Our failure to properly manage the growth we might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.
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Our business and growth may suffer if we are unable to attract and retain key employees.
Our success depends on the expertise and continued service of my different persons. If one of them leaves the company, it may be difficult to find a sufficiently qualified and motivated individual to replace him/her and it may result in our being unable to implement our business plan and even a complete cessation of our operations, which would likely result in the total loss of an investor's investment. In addition, our product development depends heavily on the services of Mr. Ashok Patel. It will be difficult to find a sufficiently qualified and motivated individual to replace Mr. Patel in the event of death, disability, or resignation.
Furthermore, our ability to expand operations to accommodate our anticipated growth will also depend on our ability to attract and retain qualified media, management, finance, marketing, sales and technical personnel. However, competition for these types of employees is intense due to the limited number of qualified professionals. Our ability to meet our business development objectives will depend in part on our ability to recruit, train and retain top quality people with advanced skills who understand our business. We hope that we will be able to attract competent employees, but no assurance can be given that we will be successful in this regard. If we are unable to engage and retain the necessary personnel, our business may be materially and adversely affected.
The recent coronavirus outbreak may adversely affect our business.
In December 2019, a strain of coronavirus was reported to have surfaced in Wuhan, China, and has reached multiple other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures in China, the U.S., Italy, Israel and other affected countries. The continued outbreak and spreading of the coronavirus has and may continue to adversely impact our business, as our operations are based in the United States which has been severely affected by the outbreak. The various precautionary measures taken by many governmental authorities around the world in order to limit the spread of the coronavirus has had and may continue to have an adverse effect on the global markets and global economy, including on the availability and pricing of employees, resources, materials, manufacturing and delivery efforts and other aspects of the global economy. The financial downturn has affected the working hours or availability of staff and third-party contractors, and our clients may encounter cash-flow issues that will delay their payments to us. We also rely on third-party professionals to provide services such as the preparation of our financial statements and to conduct audits, and many of these parties have been affected by government-imposed precautionary measures, thereby delaying our receipt of these services. Therefore, the coronavirus has and could continue to disrupt production and cause delays in the supply and delivery of our products, may continue to affect our operation and disrupt the marketplace in which we operate and may have a material adverse effect on our operations. The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. The development of the coronavirus outbreak could materially disrupt our business and operations, hamper our ability to raise additional funds or sell our securities, continue to slow down the overall economy, curtail consumer spending, interrupt our sources of supply, and make it hard to adequately staff our operations.
Risks Related to Legal Uncertainty
If we are the subject of significant future product liability or related lawsuits, our business will likely fail.
Like all sellers of products for human consumption, we cannot eliminate the risk that our products may be subjection to contamination during the manufacturing or distribution process. Although we currently maintain product liability and general liability insurance, we may not be able to obtain such coverage in the future or such coverage may not be adequate to cover all potential claims. Moreover, even if we are able to maintain sufficient insurance coverage in the future, any successful claim could significantly harm our business, financial condition and results of operations.
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The legal status of the main ingredient in our products is uncertain.
Currently, even though many companies are selling food items enhanced with Cannabidiol (CBD), the legal status of CBD for use in food is uncertain. For example, in July 2018, the Department of Public Health of the State of California issued a directive stating that CBD derived from industrial hemp, as is used in products like our ENDO Water line, is not approved for use in human or pet food. The State of New York has taken a similar position. The FDA has taken a similar position. If this position is adopted by many other states in the future, it could significantly harm our business, financial condition, and results of operations. Furthermore, the Food and Drug Administration has also not declared CBD Generally Recognized As Safe (GRAS) and, as such, it could issue a directive similar to the one issued by the State of California.
Risks Related to Our Common Stock
Because we do not expect to pay dividends for the foreseeable future, investors seeking cash dividends should not purchase our common stock.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. Accordingly, investors must rely on sales of their own common stock after price appreciation, which may never occur, as the only way to realize their investment. Investors seeking cash dividends should not purchase our common stock.
If we undertake future offerings of our common stock, shareholders will experience dilution of their ownership percentage.
Generally, existing shareholders will experience dilution of their ownership percentage in the company if and when additional shares of common stock are offered and sold. In the future, we may be required to seek additional equity funding in the form of private or public offerings of our common stock and/or use convertible debt. In the event that we undertake subsequent offerings of common stock, or raise money using convertible debentures, your ownership percentage, voting power as a common shareholder, and earnings per share, if any, will be proportionately diluted. This may, in turn, result in a substantial decrease in the per-share value of your common stock.
Because FINRA sales practice requirements may limit a stockholder's ability to buy and sell our stock, investors may not be able to sell their stock should they desire to do so.
In addition to the "penny stock" rules described below, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock, reducing a stockholder's ability to resell shares of our common stock.
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Because we are subject to the "Penny Stock" rules, the level of trading activity in our stock may be reduced.
Broker-dealer practices in connection with transactions in "penny stocks" are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges or quoted on Nasdaq). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.
Item 1B. Unresolved Staff Comments
None.
Our corporate headquarters are at 12608 Forestgate Drive Dallas, TX 75243.
The property is sufficient for our current business size.
We are currently in a dispute with a lender concerning the amount due it after conversion of a convertible debenture to common stock. In the future, we may not be able to resolve this dispute in an amount that the resources of the Company can meet or the amount of settlement could cause the Company to have serious cash flow issues. If this dispute leads to litigation the attorneys’ fees could be significant and the company may not have the resources to meet these attorneys’ fees.
Item 4. Mine Safety Disclosures
Not applicable.
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Market Information
Our common stock is quoted under the symbol "RTON" on the OTCQB tier of the over-the-counter electronic quotation system operated by OTC Markets Group, Inc. The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTC Markets quotation system. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Fiscal Year Ended March 31, 2020
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High $ |
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Low $ |
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March 31, 2020 |
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$ | 0.0013 |
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$ | 0.0001 |
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December 31, 2019 |
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$ | 0.0042 |
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$ | 0.0009 |
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September 30, 2019 |
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$ | 0.0338 |
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$ | 0.0034 |
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June 30, 2019 |
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$ | 0.0489 |
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$ | 0.0065 |
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Fiscal Year Ended March 31, 2019
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High $ |
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Low $ |
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March 31, 2019 |
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$ | 0.0995 |
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$ | 0.0400 |
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December 31, 2018 |
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$ | 0.1696 |
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$ | 0.0515 |
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September 30, 2018 |
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$ | 0.1499 |
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$ | 0.0650 |
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June 30, 2018 |
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$ | 0.3700 |
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$ | 0.1198 |
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On March 30, 2021, the last sales price per share of our common stock was $0.0037.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
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The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of March 31, 2020, we had 999,515,530 shares of our common stock issued and outstanding, held by approximately 120 shareholders of record.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
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1. |
We would not be able to pay our debts as they become due in the usual course of business; or |
|
|
|
|
|
|
2. |
Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution. |
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
| 14 |
| Table of Contents |
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Fiscal Year Ended March 31, 2020 Compared to Fiscal Year Ended March 31, 2019
During the year ended March 31, 2020, we generated revenue of $328,580. Our cost of goods sold was $307,280, resulting in gross margin of $21,300. We incurred total operating expenses of $968,540, consisting of consulting fees of $162,435, executive compensation of $101,000, general and administrative expenses of $345,157, legal and professional fees of $195,855, bad debt expense of $21,362, advertising and promotion costs of $66,838, asset impairment of $69,113 and depreciation and amortization of $6,780. In addition, we incurred interest expense of $906,177, default penalties of $301,980, financing costs of $496,784, a loss on the change in fair value of derivative liabilities of $821,961, a net loss on extinguishment of debt of $1,447 and other income of $112. Our net loss for the year ended March 31, 2020 was $3,475,477.
By comparison, during the year ended March 31, 2019, we generated revenue of $255,821. Our cost of goods sold was $168,918, resulting in gross margin of $86,903. We incurred total operating expenses of $5,103,370, consisting of consulting fees of $3,190,800, executive compensation of $1,102,858, general and administrative expenses of $446,894, legal and professional fees of $124,269, bad debt expense of $95,632, advertising and promotion costs of $86,963, and depreciation and amortization of $2,888. In addition, we incurred interest expense of $459,062, default penalties of $298,600, financing costs of $1,676,568, and a gain on the change in fair value of derivative liabilities of $1,365,539. Our net loss for the year ended March 31, 2019 was $6,085,157.
Our expenses decreased during the year ended March 31, 2020, as compared to the prior year, largely as a result of decreased costs for legal, professional, and consulting fees as well as a significant decrease in financing costs incurred for debt funding received in the current year. As we continue with the development and marketing of our new health food and planned bottled water products, we expect that our expenses, as well as our revenues, will increase significantly over the current fiscal year.
Liquidity and Capital Resources
As of March 31, 2020, we had current assets in the amount of $124,720, consisting of cash in the amount of $67,153, accounts receivable, net of allowance, of $7,169, prepaid expenses of $34,862 and inventory of $15,536.
As of March 31, 2020, we had current liabilities of $2,375,199, consisting of notes payable of $299,000, convertible debts, net of discounts, in the amount of $275,941, derivative liability of $1,574,097, accounts payable of $109,243, accrued interest of $71,318, and current portion of lease liability of $45,600.
We have funded our operations to date through the issuance of common stock in offerings exempt under Rule 506, as well as through the issuance of notes payable and convertible notes payable.
| 15 |
| Table of Contents |
Our ability to successfully execute our business plan is contingent upon us obtaining additional financing and/or upon realizing sales revenue sufficient to fund our ongoing expenses. Until we are able to sustain our ongoing operations through sales revenue, we intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.
Off Balance Sheet Arrangements
As of March 31, 2020, there were no off balance sheet arrangements.
Going Concern
We have experienced recurring losses from operations and had an accumulated deficit of $13,661,579 as of March 31, 2020. To date, we have not been able to produce sufficient sales to become cash flow positive and profitable on a consistent basis. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. If the Company raises additional funds through the issuance of equity, the percentage ownership of current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to the rights, preferences and privileges of the Company’s common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict its future plans for developing its business and achieving commercial revenues. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most "critical accounting polices" in the Management Discussion and Analysis. The SEC indicated that a "critical accounting policy" is one which is both important to the portrayal of a company's financial condition and results, and requires management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We do not believe that the following accounting policies currently fit this definition.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of Right On Brands, Inc. and its wholly owned subsidiaries (Humbly Hemp, Inc., Endo Brands, Inc. and Humble Water Company). Intercompany accounts and transactions have been eliminated upon consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided by the straight-line method over the useful lives of the related assets, from three to five years.
The cost of building the Company's website has been capitalized and amortized over a period of three years. Expenditures for minor enhancements and maintenance are expensed as incurred.
| 16 |
| Table of Contents |
Inventory
Inventories are stated at the lower of cost (average cost) or market (net realizable value). Inventory consisted of raw materials and finished goods inventory of $3,921 and $11,615, respectively, as of March 31, 2020. Inventory consisted of raw materials, work in process inventory and finished goods inventory of $43,796, $30,611 and $139,550, respectively, as of March 31, 2019.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Long-lived Assets
The Company's long-lived assets and other assets (consisting of property and equipment) are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360," Property, Plant, and Equipment", and FASB ASC Topic 205 " Presentation of Financial Statements ". The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management's estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through March 31, 2020 and 2019, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that demand for the Company's products or services will continue, which could result in an impairment of long-lived assets in the future.
Stock-Based Compensation
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.
Revenue Recognition
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of hemp products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. The transfer of control of products to our customers is typically based on written sales terms that do not allow for a right of return after 30 days from the date of purchase.
Our products are sold for cash or on credit terms. Our credit terms, which are established in accordance with local and industry practices, typically require payment within 30 days of delivery, and may allow discounts for early payment. We estimate and reserve for our bad debt exposure based on our experience with past due accounts and collectability, the aging of accounts receivable and our analysis of customer data.
| 17 |
| Table of Contents |
On April 1, 2018 the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (ASC 606)” using the modified retrospective method. Adoption of the new revenue standard had no impact on the Company’s consolidated balance sheet, results of operations, equity (deficit) or cash flows as of the adoption date and the Company does not expect and further material impact to its consolidated financial statements on an ongoing basis as a result of adopting the revenue standard.
Income Taxes
The Company is subject to income taxes in the U.S. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. In accordance with FASB ASC Topic 740, "Income Taxes," the Company provides for the recognition of deferred tax assets if realization of such assets is more likely than not. The Company accounts for income tax under the provisions of FASB ASC Topic 740, "Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Fair Value of Financial Instruments
The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2020 and 2019 the fair value of cash and accounts payable, approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.
Convertible Instruments
The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 " Derivatives and Hedging Activities".
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
| 18 |
| Table of Contents |
Recently Issued Accounting Pronouncements
Our management has considered all recent accounting pronouncements issued since the last audit of our financial statements. Our management believes that these recent pronouncements will not have a material effect on our financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
| 19 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
| 20 |
| Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Right On Brands, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Right On Brands, Inc. and its subsidiaries (the “Company”) as of March 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended March 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2020 and 2019, and the results of its consolidated operations and its consolidated cash flows for each of the two years in the period ended March 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses since inception and has a significant working capital deficiency both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.
/s/ Turner, Stone & Company, L.L.P.
We have served as the Company’s auditor since 2019.
Dallas, Texas
March 31, 2021
| F-1 |
| Table of Contents |
|
RIGHT ON BRANDS, INC. |
| |||||||
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| ||||||||
|
|
| |||||||
|
|
|
March 31, |
|
|
March 31, |
| ||
|
|
|
2020 |
|
|
2019 |
| ||
|
|
|
|
|
| ||||
|
ASSETS | ||||||||
|
Current assets |
|
|
|
|
|
| ||
|
Cash |
|
$ | 67,153 |
|
|
$ | 90,883 |
|
|
Accounts receivable, net of allowance |
|
|
7,169 |
|
|
|
24,184 |
|
|
Prepaid expenses |
|
|
34,862 |
|
|
|
- |
|
|
Inventory |
|
|
15,536 |
|
|
|
213,957 |
|
|
Total current assets |
|
|
124,720 |
|
|
|
329,024 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
Property and equipment, net of depreciation |
|
|
21,132 |
|
|
|
27,451 |
|
|
Intangible assets, net of amortization |
|
|
307 |
|
|
|
768 |
|
|
Right of use asset (Note 11) |
|
|
91,200 |
|
|
|
- |
|
|
Total non-current assets |
|
|
112,639 |
|
|
|
28,219 |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ | 237,359 |
|
|
$ | 357,243 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ | 109,243 |
|
|
$ | 66,689 |
|
|
Accrued interest payable |
|
|
71,318 |
|
|
|
30,337 |
|
|
Lease liability, current portion (Note 11) |
|
|
45,600 |
|
|
|
- |
|
|
Notes payable |
|
|
299,000 |
|
|
|
609,000 |
|
|
Convertible debt, net of discount |
|
|
275,941 |
|
|
|
347,473 |
|
|
Derivative liability |
|
|
1,574,097 |
|
|
|
1,034,939 |
|
|
Total current liabilities |
|
|
2,375,199 |
|
|
|
2,088,438 |
|
|
|
|
|
|
|
|
|
|
|
|
Lease liability, non-current (Note 11) |
|
|
45,600 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,420,799 |
|
|
|
2,088,438 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
|
|
|
Series A Preferred stock; 10,000,000 shares authorized of $.001 par value; |
|
|
|
|
|
|
|
|
|
5,000,000 and 5,000,000 shares issued March 31, 2020 and 2019, respectively |
|
|
5,000 |
|
|
|
5,000 |
|
|
Common stock; par value $.001; 12,000,000,000 and 500,000,000 shares authorized |
|
|
|
|
|
|
|
|
|
999,515,530 and 73,652,594 shares issued March 31, 2020 and 2019, respectively |
|
|
999,516 |
|
|
|
73,653 |
|
|
Additional paid-in capital |
|
|
10,382,366 |
|
|
|
8,295,767 |
|
|
Common stock payable |
|
|
66,820 |
|
|
|
56,050 |
|
|
Accumulated deficit |
|
|
(13,661,579 | ) |
|
|
(10,186,102 | ) |
|
Total Right On Brands stockholders' deficit |
|
|
(2,207,877 | ) |
|
|
(1,755,632 |
) |
|
Noncontrolling interest |
|
|
24,437 |
|
|
|
24,437 |
|
|
Total stockholders' deficit |
|
|
(2,183,440 | ) |
|
|
(1,731,195 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
|
$ | 237,359 |
|
|
$ | 357,243 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
| Table of Contents |
|
RIGHT ON BRANDS, INC. | |||||||||
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| |||||||||
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|
|
Year ended |
|
|
Year ended |
| |||
|
|
|
March 31, |
|
|
March 31, |
| |||
|
|
|
2020 |
|
|
2019 |
| |||
|
|
|
|
|
|
|
| |||
|
Revenue |
|
$ | 328,580 |
|
|
$ | 255,821 |
| |
|
Cost of goods sold |
|
|
307,280 |
|
|
|
168,918 |
| |
|
Gross profit |
|
|
21,300 |
|
|
|
86,903 |
| |
|
|
|
|
|
|
|
|
|
| |
|
Operating expenses |
|
|
|
|
|
|
|
| |
|
Depreciation and amortization |
|
|
6,780 |
|
|
|
2,888 |
| |
|
General and administrative |
|
|
345,157 |
|
|
|
446,894 |
| |
|
Advertising and promotion |
|
|
66,838 |
|
|
|
86,963 |
| |
|
Legal and professional |
|
|
195,855 |
|
|
|
124,269 |
| |
|
Executive compensation |
|
|
101,000 |
|
|
|
1,102,858 |
| |
|
Consulting |
|
|
162,435 |
|
|
|
3,190,800 |
| |
|
Asset impairment |
|
|
69,113 |
|
|
|
52,729 |
| |
|
Bad debt expense |
|
|
21,362 |
|
|
|
95,632 |
| |
|
Research and development |
|
|
- |
|
|
|
337 |
| |
|
Total operating expenses |
|
|
968,540 |
|
|
|
5,103,370 |
| |
|
|
|
|
|
|
|
|
|
| |
|
Other (income) expense |
|
|
|
|
|
|
|
| |
|
Interest expense |
|
|
906,177 |
|
|
|
459,062 |
| |
|
Default penalties |
|
|
301,980 |
|
|
|
298,600 |
| |
|
Financing costs |
|
|
496,784 |
|
|
|
1,676,568 |
| |
|
Change in fair value of derivative liability |
|
|
821,961 |
|
|
|
(1,365,539 | ) | |
|
Loss on settlement of liabilities |
|
|
9,247 |
|
|
|
- |
| |
|
Gain on settlement of liabilities |
|
|
(7,800 | ) |
|
|
- |
| |
|
Other income |
|
|
(112 | ) |
|
|
- |
| |
|
Total other (income) expense |
|
|
2,528,237 |
|
|
|
1,068,691 |
| |
|
|
|
|
|
|
|
|
|
| |
|
Net loss before noncontrolling interest |
|
|
(3,475,477 | ) |
|
|
(6,085,157 | ) | |
|
|
|
|
|
|
|
|
|
| |
|
Net gain (loss) attributable to noncontrolling interest |
|
|
- |
|
|
|
- |
| |
|
|
|
|
|
|
|
|
|
| |
|
Net loss attributable to stockholders of Right On Brands, Inc. |
|
$ | (3,475,477 | ) |
|
$ | (6,085,157 | ) | |
|
|
|
|
|
|
|
|
|
| |
|
Loss per share |
|
|
|
|
|
|
|
| |
|
Basic loss per share |
|
$ | (0.01 | ) |
|
$ | (0.09 | ) | |
|
|
|
|
|
|
|
|
|
| |
|
Basic weighted average shares outstanding |
|
|
376,175,431 |
|
|
|
66,759,168 |
| |
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
|
RIGHT ON BRANDS, INC. | ||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||
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|
Total |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Common |
|
|
|
|
|
|
Stockholders' |
| |||||||||||||||
|
|
|
Preferred Shares |
|
|
Common Shares |
|
|
Paid In |
|
|
Stock |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
Equity |
| |||||||||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Payable |
|
|
Deficit |
|
|
Interest |
|
|
(Deficit) |
| |||||||||
|
Balance, March 31, 2018 |
|
|
5,000,000 |
|
|
$ | 5,000 |
|
|
|
63,543,869 |
|
|
$ | 63,544 |
|
|
$ | 6,513,979 |
|
|
$ | 474,000 |
|
|
$ | (4,100,945 | ) |
|
$ | 24,437 |
|
|
$ | 2,980,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Issuance of common stock for cash |
|
|
- |
|
|
|
- |
|
|
|
2,666,000 |
|
|
|
2,666 |
|
|
|
97,334 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Conversion of debt to common stock |
|
|
- |
|
|
|
- |
|
|
|
6,402,725 |
|
|
|
6,403 |
|
|
|
110,847 |
|
|
|
20,000 |
|
|
|
- |
|
|
|
- |
|
|
|
137,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Issuance of common stock for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36,050 |
|
|
|
- |
|
|
|
- |
|
|
|
36,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash and warrants |
|
|
- |
|
|
|
- |
|
|
|
40,000 |
|
|
|
40 |
|
|
|
9,960 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for penalty |
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
75,100 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
76,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of convertible note payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
199,341 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
199,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and warrants issued for consulting and executive compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,289,206 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,289,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note payable for shares pending issuance |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(474,000 | ) |
|
|
- |
|
|
|
- |
|
|
|
(474,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,085,157 | ) |
|
|
- |
|
|
|
(6,085,157 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019 |
|
|
5,000,000 |
|
|
$ | 5,000 |
|
|
|
73,652,594 |
|
|
$ | 73,653 |
|
|
$ | 8,295,767 |
|
|
$ | 56,050 |
|
|
$ | (10,186,102 | ) |
|
$ | 24,437 |
|
|
$ | (1,731,195 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for cash |
|
|
- |
|
|
|
- |
|
|
|
14,416,666 |
|
|
|
14,417 |
|
|
|
80,583 |
|
|
|
30,770 |
|
|
|
- |
|
|
|
- |
|
|
|
125,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of liabilities |
|
|
- |
|
|
|
- |
|
|
|
28,000,000 |
|
|
|
28,000 |
|
|
|
(5,800 | ) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of convertible notes payable and interest |
|
|
- |
|
|
|
- |
|
|
|
840,946,270 |
|
|
|
840,946 |
|
|
|
1,439,210 |
|
|
|
(20,000 | ) |
|
|
- |
|
|
|
- |
|
|
|
2,260,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of note payable |
|
|
- |
|
|
|
- |
|
|
|
800,000 |
|
|
|
800 |
|
|
|
473,200 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
474,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for financing costs |
|
|
- |
|
|
|
- |
|
|
|
40,700,000 |
|
|
|
40,700 |
|
|
|
(20,350 | ) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for financing costs |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33,113 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
33,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,543 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for default penalty |
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
75,100 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
76,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,475,477 | ) |
|
|
- |
|
|
|
(3,475,477 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020 |
|
|
5,000,000 |
|
|
$ | 5,000 |
|
|
|
999,515,530 |
|
|
$ | 999,516 |
|
|
$ | 10,382,366 |
|
|
$ | 66,820 |
|
|
$ | (13,661,579 | ) |
|
$ | 24,437 |
|
|
$ | (2,183,440 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
|
RIGHT ON BRANDS, INC. | ||||||||
|
| ||||||||
|
|
|
Year ended |
|
|
Year ended |
| ||
|
|
|
March 31, |
|
|
March 31, |
| ||
|
|
|
2020 |
|
|
2019 |
| ||
|
|
|
|
|
| ||||
|
Cash flows used in operating activities |
|
|
|
| ||||
|
Net loss |
|
$ | (3,475,477 | ) |
|
$ | (6,085,157 | ) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
6,780 |
|
|
|
2,888 |
|
|
Bad debt expense |
|
|
21,362 |
|
|
|
95,632 |
|
|
Amortization of debt discount |
|
|
810,027 |
|
|
|
421,583 |
|
|
Inventory write-down |
|
|
69,113 |
|
|
|
52,729 |
|
|
Financing costs |
|
|
496,784 |
|
|
|
1,692,319 |
|
|
Change in fair value of derivative liability |
|
|
821,961 |
|
|
|
(1,365,539 | ) |
|
Stock-based compensation |
|
|
11,543 |
|
|
|
1,325,256 |
|
|
Stock and debt-based penalties |
|
|
301,980 |
|
|
|
298,600 |
|
|
Loss on settlement of liabilities |
|
|
1,447 |
|
|
|
|
|
|
(Increase) decrease in assets |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(4,347 | ) |
|
|
(116,919 | ) |
|
Prepaid expense |
|
|
(34,862 | ) |
|
|
110,227 |
|
|
Inventory |
|
|
129,308 |
|
|
|
(252,642 | ) |
|
Deposit |
|
|
- |
|
|
|
2,000 |
|
|
Prepaid stock compensation |
|
|
- |
|
|
|
2,858,457 |
|
|
Increase (decrease) in liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
43,865 |
|
|
|
49,978 |
|
|
Accrued interest payable |
|
|
117,516 |
|
|
|
36,965 |
|
|
Net cash used in operating activities |
|
|
(683,000 | ) |
|
|
(873,623 | ) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
- |
|
|
|
(18,000 | ) |
|
Net cash used in investing activities |
|
|
- |
|
|
|
(18,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by financing activities |
|
|
|
|
|
|
|
|
|
Proceeds from notes payable |
|
|
25,000 |
|
|
|
- |
|
|
Proceeds from convertible debt |
|
|
508,500 |
|
|
|
825,000 |
|
|
Proceeds from issuances of common stock |
|
|
125,770 |
|
|
|
110,000 |
|
|
Net cash provided by financing activities |
|
|
659,270 |
|
|
|
935,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
(23,730 | ) |
|
|
43,377 |
|
|
Cash-beginning of year |
|
|
90,883 |
|
|
|
47,506 |
|
|
Cash-end of year |
|
$ | 67,153 |
|
|
$ | 90,883 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ | - |
|
|
$ | - |
|
|
Cash paid for income taxes |
|
$ | - |
|
|
$ | - |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities |
|
|
|
|
|
|
|
|
|
Right of use asset and liability |
|
$ | 136,800 |
|
|
$ | - |
|
|
Original issuance discount on note payable |
|
$ | 25,000 |
|
|
$ | - |
|
|
Original issuance discount on convertible debt |
|
$ | 42,150 |
|
|
$ | 980,800 |
|
|
Discount on convertible debt from derivative liability |
|
$ | 495,795 |
|
|
$ | - |
|
|
Common stock issued to settle notes payable |
|
$ | 474,000 |
|
|
$ | - |
|
|
Convertible debt and interest converted into common stock |
|
$ | 2,260,156 |
|
|
$ | 137,250 |
|
|
Common stock payable converted to note payable |
|
$ | - |
|
|
$ | 494,000 |
|
|
Penalty accrued as note payable |
|
$ | - |
|
|
$ | 135,000 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
RIGHT ON BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
1. |
BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
|
|
|
Formation and Business Activity |
|
|
|
|
|
Right on Brands, Inc. (“we” or “the Company” or “Right on Brands”) was incorporated under the laws of the State of Nevada on April 1, 2011, as HealthTalk Live, Inc. On August 10, 2017, the Company amended is articles of incorporation and changed its name to Right On Brands, Inc. ("Right On Brands")("the Company"). Right On Brands is a health and wellness focused company developing and marketing their brands as described herein.
|
|
|
During the year ended March 31, 2017, the Company acquired Humbly Hemp, Inc. as a wholly owned subsidiary. On August 31, 2017 the Company common shares commenced trading under the new stock symbol OTC Pink: RTON. Our Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280. |
|
|
|
|
|
Addition of New Wholly Owned Subsidiary, Humble Water Company |
|
|
|
|
|
On May 11, 2017, the Company formed a wholly owned subsidiary, Humble Water Company. ("Humble") Humble was formed to handle the joint venture with Spring Hill Water Co. No significant activity related to the joint venture occurred during the fiscal years ended March 31, 2020 and 2019. |
|
|
|
|
|
Addition of New Wholly Owned Subsidiary, Endo Brands, Inc. |
|
|
|
|
|
On June 27, 2017, the Company formed a wholly owned subsidiary, Endo Brands, Inc. ("Endo"). Endo Brands has products in the CBD and hemp oil marketplace.
Addition of Partially Owned Subsidiary, Endo & Centre Venture LLC
On April 16, 2018, the Company entered into an operating agreement with Centre Manufacturing, Inc. ("Centre") and agreed to form an LLC. The LLC is owned 51% by the Company and 49% owned by Centre, but all income and losses will be split evenly. The owner of Centre is the CEO of the Company. On June 19, 2018, the Company formed a majority owned subsidiary, Endo & Centre Venture LLC. No significant activity has occurred during the fiscal years ended March 31, 2020 and 2019. |
| F-6 |
| Table of Contents |
|
|
Principles of Consolidation |
|
|
|
|
|
The consolidated financial statements of the Company include the accounts of Right On Brands, Inc. and its wholly owned subsidiaries and majority owned business (Humbly Hemp, Inc., Endo Brands, Inc., Humble Water Company, Springhill Water Co, and Endo & Centre Venture LLC). Intercompany accounts and transactions have been eliminated upon consolidation. |
|
|
|
|
|
Cash and Cash Equivalents |
|
|
|
|
|
The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances at three financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. As of March 31, 2020, and 2019, the Company’s cash balance did not exceed FDIC coverage.
Accounts Receivable
The Company performs periodic credit evaluations of its customers’ financial condition and extends credit to virtually all of its customers on an uncollateralized basis. Credit losses to date have been insignificant and within management’s expectations. The Company provides an allowance for doubtful accounts that is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal accounts receivable are due 30 to 45 days after the issuance of the invoice. Receivables past due more than 60 days are considered delinquent. Delinquent receivables are evaluated for collectability based on individual credit evaluation and specific circumstances of the customer. As of March 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $0 and $34,479, respectively. The Company wrote off $34,479 and $61,153 of accounts receivable against the allowance for doubtful accounts during fiscal years ended March 31, 2020 and 2019, respectively. |
|
|
|
|
|
Property and Equipment |
|
|
|
|
|
Property and equipment are stated at cost, using a capitalization threshold of $2,500. Depreciation is provided by the straight-line method over the useful lives of the related assets, ranging from one to five years. |
|
|
|
|
|
The cost of building the Company's website has been capitalized and amortized over a period of three years. Expenditures for minor enhancements and maintenance are expensed as incurred. |
|
|
|
|
|
Inventory |
|
|
|
|
|
Inventories are stated at the lower of cost (average cost) or market (net realizable value). Cost includes materials related to the purchase and production of inventories. We regularly review inventory quantities on hand, future purchase commitments with our suppliers, and the estimated utility of our inventory. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to cost of revenue. |
|
|
|
|
|
Use of Estimates |
|
|
|
|
|
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
| F-7 |
| Table of Contents |
|
|
Long-lived Assets |
|
|
|
|
|
The Company's long-lived assets and other assets (consisting of property and equipment) are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360," Property, Plant, and Equipment", and FASB ASC Topic 205 " Presentation of Financial Statements ". The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management's estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through March 31, 2020 and 2019, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that demand for the Company's products or services will continue, which could result in an impairment of long-lived assets in the future. |
|
|
|
|
|
Stock Based Compensation |
|
|
|
|
|
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50. |
|
|
|
|
|
Revenue Recognition |
|
|
|
|
|
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of hemp products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. The transfer of control of products to our customers is typically based on written sales terms that do not allow for a right of return after 30 days from the date of purchase.
Our products are sold for cash or on credit terms. Our credit terms, which are established in accordance with local and industry practices, typically require payment within 30 days of delivery, and may allow discounts for early payment. We estimate and reserve for our bad debt exposure based on our experience with past due accounts and collectability, the aging of accounts receivable and our analysis of customer data. |
| F-8 |
| Table of Contents |
|
|
Income Taxes |
|
|
In accordance with FASB ASC Topic 740, "Income Taxes," the Company provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
In addition, the Company’s management performs an evaluation of all uncertain income tax positions taken or expected to be taken in the course of preparing the Company’s income tax returns to determine whether the income tax positions meet a “more likely than not” standard of being sustained under examination by the applicable taxing authorities. This evaluation is required to be performed for all open tax years, as defined by the various statutes of limitations, for federal and state purposes. If the Company has interest or penalties associated with insufficient taxes paid, such expenses are reported in income tax expense.
Fair Value Measurement
ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but Generally Accepted Accounting Principles in the United States (“GAAP”) provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Financial Instruments.”
Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company’s balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The Company did not have any Level 1 or Level 2 assets and liabilities at March 31, 2020 and 2019. The Derivative liabilities are Level 3 fair value measurements. |
| F-9 |
| Table of Contents |
|
|
The following is a summary of activity of Level 3 liabilities during the fiscal years ended March 31, 2020 and 2019: |
|
|
|
2020 |
|
|
2019 |
| ||
|
Derivative liability balance at beginning of period |
|
$ | 1,034,939 |
|
|
$ | - |
|
|
Additions from debt issuances |
|
|
942,145 |
|
|
|
2,599,819 |
|
|
Additions from default penalties |
|
|
81,143 |
|
|
|
- |
|
|
Reclass to equity upon conversion/cancellation |
|
|
(1,306,091 | ) |
|
|
(199,341 | ) |
|
Change in fair value |
|
|
821,961 |
|
|
|
(1,365,539 | ) |
|
Derivative liability balance at end of period |
|
$ | 1,574,097 |
|
|
$ | 1,034,939 |
|
|
|
During the years ended March 31, 2020 and 2019, the Company entered into several convertible note agreements (Note 6). These notes are convertible at a fraction of the stock closing price near the conversion date. Additionally, the conversion price, as well as other terms including interest rates, adjust if any future financings have more favorable terms. The conversion features of these notes meet the definition of a derivative which therefore requires bifurcation and are accounted for as a derivative liability. |
|
|
|
|
|
The Company estimated the fair value of the conversion feature derivatives embedded in the convertible debentures based on weighted probabilities of assumptions used in the Black Scholes pricing model. At March 31, 2020, the fair value of the derivative liabilities of convertible notes was estimated using the following weighted-average inputs: the price of the Company’s common stock of $0.0002; a risk-free interest rate ranging from 0.15% to 0.17%, and expected volatility of the Company’s common stock of 364%, various estimated exercise prices, and terms under one year. At March 31, 2019, the fair value of the derivative liabilities of convertible notes was estimated using the following weighted-average inputs: the price of the Company’s common stock of $0.045; a risk-free interest rate ranging from 2.32% to 2.50%, and expected volatility of the Company’s common stock ranging from 286% to 305%, various estimated exercise prices, and terms under one year. |
|
|
|
|
|
Financial Instruments |
|
|
|
|
|
The Company’s financial instruments include cash and cash equivalents, receivables, payables, and debt and are accounted for under the provisions of ASC Topic 825, “Financial Instruments”. The carrying amount of these financial instruments, with the exception of discounted debt, as reflected in the consolidated balance sheets approximates fair value. |
|
|
|
|
|
Convertible Instruments |
|
|
|
|
|
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 "Derivatives and Hedging Activities". |
|
|
|
|
|
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. |
| F-10 |
| Table of Contents |
|
|
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. Proceeds from these convertible notes are reported under the financing section of the statements of cash flows. Changes to the fair value of the derivative liability are reported as adjustments to reconcile net loss to net cash used in operating activities in the accompanying statement of cash flows. |
|
|
|
|
|
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers: Topic 606, or ASU 2014-09. ASU 2014-09 establishes the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In applying the new revenue recognition model to contracts with customers, an entity: (1) identifies the contract(s) with a customer; (2) identifies the performance obligations in the contract(s); (3) determines the transaction price; (4) allocates the transaction price to the performance obligations in the contract(s); and (5) recognizes revenue when (or as) the entity satisfies a performance obligation. The accounting standards update applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification. The accounting standards update also requires significantly expanded quantitative and qualitative disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted Topic 606 as of April 1, 2018, using the modified retrospective transition method. Under the modified retrospective method, the Company would recognize the cumulative effect of initially applying the standard as an adjustment to opening retained earnings at the date of initial application; however, the Company did not have any material adjustment as of the date of the adoption and adoption had no impact on the Company's consolidated balance sheet, results of operations, equity or cash flows as of the adoption date. The comparative periods have not been restated.
In February 2016, the FASB issued ASU 2016-02, Leases. This is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the term of the lease. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard became effective beginning April 1, 2019 at the inception of the Company’s office and warehouse lease (Note 11). The Company believes adoption of the standard did not have a material impact on our results of operations and financial condition.
During the year ended March 31, 2020, and through the date of this report, there were several new accounting pronouncements issued by the FASB. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.
|
|
2. |
GOING CONCERN |
|
|
|
|
|
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. For the year ended March 31, 2020, the Company had an accumulated deficit of approximately $13,662,000, had a net loss of approximately $3,475,000, and net cash used in operating activities of approximately $683,000, with approximately $329,000 revenue earned, and a lack of profitable operational history. These matters, among others, raise substantial doubt about the Company's ability to continue as a going concern. |
| F-11 |
| Table of Contents |
|
|
While the Company is attempting to generate greater revenues, the Company's cash position may not be significant enough to support the Company's daily operations. Management intends to raise additional funds by way of additional public and/or private offerings of its stock. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company's ability to further implement its business plan and generate revenues.
The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
|
|
3. |
INVENTORY
At March 31, 2020 and 2019, inventory consisted of the following: |
|
|
|
As of March 31, 2020 |
|
|
As of March 31, 2019 |
| ||
|
|
|
|
|
|
|
| ||
|
Raw materials |
|
$ | 3,921 |
|
|
$ | 43,796 |
|
|
Work-in-process |
|
|
- |
|
|
|
30,611 |
|
|
Finished Goods |
|
|
11,615 |
|
|
|
139,550 |
|
|
Ending Balance |
|
$ | 15,536 |
|
|
$ | 213,957 |
|
| F-12 |
| Table of Contents |
|
4. |
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS |
|
|
|
As of March 31, 2020 |
|
|
As of March 31, 2019 |
| ||
|
|
|
|
|
|
|
| ||
|
Website development |
|
$ | 88,965 |
|
|
$ | 88,965 |
|
|
Automobile |
|
|
31,596 |
|
|
|
31,596 |
|
|
Studio and office equipment |
|
|
5,957 |
|
|
|
5,957 |
|
|
Tenant improvements |
|
|
10,879 |
|
|
|
10,879 |
|
|
Intangible assets |
|
|
1,024 |
|
|
|
1,024 |
|
|
|
|
|
138,421 |
|
|
|
138,421 |
|
|
Accumulated depreciation and amortization |
|
|
(116,982 | ) |
|
|
(110,202 | ) |
|
Ending Balance |
|
$ | 21,439 |
|
|
$ | 28,219 |
|
|
|
Depreciation expense of property and equipment for the fiscal years ended March 31, 2020 and 2019 was $6,319 and $2,786, respectively.
Intangible assets consist of a trademark acquired March 31, 2017 and is being amortized over five years. Amortization expense for the fiscal years ended March 31, 2020 and 2019 was $461 and $102, respectively. |
| F-13 |
| Table of Contents |
|
5. |
NONCONTROLLING INTEREST |
|
|
|
|
|
Investments in partnerships, joint ventures and less-than-majority-owned subsidiaries in which we have significant influence are accounted for under the equity method. |
|
|
|
|
|
As of March 31, 2018, the Company's consolidated financial statements includes a venture for the development of a commercial bottled water operation near Browning, Montana. The new venture will be operated through Spring Hill Water Company, LLC, a Nevada limited liability company ("Spring Hill"). Spring Hill is 49% owned by our newly-formed subsidiary corporation, Humble Water Company, and 51% owned by Doore, LLC. Doore, LLC, which serves as the manager of Spring Hill, has contributed the land and water source to be used in the new operation through a Land & Water Lease Agreement under which Spring Hill will have the use of 2 acres of land and no less than 5 acre-feet of water for an initial term of 25 years and at a lease rate of $1 per year. Through Humble Water Company, our initial capital contribution to Spring Hill was approximately $100,000 to be used in commencing operations. In addition, we have committed to provide additional capital to be used for a bottling facility and equipment, in an amount up to $530,000, within the next 3 years. Should we fail to provide this additional capital within the next 3 years, our ownership percentage in Spring Hill will be reduced from 49% to 20%. Although we hold a minority ownership percentage in Spring Hill, we will have voting control over the company with 75% of the voting membership units. Further, 100% of the losses, expenditures, and deductions from Spring Hill will be allocated to our subsidiary, Humble Water Company. The activity of Spring Hill is accounted for under the voting interest method and we consolidate 100% of the business activity and record 25% of noncontrolling interest on the balance sheet and 0% of the net losses based on the terms of the agreement.
As of March 31, 2020 and 2019, the noncontrolling interest was $24,437 in the accompanying consolidated financial statements. As of March 31, 2020 and 2019, our total investment into Spring Hill to date was $101,470. During the fiscal years ended March 31, 2020 and 2019, there have been no significant operations or expenditures in the joint venture.
|
|
6. |
DEBT |
|
|
|
|
|
Notes Payable |
|
|
|
|
|
During October 2016, the Company extinguished $129,549 of debt in exchange for 5,000,000 shares of newly issued common stock. The original note had a maturity date of November 11, 2016 and no interest rate. A total of 4,200,000 shares were issued to three of the four noteholders. As of December 31, 2016, the remaining balance of 800,000 shares of common stock was pending issuance to one noteholder, so common stock payable of $474,000 was recorded in the accompanying consolidated statement of stockholders’ equity. As of July 2019, the shares were still pending issuance; accordingly, the Company reclassified the amount due to Noteholder 8 to notes payable at the fair value of the common stock. During February 2020, the Company issued 800,000 shares of the Company’s common stock pursuant to the October 2016 debt extinguishment. As a result, the note payable of $474,000 is no longer outstanding.
On February 12, 2019, Noteholder 1 submitted a notice of conversion for $125,000 principal and $11,250 accrued interest after the note was in default. The note terms provided a $3,000 daily fee for failure to deliver common stock prior to a deadline of two days after the conversion notice. The shares due under the conversion were not issued until May 8, 2019. Accordingly, a note payable of $135,000 was recorded as a penalty at March 31, 2019. An additional $114,000 was accrued as a penalty during the year ended March 31, 2020. The $249,000 balance remains outstanding at March 31, 2020.
On November 22, 2019, the Company issued a $50,000 promissory note to Noteholder 11 for a $25,000 cash borrowing. Accordingly, a $25,000 discount was recorded at issuance, all of which was amortized by March 31, 2020. The non-interest-bearing note is secured by inventory, matured February 20, 2020 and remains in default at March 31, 2020. |
| F-14 |
| Table of Contents |
|
Convertible Debt | ||||||||||||
|
|
| |||||||||||
|
|
On April 11, 2016, the Company issued a convertible promissory note with Noteholder 8 for $10,000. The unsecured note bears interest at 8% per annum and was due on February 7, 2017. This note is convertible at $0.01 per share and can be converted on or before the maturity date. The Company and lender mutually agreed to extend the maturity date of the note to March 10, 2017, at which time the Company defaulted on the note. Prior to the March 31, 2018, $8,000 in principal was converted into 800,000 shares of the Company’s common stock. The $2,000 balance outstanding at March 31, 2020 remains in default.
On July 7, 2016, the Company issued a convertible promissory note with Noteholder 9 for $25,000. The unsecured note bears interest at 6% per annum and is due on January 7, 2017. This note is convertible at $0.10 per share and can be converted on or before the maturity date. The Company and lender mutually agreed to extend the maturity date of the note to September 30, 2019, at which time the Company defaulted on the note. The $25,000 balance outstanding at March 31, 2020 and 2019 remains in default.
On November 21, 2017, the Company issued a convertible promissory note with Noteholder 8 for $20,000. The unsecured note bears interest at 6% per annum and was due on May 21, 2018 but was extended to September 30, 2019, at which time the Company defaulted on the note. The note is convertible at $0.20 per share and can be converted on or before the maturity date. The $20,000 balance outstanding at March 31, 2020 and 2019 remains in default.
During the fiscal year ended March 31, 2019, the Company issued convertible promissory notes summarized as follows: | |||||||||||
|
|
|
Origination |
|
|
|
Interest |
|
|
Conversion |
|
|
Note |
| |||
|
Noteholder |
|
Date |
|
Date Due |
|
Rate |
|
|
Discount |
|
|
Amount |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Noteholder 1 |
|
04/26/18 |
|
10/26/18 |
|
|
12 | % |
|
|
50 | % |
|
$ | 125,000 |
|
|
Noteholder 2 |
|
11/01/18 |
|
08/01/19 |
|
|
12 | % |
|
|
35 | % |
|
|
247,500 |
|
|
Noteholder 3 |
|
12/04/18 |
|
12/04/19 |
|
|
10 | % |
|
|
35 | % |
|
|
75,000 |
|
|
Noteholder 4 |
|
11/15/18 |
|
08/15/19 |
|
|
12 | % |
|
|
35 | % |
|
|
81,900 |
|
|
Noteholder 5 |
|
11/12/18 |
|
11/12/19 |
|
|
12 | % |
|
|
35 | % |
|
|
134,400 |
|
|
Noteholder 5 |
|
02/22/19 |
|
02/22/20 |
|
|
12 | % |
|
|
35 | % |
|
|
110,250 |
|
|
Noteholder 6 |
|
01/03/19 |
|
10/03/19 |
|
|
12 | % |
|
|
35 | % |
|
|
130,000 |
|
|
Noteholder 7 |
|
01/24/19 |
|
01/24/20 |
|
|
12 | % |
|
|
35 | % |
|
|
81,750 |
|
|
|
At March 31, 2019, the Company's convertible promissory notes and related debt discount and derivative liability are summarized as follows: |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
| ||||
|
|
|
Gross |
|
|
amount |
|
|
Net amounts |
|
|
Corresponding |
| ||||
|
|
|
amount |
|
|
offset by |
|
|
of liabilities |
|
|
Derivative |
| ||||
|
Noteholder |
|
of liability |
|
|
debt discount |
|
|
presented |
|
|
Balance |
| ||||
|
Noteholder 2 |
|
$ | 247,500 |
|
|
$ | 115,592 |
|
|
$ | 131,908 |
|
|
$ | 258,372 |
|
|
Noteholder 3 |
|
|
75,000 |
|
|
|
54,849 |
|
|
|
20,151 |
|
|
|
94,843 |
|
|
Noteholder 4 |
|
|
81,900 |
|
|
|
51,188 |
|
|
|
30,712 |
|
|
|
87,582 |
|
|
Noteholder 5 |
|
|
244,650 |
|
|
|
183,074 |
|
|
|
61,576 |
|
|
|
325,589 |
|
|
Noteholder 6 |
|
|
130,000 |
|
|
|
87,500 |
|
|
|
42,500 |
|
|
|
155,384 |
|
|
Noteholder 7 |
|
|
81,750 |
|
|
|
68,124 |
|
|
|
13,626 |
|
|
|
113,169 |
|
|
Noteholder 8 |
|
|
22,000 |
|
|
|
- |
|
|
|
22,000 |
|
|
|
- |
|
|
Noteholder 9 |
|
|
25,000 |
|
|
|
- |
|
|
|
25,000 |
|
|
|
- |
|
|
|
|
$ | 907,800 |
|
|
$ | 560,327 |
|
|
$ | 347,473 |
|
|
$ | 1,034,939 |
|
| F-15 |
| Table of Contents |
|
|
During the fiscal year ended March 31, 2020, the Company issued convertible promissory notes summarized as follows: |
|
|
|
Origination |
|
|
|
Interest |
|
|
Conversion |
|
|
Note |
| |||
|
Noteholder |
|
Date |
|
Date Due |
|
Rate |
|
|
Discount |
|
|
Amount |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Noteholder 3 |
|
07/17/19 |
|
12/04/19 |
|
|
10 | % |
|
|
35 | % |
|
|
22,500 |
|
|
Noteholder 3 |
|
12/04/19 |
|
12/04/19 |
|
|
10 | % |
|
|
35 | % |
|
|
22,876 |
|
|
Noteholder 4 |
|
07/15/19 |
|
08/15/19 |
|
|
12 | % |
|
|
35 | % |
|
|
22,441 |
|
|
Noteholder 5 |
|
08/05/19 |
|
08/05/20 |
|
|
12 | % |
|
|
35 | % |
|
|
139,650 |
|
|
Noteholder 5 |
|
09/13/19 |
|
09/13/20 |
|
|
12 | % |
|
|
35 | % |
|
|
110,250 |
|
|
Noteholder 5 |
|
10/14/19 |
|
10/14/20 |
|
|
12 | % |
|
|
35 | % |
|
|
68,250 |
|
|
Noteholder 6 |
|
02/13/20 |
|
12/13/20 |
|
|
12 | % |
|
|
40 | % |
|
|
100,000 |
|
|
Noteholder 10 |
|
02/27/20 |
|
02/26/21 |
|
|
10 | % |
|
|
40 | % |
|
|
110,000 |
|
|
|
At March 31, 2020, the Company's convertible promissory notes and related debt discount and derivative liability are summarized as follows: |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
| ||||
|
|
|
Gross |
|
|
amount |
|
|
Net amounts |
|
|
Corresponding |
| ||||
|
|
|
amount |
|
|
offset by |
|
|
of liabilities |
|
|
Derivative |
| ||||
|
Noteholder |
|
of liability |
|
|
debt discount |
|
|
presented |
|
|
Balance |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Noteholder 2 |
|
$ | 21,487 |
|
|
$ | - |
|
|
$ | 21,487 |
|
|
$ | 59,069 |
|
|
Noteholder 3 |
|
|
29,450 |
|
|
|
- |
|
|
|
29,450 |
|
|
|
80,960 |
|
|
Noteholder 5 |
|
|
281,250 |
|
|
|
127,874 |
|
|
|
153,376 |
|
|
|
774,897 |
|
|
Noteholder 6 |
|
|
100,000 |
|
|
|
84,539 |
|
|
|
15,461 |
|
|
|
308,481 |
|
|
Noteholder 8 |
|
|
22,000 |
|
|
|
- |
|
|
|
22,000 |
|
|
|
- |
|
|
Noteholder 9 |
|
|
25,000 |
|
|
|
- |
|
|
|
25,000 |
|
|
|
- |
|
|
Noteholder 10 |
|
|
110,000 |
|
|
|
100,833 |
|
|
|
9,167 |
|
|
|
350,690 |
|
|
|
|
$ | 589,187 |
|
|
$ | 313,246 |
|
|
$ | 275,941 |
|
|
$ | 1,574,097 |
|
|
|
On February 12, 2019, Noteholder 1 submitted a notice of conversion for $125,000 principal and $11,250 accrued interest after the note was in default. The note terms provided a $3,000 daily fee for failure to deliver common stock prior to a deadline of two days after the conversion notice. The shares due under the conversion were not issued until May 8, 2019. Accordingly, a note payable of $135,000 was recorded as a penalty at March 31, 2019. An additional $114,000 was accrued as a penalty during the year ended March 31, 2020. The $249,000 balance remains outstanding at March 31, 2020. |
|
|
|
|
|
The convertible debt held by noteholders 2, 3, 6, 8 and 9 are in default at March 31, 2020. Subsequent to March 31, 2020 and prior to the issuance of these financial statements, the Company defaulted on convertible debt held by noteholder 5. At the noteholders’ discretion, if notice is given to the Company, additional penalties of approximately $20,000 would be due.
The fiscal year 2019 and fiscal year 2020 note agreements require a certain number of shares be reserved so that they are readily available for note conversion. As of March 31, 2020 and 2019, we had approximately 7 billion shares and 398 million shares, respectively, of our common stock reserved or designated for future issuance upon conversion of outstanding convertible promissory notes. As of March 31, 2020, Noteholder 5 had fewer shares reserved than required; however, sufficient shares were reserved for note conversion. |
| F-16 |
| Table of Contents |
|
|
Future maturities of the Company’s debt as of March 31, 2020 is as follows: |
|
Years Ending March 31, |
|
Amount |
| |
|
2021 |
|
$ | 888,187 |
|
|
Less debt discount |
|
|
(313,246 | ) |
|
|
|
$ | 574,941 |
|
|
|
Interest expense for the year ended March 31, 2020 included interest expense on debt of $95,789 and amortization of debt discount of $810,027. As of March 31, 2020, the balance of accrued interest was $71,290. |
|
|
|
|
|
Interest expense for the year ended March 31, 2019 included interest expense on debt of $37,479 and amortization of debt discount of $421,583. As of March 31, 2019, the balance of accrued interest was $30,337. |
|
7. |
EARNINGS PER SHARE |
|
|
|
|
|
FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations. |
|
|
|
|
|
Basic earnings (loss) per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. |
|
|
|
|
|
The Company had no potential additional dilutive securities outstanding for the years ended March 31, 2020 and 2019, except as follows: |
|
|
|
Potential additional common stock shares |
| |||||
|
|
|
March 31, 2020 |
|
|
March 31, 2019 |
| ||
|
|
|
|
|
|
|
| ||
|
Potentially dilutive security: |
|
|
|
|
|
| ||
|
Preferred stock |
|
|
25,000,000 |
|
|
|
25,000,000 |
|
|
Warrants |
|
|
19,230,000 |
|
|
|
4,480,000 |
|
|
Options |
|
|
8,000,000 |
|
|
|
8,000,000 |
|
|
Convertible debt |
|
|
8,611,119,231 |
|
|
|
30,910,975 |
|
|
Potentially dilutive securities |
|
|
8,663,349,231 |
|
|
|
68,390,975 |
|
| F-17 |
| Table of Contents |
|
8. |
STOCKHOLDERS' EQUITY |
|
|
|
|
|
Series A Preferred Stock |
|
|
|
|
|
The Series A Preferred Stock is convertible to common stock at a rate of five shares for every share held and the holder(s) have the right to cast a total of fifty-percent (50%) plus one votes on all matters submitted to a vote of holder of the Company’s common stock. Our Series A Preferred Stock ranks equally, on an as-converted basis, to our common stock with respect to rights upon winding up, dissolution, or liquidation.
On June 6, 2019 the Board of Directors agreed to amend the certificate of designation for the Series A Preferred stock to have the right to cast a total of fifty-percent (50%) plus one votes on all matters submitted to a vote of holder of the Company’s common stock, including the election of directors, and all other matters as required by law. There is no right to cumulative voting in the election of directors. The holders of Series A Preferred Stock shall vote together with all other classes and series of common stock of the Company as a single class on all actions to be taken by the common stock holders of the Company except to the extent that voting as a separate class or series is required by law. Our Series A Preferred Stock does not have any special dividend rights. |
|
|
|
|
|
On October 1, 2016, the Company issued 5,000,000 shares of our Series A Preferred Stock to Daniel Crawford, a related party, in exchange for 10,000,000 shares of Series A Preferred Stock in Humbly Hemp. |
| F-18 |
| Table of Contents |
|
|
Common Stock |
|
|
|
|
|
During the year ended March 31, 2019, the Company issued 2,666,000 shares of common stock to two investors for cash of $100,000.
During the year ended March 31, 2019, for cash proceeds from an investor of $10,000, the Company issued 40,000 shares of common stock, 40,000 warrants to purchase 1 share of common stock at $0.75, and 40,000 warrants to purchase 1 share of common stock at $1.25. The warrants are exercisable at any time prior to March 29, 2020.
During the year ended March 31, 2019, 1,000,000 shares of common stock, valued at $76,100, were issued pursuant to a penalty provision contingent on a business combination that did not materialize.
During the year ended March 31, 2019, the Company issued a total of 6,402,725 shares of common stock to lenders for debt of $126,000 and accrued interest of $11,250. The fair value of the derivative at the time of settlement was $199,341.
During December 2017, the Company entered into a three-year consulting agreement with Dr. Ashock Patel, the Company’s CEO, to serve as Director of Product Development. Consideration for services under the agreement provided for the issuance of 700,000 shares of common stock of the Company at the time of execution of the agreement, and the following two anniversaries of the agreement. Since the shares have yet to be issued at March 31, 2020 and 2019, they are reported in common stock payable in the accompanying consolidated statement of stockholders’ equity (deficit). |
|
|
|
|
|
During the year ended March 31, 2018, the Company issued a total of 7,452,500 shares of common stock for a lock up agreement of $39,000 and for services of $3,164,375. During the year ended March 31, 2019, the Company recorded $2,858,457 for related consulting services and the balance of prepaid stock compensation at March 31, 2019 totaled $0. |
|
|
|
|
|
During the year ended March 31, 2020, the Company issued a total of 840,946,270 shares of common stock to lenders for upon conversions of convertible debt of $899,230 and related accrued interest of $54,835. The fair value of the derivative liability of the amounts settled at the time of settlement was $1,306,091. |
|
|
|
|
|
During February 2020, the Company issued 800,000 shares of the Company’s common stock pursuant to an October 2016 debt extinguishment (Note 6). |
|
|
|
|
|
During the year ended March 31, 2020, the Company issued a total of 14,416,666 shares of common stock to investors for cash of $125,770. |
|
|
|
|
|
During the year ended March 31, 2020, the Company issued a total of 28,000,000 shares of common stock for the settlement of accounts payable totaling $22,200. |
|
|
|
|
|
During the year ended March 31, 2020, the Company issued a total of 40,700,000 shares of common stock for debt financing fees totaling $20,350. |
|
|
|
|
|
During the year ended March 31, 2020, the Company issued a total of 1,000,000 shares of common stock for a debt default penalty totaling $76,100. |
| F-19 |
| Table of Contents |
|
|
Stock Options and Warrants |
|
|
|
|
|
On November 19, 2018, the Company issued options to its Chief Executive Officer and Chief Financial Officer to purchase 6,000,000 and 2,000,000 shares of common stock, respectively, at five cents ($0.05) per share. The options were immediately vested and expire November 19, 2021.
During January 2019, the Company issued 4,400,000 warrants to consultants. The warrants are convertible one-for-one into common stock at an exercise price of $.05. The warrants were immediately exercisable and expire January 14, 2021.
During the year ended March 31, 2020, stock warrants for 11,250,000 common shares were issued in connection with financing received. An additional warrant to purchase 500,000 common shares was issued with a subscription agreement dated September 16, 2019. The warrants are convertible one-for-one into common stock at an exercise price of $.05. The warrants were immediately exercisable and expire between July and November 2021. In connection with these issuances, the Company recorded financing expenses totaling $33,113.
Additionally, in connection with the appointment of Advisory Board members, warrants for 3,000,000 common shares were issued during October 2019. The warrants are convertible one-for-one into common stock at an exercise price of $.01. The warrants were immediately exercisable and expire September 30, 2021. In connection with these issuances, the Company recorded consulting expenses totaling $11,543.
The Company estimated the fair value of the warrants based on weighted probabilities of assumptions used in the Black Scholes pricing model. The fair value of the warrants were estimated using the following inputs: the price of the Company’s common stock of on the date of issuance; risk-free interest rates ranging from 1.56% to 2.82%, and expected volatility of the Company’s common stock ranging from 292% to 318%, various exercise prices, and terms of approximately two years.
A summary of the status of the Company’s option and warrant grants as of March 31, 2019 and the changes during the fiscal year then ended is presented below: |
|
|
|
|
|
|
Weighted-Average |
| ||
|
|
|
Shares |
|
|
Exercise Price |
| ||
|
Outstanding, March 31, 2018 |
|
|
- |
|
|
$ | - |
|
|
Granted |
|
|
12,480,000 |
|
|
|
0.06 |
|
|
Exercised |
|
|
- |
|
|
|
- |
|
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2019 |
|
|
12,480,000 |
|
|
$ | 0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2019 |
|
|
12,480,000 |
|
|
$ | 0.06 |
|
|
|
A summary of the status of the Company’s option and warrant grants as of March 31, 2020 and the changes during the fiscal year then ended is presented below: |
|
|
|
|
|
|
Weighted-Average |
| ||
|
|
|
Shares |
|
|
Exercise Price |
| ||
|
Outstanding, March 31, 2019 |
|
|
12,480,000 |
|
|
$ | 0.06 |
|
|
Granted |
|
|
14,750,000 |
|
|
|
0.04 |
|
|
Exercised |
|
|
- |
|
|
|
- |
|
|
Expired |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2020 |
|
|
27,230,000 |
|
|
$ | 0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2020 |
|
|
27,230,000 |
|
|
$ | 0.05 |
|
| F-20 |
| Table of Contents |
|
9. |
FEDERAL INCOME TAX |
|
|
|
|
|
The Company accounts for income taxes under ASC 740-10, which provides for an asset and liability approach of 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, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes. The provision (benefit) for income taxes for the years ended March 31, 2020 and 2019 assumes a statutory 21%, effective tax rate for federal income taxes. |
|
|
|
March 31, 2020 |
|
|
March 31, 2019 |
| ||
|
|
|
|
|
|
|
| ||
|
Federal tax statutory rate |
|
|
21 | % |
|
|
21 | % |
|
Temporary differences |
|
|
(8 | )% |
|
|
(16 | )% |
|
Changes in estimates |
|
|
0 | % |
|
|
9 | % |
|
Valuation allowance |
|
|
(13 | )% |
|
|
(14 | )% |
|
Effective rate |
|
|
0 | % |
|
|
0 | % |
|
|
The components of deferred tax assets and liabilities as of March 31, 2020 are as follows: |
|
|
|
March 31, 2020 |
| |
|
Deferred tax assets (liabilities): |
|
|
| |
|
Net loss |
|
$ | (3,475,477 | ) |
|
Temporary differences |
|
|
(1,630,000 | ) |
|
Bad debt expense |
|
|
21,362 |
|
|
Change in derivative valuation |
|
|
821,961 |
|
|
Financing costs |
|
|
496,784 |
|
|
Valuation allowance |
|
|
2,135,370 |
|
|
Net deferred tax assets |
|
$ | -- |
|
|
|
The Company had deferred income tax assets as of March 31, 2020 and 2019 as follows: |
|
|
|
March 31, 2020 |
|
|
March 31, 2019 |
| ||
|
|
|
|
|
|
|
| ||
|
Loss carryforwards |
|
$ | 1,630,000 |
|
|
$ | 1,182,000 |
|
|
Less - valuation allowance |
|
|
(1,630,000 | ) |
|
|
(1,182,000 | ) |
|
Total net deferred tax assets |
|
$ | -- |
|
|
$ | -- |
|
|
|
The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a valuation allowance against the net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, we have not reflected any benefit of such deferred tax assets in the accompanying financial statements. Our net deferred tax asset and valuation allowance increased by $448,000 and $303,000 in the fiscal years ending March 31, 2020 and 2019, respectively. In the fiscal year ended March 31, 2020, the March 31, 2019 valuation allowance was increased by $570,000 due to an adjustment of the previously estimated loss carryforward of approximately $2,715,000. |
|
|
|
|
|
At March 31, 2020, the Company had approximately $7,764,000 in federal net operating loss carryforwards. These carry forwards are allowed to be carried forward indefinitely and are to be limited to 80% of the taxable income. Pursuant to Internal Revenue Code Section 382, the future utilization of our net operating loss carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future.
To the extent that the tax deduction is included in a net operating loss carry forward and is in excess of amounts recognized for book purposes, no benefit will be recognized until the loss carry forward is recognized. Upon utilization and realization of the carry forward, the corresponding change in the deferred asset and valuation allowance will be recorded as additional paid-in capital.
As of March 31, 2020, the Company had no uncertain tax positions, or interest and penalties, that qualify for either recognition or disclosure in the financial statements. The company is subject to U.S. federal, state and local income tax examinations by tax authorities for years 2016 thru 2019. The tax returns for the fiscal year ended March 31, 2020 has not yet been filed. |
| F-21 |
| Table of Contents |
|
10. |
RELATED PARTY TRANSACTIONS |
|
|
|
|
|
During December 2017, the Company entered into a consulting agreement with Dr. Ashok Patel, who served as CEO until September 2019, to serve as Director of Product Development. Consideration for services under the agreement provided for the issuance of 700,000 shares of common stock of the Company at the time of execution of the agreement, and the following two anniversaries of the agreement. During the years ended March 31, 2020 and 2019, the Company recorded compensation expenses related to the agreement totaling $36,050 and $770, respectively. At March 31, 2020 and 2019, the anniversary shares have yet to be issued. Accordingly, they are reported in the accompanying consolidate statement of stockholders’ equity (deficit) as common stock payable. |
|
|
|
|
|
The trustee of La Dulce Vita Trust, Noteholder 8, is the aunt of Daniel Crawford, a related party. The trust is a noteholder as detailed in Note 6 and was issued common stock as detailed in Note 8. |
|
|
|
|
|
On April 16, 2018, the Company entered into an operating agreement with Centre Manufacturing, Inc. ("Centre") and agreed to form an LLC. The LLC is owned 51% by the Company and 49% owned by Centre, but all income and losses will be split evenly. The owner of Centre is the CEO of the Company. On June 19, 2018, the Company formed a majority owned subsidiary, Endo & Centre Venture LLC. No significant activity has occurred during the fiscal years ended March 31, 2020 and 2019. |
|
|
|
|
|
During the years ended March 31, 2020 and 2019, the Company purchased inventory totaling $13,495 and $140,441, respectively, from Centre. Additionally, during the year ended March 31, 2020, the Company incurred $10,000 in consulting fees with Centre. At March 31, 2020 and 2019, the Company owed Centre $14,154 and $26,791, respectively, which is included in accounts payable on the accompanying consolidated balance sheets. |
|
|
|
|
|
On August 16, 2018, the Company’s Board of Directors approved the Right On Brands, Inc. 2018 Incentive Plan (the “Plan”). The purpose of the Plan is to provide a means for the Company to continue to attract, motivate and retain management, key employees, consultants and other independent contractors, and to provide these individuals with greater incentive for their service to the Company by linking their interests in the Company’s success with those of the Company and its shareholders. The Plan provides that up to a maximum of 10,000,000 shares of the Company’s common stock (subject to adjustment) are available for issuance under the Plan. To date, no shares have been issued under the Plan. |
|
|
|
|
|
During November 2018 the Company issued options to its CEO and CFO for the purchase of 6,000,000 and 2,000,000, respectively, shares of common stock as detailed in Note 8. In connection with these issuances, the Company recorded executive compensation expense totaling $1,102,858. |
|
|
|
|
|
On October 1, 2019 the Company appointed three members to an advisory board and issued each member a warrant convertible into 1,000,000 shares of common stock at $.01 per share as detailed in Note 8.
During the year ended March 31, 2020, David Vic Morisson, the Company’s former head of sales, received $67,000 and $37,500 in consulting fees and contract labor fees, respectively. Additionally, during February 2020, the Company issued its former head of sales 18,000,000 shares of common stock to settle $20,000 in accounts payable.
During the year ended March 31, 2020, the Company’s CEO, Jerry Grisaffi, and CFO, A. David Youssefyah, received executive compensation totaling $56,000 and $45,000, respectively. Additionally, during the year ended March 31, 2020, the Company’s CEO incurred travel expenses and reimbursed travel expenses totaling $41,137 and $6,000, respectively.
At March 31, 2020, the Company had accounts payable totaling $30,800 and $22,760 due to the Company’s CEO and CFO, respectively. |
| F-22 |
| Table of Contents |
|
11. |
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
On April 1, 2019 the Company entered into a three-year office and warehouse lease of approximately 5,700 square feet in Carrollton, Texas. At the inception of the lease, the Company adopted ASC 842 requiring the recording of assets and liabilities related to leases on the balance sheet. The Company records rent on straight-line basis over the terms of the underlying lease. Rent expense for the years ended March 31, 2020 and 2019 was $40,280 and $0, respectively. |
|
Years Ending March 31, |
|
Amount |
| |
|
2021 |
|
$ | 45,600 |
|
|
2022 |
|
|
45,600 |
|
|
|
|
$ | 91,200 |
|
|
|
There is a dispute between the Company and the holder of a convertible note regarding the timing of the conversion. As of March 31, 2020, the full amount of the penalty totaling $249,000 has been recorded within notes payable on the accompanying consolidated balance sheet, and neither side has filed formal legal proceedings against the other side and negotiations are ongoing to resolve the matter |
|
12. |
SUBSEQUENT EVENTS |
|
|
|
|
|
Subsequent to March 31, 2020, the Company issued common stock for settlement of convertible debt and accrued interest as summarized below: |
|
Noteholder |
|
Debt and interest converted |
|
|
Shares issued |
| ||
|
Noteholder 3 |
|
$ | 17,346 |
|
|
|
362,500,000 |
|
|
Noteholder 5 |
|
|
275,955 |
|
|
|
3,091,020,898 |
|
|
Noteholder 6 |
|
|
120,749 |
|
|
|
160,999,066 |
|
|
Noteholder 8 |
|
|
2,591 |
|
|
|
25,910,000 |
|
|
|
|
$ | 416,641 |
|
|
|
3,640,429,964 |
|
|
|
On May 9, 2020, the Company received loan proceeds in the amount of $68,000 from a May 5, 2020 note payable under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses and organizations for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP and the Company expects the loan to be forgiven during the first quarter of 2021. |
|
|
|
|
|
On July 14, 2020, the Company and Noteholder 8 agreed to amend the conversion terms of the $20,000 convertible note payable so that the conversion price is equal to the lessor of $0.0002 or the lowest price the Company has issued stock to any other common stockholder or through the issuance of stock for the conversion of debt during the 90 days prior to the date of submission of a conversion notice by Noteholder 8.
On July 20, 2020, the Company issued 3,000,000 shares of common stock related to $15,000 cash received when the investor purchased the shares in June 2019. As a result of the issuance, common stock payable was reduced by $15,000.
On October 1, 2020, the Company issued a total of 380,000,000 shares of common stock valued at $76,000 to five individuals for services performed on behalf of the Company. Included in the shares issued were 100,000,000 shares to Director A. David Youssefyeh, 100,000,000 shares to Director and CEO Jerry Grisaffi, and 50,000,000 shares to Director David Lewis.
During December 2020, the Company’s Board of Directors voted to remove Dr. Ashok Patel from his roles as President and Director of the Company.
On February 1, 2021, the Company issued 249,999,999 shares of common stock to investors under three subscription agreements. As part of the subscription agreements, the Company received cash proceeds totaling $75,000.
From February 2, 2021 to February 16, 2021, the Company issued 200,333,333 shares of common stock to an investor under three subscription agreements. As part of the subscription agreements, the Company received proceeds totaling $60,100, of which $35,100 was received in cash and $25,000 was paid directly to a vendor for the purchase of inventory.
On February 16, 2021, the Company issued a $140,000 convertible note payable to an investor. As part of the convertible note agreement, the Company received proceeds totaling $140,000, of which $100,000 was paid directly to Noteholder 5 to pay in full the principal and interest due under the October 14, 2019 convertible note payable (Note 6) and $40,000 was paid directly to Noteholder 3 to pay in full the principal and interest due under the July 17, 2019 convertible note payable (Note 6). The $140,000 convertible note bears interest at 6% per annum, is convertible at $0.015, and matures on August 16, 2021. |
| F-23 |
| Table of Contents |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
No events occurred requiring disclosure under Item 307 and 308 of Regulation S-K during the fiscal year ending March 31, 2020.
Item 9A. Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal year ended March 31, 2020. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
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 Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2020 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of March 31, 2020, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending March 31, 2021: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to an exemption for non-accelerated filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
None
| 21 |
| Table of Contents |
Item 10. Directors, Executive Officers and Corporate Governance
The following information sets forth the names, ages, and positions of our current directors and executive officers as of March 31, 2021.
|
Name |
|
Age |
|
Present Positions |
|
Jerry Grisaffi |
|
75 |
|
CEO and Chairman of the Board |
|
David Lewis |
|
51 |
|
Director |
|
A. David Youssefyeh |
|
50 |
|
CFO and Director |
Set forth below is a brief description of the background and business experience of each of our current executive officers and directors.
Jerry Grisaffi – Chairman of the Board
Mr. Grisaffi is a serial entrepreneur who has lived all of his life in Texas. Prior to his appointment Mr. Grisaffi was a consultant to public companies, assisting them with corporate strategy and development. Prior to that, from 2014 to 2017, Mr. Grisaffi was the founder and chairman of the board of Rocky Mountain High Brands, a brand management company that markets healthy products to health-conscious consumers. Prior to founding Rocky Mountain High Brands, from 2010 to 2013, Mr. Grisaffi was the Chairman of the Board and President of Republic of Texas Brands. From 2003 to 2008, Mr. Grisaffi was the President of Microtrack, a company focused on monetizing GPC technology. Previously, Mr. Grisaffi spent forty successful years in the automobile business. He is a lifelong Texan and enjoys spending time with his extended family of 11 grandchildren and 2 great-grandchildren.
David Lewis – Director
Mr. Lewis is a seasoned executive with over twenty-five years’ experience in the capital markets. Having started his career at the boutique investment banking firm Alex Brown, he developed an interest in the public markets and was responsible for the firm underwriting various initial public offerings and secondary offerings. Since then, he has served on the board of numerous companies and has advised dozens of private and public companies on diverse corporate activities, including securing growth capital, capital restructuring, debt restructuring, reverse mergers, M&A, as well as building management and advisory boards, marketing, distribution and strategic direction. For the past five years through the present, he has been the Executive Director of Protext Pharma.
A. David Youssefyeh – CFO and Director
A. David Youssefyeh specializes in complex business, tort, real estate and employment litigation in state and federal courts. He completed his undergraduate studies in International Finance at the University of Southern California and later received his J.D. from Loyola Law School.
Mr. Youssefyeh’s distinctive background as an attorney and an entrepreneur allows him to draw upon his knowledge and experience from a variety of fields – from consumer products to on-line ventures to distribution companies and real-estate management – to provide his clients with real world solutions to their needs.
Term of Office
Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
| 22 |
| Table of Contents |
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by the Company to become directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time except that Jerry Grisaffi filed for personal bankruptcy in 2019; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Committees of the Board
We do not currently have a compensation committee, executive committee, or stock plan committee.
Audit Committee
We do not have a separately designated standing audit committee. The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board when performing the functions of what would generally be performed by an audit committee. The Board approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor. Our Board of Directors, which performs the functions of an audit committee, does not have a member who would qualify as an "audit committee financial expert" within the definition of Item 407(d)(5)(ii) of Regulation S-K. We believe that, at our current size and stage of development, the addition of a special audit committee financial expert to the Board is not necessary.
Nomination Committee
Our Board of Directors does not maintain a nominating committee. As a result, no written charter governs the director nomination process. Our size and the size of our Board, at this time, do not require a separate nominating committee.
When evaluating director nominees, our directors consider the following factors:
|
|
-The appropriate size of our Board of Directors; |
|
|
|
|
|
-Our needs with respect to the particular talents and experience of our directors; |
|
|
|
|
|
-The knowledge, skills and experience of nominees, including experience in finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board; |
|
|
|
|
|
-Experience in product development and marketing; |
|
|
|
|
|
-Experience with accounting rules and practices; and |
|
|
|
|
|
-The desire to balance the benefit of continuity with the periodic injection of the fresh perspective provided by new Board members. |
| 23 |
| Table of Contents |
Our goal is to assemble a Board that brings together a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Board will also consider candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Board may also consider such other factors as it may deem are in our best interests as well as our stockholders. In addition, the Board identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service or if the Board decides not to re-nominate a member for re-election, the Board then identifies the desired skills and experience of a new nominee in light of the criteria above. Current members of the Board are polled for suggestions as to individuals meeting the criteria described above. The Board may also engage in research to identify qualified individuals. To date, we have not engaged third parties to identify or evaluate or assist in identifying potential nominees, although we reserve the right in the future to retain a third-party search firm, if necessary. The Board does not typically consider shareholder nominees because it believes that its current nomination process is sufficient to identify directors who serve our best interests.
Code of Ethics
As of March 31, 2020, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Item 11. Executive Compensation
Compensation Discussion and Analysis
Until August 2018, our sole executive officer, Daniel Crawford, received a base salary of $72,000 per year under an employment contract dated April 1, 2017. Subsequent to August 2018, there have been no employment agreements in effect except one consulting agreement with our former President, Ashok Patel. Under the terms of the agreement, Mr. Patel received 700,000 shares of common stock at issuance, and on the successive anniversary in December 2018. Any bonus compensation is at the discretion of the board, or the compensation committee.
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our former or current executive officers for the fiscal years ended March 31, 2020 and March 31, 2019.
|
SUMMARY COMPENSATION TABLE | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
|
Name and principal position |
|
Year |
|
|
Salary ($) |
|
|
Bonus ($) |
|
|
Stock Awards ($) |
|
|
Option Awards ($) |
|
|
Non-Equity Incentive Plan Compensation ($) |
|
|
Nonqualified Deferred Compensation Earnings ($) |
|
|
All Other Compensation ($) |
|
|
Total ($) |
|||||||||
|
Daniel Crawford, Former BOD Chairman |
|
2020 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
and former CFO |
|
2019 |
|
|
$ |
19,117 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
19,117 |
|
|
Ashok Patel, former Director |
|
2020 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
and President |
|
2019 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
A.David Youssefyeh, Director |
|
2020 |
|
|
$ |
45,000 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
45,000 |
|
|
And CFO |
|
2019 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
Jerry Grisaffi, BOD Chairman |
|
2020 |
|
|
$ |
59,000 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
59,000 |
|
|
and CEO |
|
2019 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
David Lewis, |
|
2020 |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
| |
|
Director |
|
2019 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
| 24 |
| Table of Contents |
Narrative Disclosure to the Summary Compensation Table
Our executive officers received, or accrued, the cash compensation set forth above.
Stock Option Grants
We have not granted any stock options to the executive officers or directors except for the options to our President and CFO to purchase 6,000,000 and 2,000,000 shares of common stock, respectively. These options were immediately vested when issued November 19, 2018 and expire after three years.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of March 31, 2020.
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||
|
OPTION AWARDS |
|
|
STOCK AWARDS |
| ||||||||||||||||||||||||||||||||
|
Name |
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
|
Option Exercise Price ($) |
|
|
Option Expiration Date |
|
|
Number Of Shares or Shares of Stock That Have Not Vested (#) |
|
|
Market Value of Shares or Shares of Stock That Have Not Vested ($) |
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Shares or Other Rights That Have Not Vested (#) |
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Shares or Other Rights That Have Not Vested (#) |
| |||||||||
|
Daniel Crawford, Chairman |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Ashok Patel, Former Director, President, and CEO |
|
|
6,000,000 |
|
|
|
- |
|
|
|
- |
|
|
$ | .05 |
|
|
11/19/2021 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
A.David Youssefyeh, Director, CFO |
|
|
2,000,000 |
|
|
|
- |
|
|
|
- |
|
|
$ | .05 |
|
|
11/19/2021 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
David Lewis, Director |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| 25 |
| Table of Contents |
Director Compensation
The table below summarizes all compensation of our directors for our last completed fiscal year.
|
DIRECTOR COMPENSATION | ||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||
|
Name |
|
Fees Earned or Paid in Cash ($) |
|
|
Stock Awards ($) |
|
|
Option Awards ($) |
|
|
Non-Equity Incentive Plan Compensation ($) |
|
|
Non-Qualified Deferred Compensation Earnings ($) |
|
|
All Other Compensation ($) |
|
|
Total ($) |
| |||||||
|
Jerry Grisaffi |
|
|
59,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
59,000 |
|
|
A. David Youssefyeh |
|
|
45,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
45,000 |
|
Narrative Disclosure to the Director Compensation Table
We did not provide compensation to directors for their service as directors during our last fiscal year.
Employment Agreements with Current Management
As of March 2021, there are no employment agreements in effect.
The following table sets forth, as of March 31, 2021, the beneficial ownership of our common stock by each executive officer and director, by each person known by us to beneficially own more than 5% of our common stock and by the executive officers and directors as a group. Except as otherwise indicated, all shares are owned directly. The voting power shown is based on a total of 10,522,488,389 shares, consisting of 5,261,244,194 shares of common stock issued and outstanding, and 5,261,244,195 votes that may be cast by holders of our Series A Preferred Stock. Class ownership percentages for the class of common stock are based on 5,286,244,194 shares, consisting of 5,261,244,194 shares of common stock and 25,000,000 of common stock issuable upon conversion of all shares of our Series A Preferred Stock.
|
Title of class |
|
Name and address of beneficial owner |
|
Amount of beneficial ownership |
|
|
Percent of class |
|
|
Percent Voting Power |
| |||
|
Common |
|
Daniel Crawford 2667 32nd St. Santa Monica, CA 90405 |
|
|
162,670,407 |
(1) |
|
|
3.08 | % |
|
|
51.55 | % |
|
Common |
|
Jerry Grisaffi 12608 Forestgate Dr. Dallas, TX 75243 |
|
|
100,000,000 |
|
|
|
1.89 | % |
|
|
0.95 | % |
|
Common |
|
A. David Youssefyeh 1925 Century Park E, Ste 220 Los Angeles, CA 90067 |
|
|
101,000,992 |
|
|
|
1.91 | % |
|
|
0.96 | % |
|
Common |
|
David Lewis 12608 Forestgate Dr. Dallas, TX 75243 |
|
|
50,000,000 |
|
|
|
0.95 | % |
|
|
0.48 | % |
|
Common |
|
Total all executive officers and directors |
|
|
413,671,399 |
|
|
|
7.83 | % |
|
|
53.93 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
Other 5% Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Preferred Stock |
|
Daniel Crawford 2667 32nd St. Santa Monica, CA 90405 |
|
|
5,000,000 |
(1) |
|
|
100 | % |
|
|
|
|
______________
(1) Consists of 137,670,407 shares of common stock and 5,000,000 shares of Series A Preferred Stock convertible to 25,000,000 shares of common stock. Series A Preferred stock has the right to cast a total of fifty-percent (50%) plus one votes on all matters submitted to a vote of holder of the Company’s common stock.
| 26 |
| Table of Contents |
As used in this table, "beneficial ownership" means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security). In addition, for purposes of this table, a person is deemed, as of any date, to have "beneficial ownership" of any security that such person has the right to acquire within 60 days after such date.
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Except as set forth below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to all of our outstanding shares, nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us:
Subsequent to August 2018, there have been no employment agreements in effect except one consulting agreement with our former President, Ashok Patel. Under the terms of the agreement, Mr. Patel received 700,000 shares of common stock at issuance, and on the successive anniversary in December 2018. Any bonus compensation is at the discretion of the board, or the compensation committee. Mr. Patel was terminated as an officer and director during December 2020.
Director Independence
We are not a "listed issuer" within the meaning of Item 407 of Regulation S-K and there are no applicable listing standards for determining the independence of our directors. Applying the definition of independence set forth in Rule 4200(a)(15) of The Nasdaq Stock Market, Inc., we do not believe that we currently have any independent directors.
Item 14. Principal Accountant Fees and Services
The following table presents the aggregate fees billed for each of the last two fiscal years by the Company's former independent registered public accounting firm, Turner, Stone, & Company, L.L.P. (since fiscal 2020) and AMC Auditing, in connection with the audit of the Company's consolidated financial statements and other professional services rendered.
|
Year Ended: |
|
Audit Services |
|
|
Audit Related Fees |
|
|
Tax Fees |
|
|
Other Fees |
| ||||
|
March 31, 2020 |
|
$ | 37,500 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
March 31, 2019 |
|
$ | 28,273 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
Audit fees represent the professional services rendered for the audit of the Company's annual consolidated financial statements and the review of the Company's consolidated financial statements included in quarterly reports, along with services normally provided by the accounting firm in connection with statutory and regulatory filings or other engagements. Audit-related fees represent professional services rendered for assurance and related services by the accounting firm that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements that are not reported under audit fees.
Tax fees represent professional services rendered by the accounting firm for tax compliance, tax advice, and tax planning. All other fees represent fees billed for products and services provided by the accounting firm, other than the services reported for the other categories.
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Item 15. Exhibits, Financial Statements Schedules
(a) Financial Statements and Schedules
The following financial statements and schedules listed below are included in this Form 10-K.
Financial Statements (See Item 8)
(b) Exhibits
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101** |
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The following materials from the Company's Annual Report on Form 10-K for the year ended March 31, 2020 formatted in Extensible Business Reporting Language (XBRL). |
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101.INS |
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XBRL Instance Document |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase |
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101.SCH |
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XBRL Taxonomy Extension Schema |
_________
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(1) |
Incorporated by reference to Registration Statement on Form S-1 filed July 1, 2013. |
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(2) |
Incorporated by reference to Current Report on Form 8-K filed October 5, 2016. |
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* |
Filed herewith |
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Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed "furnished" and not "filed" or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, or deemed "furnished" and not "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Right on Brands, Inc. |
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March 31, 2021 |
By: |
/s/ Jerry Grisaffi |
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Jerry Grisaffi |
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Chief Executive Officer |
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In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
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March 31, 2021 |
By: |
/s/ A. David Youssefyeh |
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A. David Youssefyeh |
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Chief Financial Officer |
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| 29 |
EXHIBIT 3.1
EXHIBIT 3.2
EXHIBIT 3.3
EXHIBIT 3.4
BYLAWS
OF
HEALTHTALK LIVE, INC.
(A NEVADA CORPORATION)
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of Nevada. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the Board of Directors shall fix and designate a principal business office in the State of Nevada.
Section 2. OTHER OFFICES. The Board of Directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any place within or outside the State of Nevada designated by the Board of Directors. In the absence of any such designation, shareholders’ meetings shall be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING. The annual meeting of the shareholders shall be held on the 2nd Monday of January in each year at 10:00 a.m. However, if this day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At this meeting, directors shall be elected, and any other proper business may be transacted. The meeting shall be held at a location set by the Board of Directors.
Section 3. SPECIAL MEETING. A special meeting of the shareholders may be called at any time by the Board of Directors, or by the chairman of the board, or by the president, or by one or more shareholders holding shares in the aggregate entitled to cause not less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president, any vice president, or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Section 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than ten (10) nor more than thirty (30) days after the receipt of the request. If the notice is not given with five (5) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the Board of Directors may be held.
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Section 4. NOTICE OF SHAREHOLDERS’ MEETINGS. All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) nor more than thirty (30) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting, those matters which the Board of Directors, at the time of giving the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election.
Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporations’ books or is given, notice shall be deemed to have been given if sent to that shareholder by first class mail or telegraphic or other written communication to the corporation’s principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any shareholders’ meeting shall be executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, and shall be filed and maintained in the minute book of the corporation.
Section 6. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.
Section 7. ADJOURNED MEETING; NOTICE. Any shareholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 6 of this Article II.
When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given at the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 and 5 of this Article II. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
Section 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II. The shareholders’ vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder’s approving vote is with respect to all shares that the shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless the vote of a greater number of voting by classes is required by law or by the Articles of Incorporation.
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At a shareholders’ meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder’s shares). The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected.
Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of the proposal. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the meeting.
Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted.
In the case of election of director, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors; provided however, that a director may be elected at any time to fill a vacancy on the Board of Directors that has not been filled by the director, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholder’s proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary.
Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the Board of Directors may fix, in advance, a record date, which shall not be more than thirty (30) days nor less than ten (10) days before the date of any such action without a meeting, and in this event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the date may be, notwithstanding any transfer of shares on the books of the corporation after the record date, except as otherwise provided by Nevada law.
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If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to a notice of to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close if business on the business day next preceding the day on which the meeting is held.
(b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the Board has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the Board has been taken, shall be at the close of business on the day on which then Board accepts the resolution relating to that action, or the thirtieth (30th) day before the date of such other action, whenever is later.
Section 12. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the shareholder or the shareholder’s attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of the proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face is irrevocable shall be governed by the provisions of the Corporations Law of the State of Nevada.
Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the Board of Directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any shareholder or shareholder’s proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder’s proxy shall, appoint a person to fill that vacancy.
These inspectors shall:
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Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies; |
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Receive votes, ballots, or consents; |
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(c) |
Hear and determine all challenges and questions in any way arising in connection with the right to vote; |
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(d) |
Count and tabulate all votes or consents; |
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(e) |
Determine when the polls shall close; |
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(f) |
Determine the result; and |
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(g) |
Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. |
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ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of Nevada General Corporation Law and any limitations in the Articles of Incorporation and these By-Laws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.
Section 2. NUMBER AND QUALIFICATIONS OF DIRECTORS. The authorized number of directors shall be not less than one (1) and more than nine (9) until changed by a duly adopted amendment to the Articles of Incorporation or by an amendment to this By-Law adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.
Section 4. VACANCIES. Vacancies in the Board of Directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of a majority of the outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the Board of Directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the Board of Directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of the court or convicted of a felony, or if the authorized number of directors is increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be voted for at that meeting.
The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary, or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the Board of Directors may elect a successor to take office when the resignation becomes effective.
No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of the Board of Directors may be held at any place within or outside the State of Nevada that has been designated from time to time by resolution of the Board. In the absence of such a designation, regular meetings shall be held at the principal executive offices of the corporation. Special meetings of the Board shall be held at any place within or outside the State of Nevada that has been designated in the notice of the meeting or, if not stated in the notice or there is not notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting.
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Section 6. ANNUAL MEETING. Immediately following each annual meeting of shareholders, the Board of Director shall hold a regular meeting for the purpose of organization, any desired election of officers, and the transaction of other business. Notice of this meeting shall not be required.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of Directors shall be held without call at such time as shall, from time to time, be fixed by the Board of Directors. Such regular meetings may be held without notice.
Section 8. SPECIAL MEETINGS. Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairman of the Board or the president or any vice president or the secretary
or any two directors.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first class mail or telegram, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. In case the notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation.
Section 9. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 11 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
Section 10. WAIVER OF NOTICE. The transactions of any meeting of the Board of Director, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting before or at its commencement, the lack of notice of that director.
Section 11. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment.
Section 13. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the Board of Directors. Such written consent or consents shall be filed with the minutes of the proceedings of the Board.
Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of committees may receive such compensation , if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the Board of Directors. This Section 14 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for those services.
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ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF DIRECTORS. The Board of Directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the Board. The Board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the Board, shall have all the authority of the Board, except with respect to:
(a) the approval of any action which, under the General Corporation Law of Nevada also requires shareholders’ approval or approval of the outstanding shares;
(b) the approval of any action which, under the General Corporation law of Nevada also requires shareholders’ approval or approval of the outstanding shares;
(c) the appointment of any other committees of the Board of Directors or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these By-Laws, Section 5 (place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment), 13 (action without meeting), with such changes in the context of those By-Laws to substitute the committee and its members for the Board of Directors and its members, except that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee; special meetings of committees may also be called by resolution of the Board of Directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the Board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any member of officers may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the Board of Directors, and each shall serve at the pleasure of the Board, subject to the rights, if any, of any officer under the contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the By-Laws or as the Board of Directors may, from time to time, determine.
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Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of any officer under any contract or employment, any officer may be removed, either with or without cause, by the Board, or, except in case of an officer chosen by the Board of Directors, by an officer upon whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICERS. A vacancy in any officer because of death, resignation, removal disqualification or any other cause shall be filled in the manner prescribed in these By-Laws for regular appointments to that officer.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may be, from time to time, assigned to him by the Board of Directors or prescribed by the By-Laws. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, or if there be none, at all meetings of the Board of Directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENTS. In the absence of disability of the president, the vice presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a vice president designated by the Board of Directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as, from time to time, may be prescribed for them respectively by the Board of Directors or the By-Laws, and the president, or the chairman of the board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept, at the principal executive office or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given, the names of those presented at directors’ meetings or committee meetings, the number of shares presented or represented a shareholder’s meetings, and the proceedings.
The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by the By-Laws or by law to be given, and he shall keep the seal of the corporation if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the By-Laws.
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Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earning, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designate by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the president and directors, whenever they request it, an account of all if his transactions as chief financial officer and the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or the By-Laws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS
The corporation shall, to the maximum extent permitted by the Nevada General Corporation Law, indemnify each of its agents against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact any such person is or was an agent of the corporation. For purposes of this Section, an “agent” of the corporation includes any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, or was a director, officer, employee, or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the Board of Directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder.
A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of shareholders’ names and addresses and shareholdings during usual business hours on five days prior written demand on the corporation, and (ii) obtain from the transfer agent of the corporation on written demand and on the tender of such transfer agent’s usual charges for such list, a list of the shareholders’ names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. This list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or the date specified in the demand as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder’s interests as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of Nevada, at its principal business office in this state, the original or a copy of the By-Laws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of Nevada and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the By-Laws as amended to date.
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Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the Board of Directors shall be kept at such place or places designated by the Board of Directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder’s interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall extend to the records of each subsidiary corporation of the corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The Board of Directors shall cause an annual report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year adopted by the corporation. This report shall be sent at least fifteen (15) days before the annual meeting of shareholders to be held during the next fiscal year and in the manner specified in Section 5 of Article II of these By-Laws for giving notice to shareholders of the corporation. The annual report shall contain a balance sheet as of the end of the fiscal year and an income statement and a statement of changes in financial position for the fiscal year, accompanied by any report of independent accountants or, if there is no such report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.
Section 6. FINANCIAL STATEMENTS. A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three month, six month, or nine month period of the then current fiscal year ended more than thirty (30) days after the receipt of the request, and a balance sheet of the corporation as of the end of that period the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent the shareholders its annual report for the last fiscal year, this report shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request.
The corporation shall also, on the written request of any shareholder, mail to the shareholder a copy of the last annual, semi-annual, or quarterly income statement which it has prepared, and a balance sheet as of the end of that period. The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountant engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation.
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ARTICLE VIII
GENERAL CORPORATE MATTERS
Section 1. RECORD DATES FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution, or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Nevada General Corporation Law.
If the Board of Directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the Board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later.
Section 2. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors.
Section 3. CORPORATE CONTRACTS AND INSTRUMENTS EXECUTED. The By-Laws, may authorize an officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and, unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent, or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount, except as to those contracts or agreements entered into by the president on behalf of the corporation.
Section 4. CERTIFICATES FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each shareholder when any of these shares are fully paid, and the Board of Directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of the consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the chairman of the board or vice chairman of the board or the president or treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent, or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent, or registrar at the date of issue.
Section 5. LOST CERTIFICATES. Except as provided in this Section 5, no new certificates for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and cancelled at the same time. The Board of Directors may, in case any share certificate or certificates for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the Board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate.
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Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the board, the president, or any vice president, or any other person authorized by resolution of the Board of Directors or by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The authority granted to these officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any of these officers in person or by any person authorized to do so by a proxy duly executed by these officers.
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Nevada General Corporation Law shall govern the construction of these By-Laws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be adopted or these By-Laws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the Articles of Incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the Articles of Incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article IX, By-Laws, other than a By-Law or an amendment of a By-Law changing the authorized number of directors, may be adopted, amended, or repealed by the Board of Directors.
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EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.7
EXHIBIT 10.8
EXHIBIT 10.9
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EXHIBIT 31.1
CERTIFICATIONS
I, Jerry Grisaffi, certify that;
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1. |
I have reviewed this annual report on Form 10-K for the year ended March 31, 2020 of Right On Brands, Inc. (the "registrant"); |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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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; |
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b. |
Designed such internal control over financial reporting, or caused 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; |
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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 |
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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 |
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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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 |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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Date: March 31, 2021 |
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/s/ Jerry Grisaffi |
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By: |
Jerry Grisaffi |
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Title: |
Chief Executive Officer |
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EXHIBIT 31.2
CERTIFICATIONS
I, A. David Youssefyeh, certify that;
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1. |
I have reviewed this annual report on Form 10-K for the year ended March 31, 2020 of Right On Brands, Inc. (the "registrant"); |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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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; |
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b. |
Designed such internal control over financial reporting, or caused 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; |
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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 |
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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 |
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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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 |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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Date: March 31, 2021 |
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/s/ A. David Youssefyeh |
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By: |
A. David Youssefyeh |
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Title: |
Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual Report of Right On Brands, Inc. (the "Company") on Form 10-K for the year ended March 31, 2020 filed with the Securities and Exchange Commission (the "Report"), I, Jerry Grisaffi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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1. |
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented. |
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By: |
/s/ Jerry Grisaffi |
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Name: |
Jerry Grisaffi |
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Title: |
Principal Executive Officer |
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Date: |
March 31, 2021 |
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This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EXHIBIT 32.2
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual Report of Right On Brands, Inc. (the "Company") on Form 10-K for the year ended March 31, 2020 filed with the Securities and Exchange Commission (the "Report"), I, A.David Youssefyeh, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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1. |
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations of the Company for the periods presented. |
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By: |
/s/ A.David Youssefyeh |
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Name: |
A.David Youssefyeh |
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Title: |
Principal Financial Officer |
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Date: |
March 31, 2021 |
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This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.