0001683168-18-001819.txt : 20180629 0001683168-18-001819.hdr.sgml : 20180629 20180629164652 ACCESSION NUMBER: 0001683168-18-001819 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 69 CONFORMED PERIOD OF REPORT: 20180331 FILED AS OF DATE: 20180629 DATE AS OF CHANGE: 20180629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Freedom Leaf Inc. CENTRAL INDEX KEY: 0001581545 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 462093679 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55687 FILM NUMBER: 18929833 BUSINESS ADDRESS: STREET 1: 3571 E. SUNSET ROAD, SUITE 420 CITY: LAS VEGAS STATE: NV ZIP: 89120 BUSINESS PHONE: 877-442-0411 MAIL ADDRESS: STREET 1: 3571 E. SUNSET ROAD, SUITE 420 CITY: LAS VEGAS STATE: NV ZIP: 89120 FORMER COMPANY: FORMER CONFORMED NAME: Arkadia International DATE OF NAME CHANGE: 20130715 10-Q 1 freedom_10q-033118.htm QUARTERLY REPORT

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2018

 

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

 

For the transition period from _________ to _________

 

Commission File Number: 000-55687

 

 

FREEDOM LEAF INC.

(Exact name of Registrant as specified in its charter)

 

Nevada   46-2093679
(State of incorporation)   (IRS Employer ID Number)

 

3571 E. Sunset Road, Suite 420

Las Vegas, Nevada 89120

 

877-442-0411

(Registrant’s telephone number)

 

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 preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

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

 

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

 

Large accelerated filer    o Accelerated filer    o
Non-accelerated filer    o   (Do not check if a smaller reporting company) Smaller reporting company    x
Emerging growth company    o  

 

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

 

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

 

As of June 27, 2018, there were 187,048,252 shares of common stock, par value $0.001 per share issued, issuable, and outstanding.

 

 

 

   
 

 

FREEDOM LEAF INC.

FORM 10-Q

MARCH 31, 2018

 

INDEX

 

  Page No.
PART I – FINANCIAL INFORMATION 3
Item 1.   Financial Statements 4
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 29
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 34
Item 4.   Controls and Procedures 34
       
PART II – OTHER INFORMATION 36
Item 1.   Legal Proceedings 36
Item 1A.   Risk Factors 36
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 36
Item 3.   Defaults Upon Senior Securities 38
Item 4.   Mine Safety Disclosures 38
Item 5.   Other Information 38
Item 6.   Exhibits 39
       
SIGNATURES 40

 

 

 

 

 

 

 

 

 2 
 

 

PART I – FINANCIAL INFORMATION

 

TABLE OF CONTENTS

 

Index to Financial Statements   Page
     
Condensed Consolidated Balance Sheets as of March 31, 2018 (unaudited) and June 30, 2017   4
     
Condensed Consolidated Statements of Operations and Comprehensive Income for the three months and nine months ended March 31, 2018 and 2017 (unaudited)   5
     
Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2018 and 2017 (unaudited)   6
     
Notes to Condensed Consolidated Financial Statements   7

 

 

 

 

 

 

 

 3 
 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

FREEDOM LEAF INC.

and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited)

 

 

   March 31,   June 30, 
   2018   2017 
   (unaudited)     
         
ASSETS    
Current assets          
Cash  $165,544   $2,498 
Accounts receivable, net   28,881     
Inventory, net   82,485     
Prepaid expense and other current assets   119,615    1,600 
Other receivable, net of reserves   1,123    637,817 
Total current assets   397,648    641,915 
           
Fixed assets, net   196,631     
Intangible assets, net   316,955    10,820 
Goodwill   315,685     
Other assets   44,185    338,084 
           
Total assets  $1,271,104   $990,819 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current liabilities          
Convertible notes payable, net of discount  $   $70,678 
Notes payable   759    3,141 
Accounts payable   323,924    15,789 
Accrued expenses   97,806    31,891 
Accrued expenses to related parties   109,500     
Derivative liabilities       52,757 
Total current liabilities   531,989    174,256 
           
Non-current liabilities          
Other non-current liabilities       188,075 
Payable to related party   313,713    290,670 
Total non-current liabilities   313,713    478,745 
           
Total liabilities   845,702    653,001 
           
Commitments and contingencies       150,000 
           
Stockholders' equity          
Preferred stock, $0.001 par value, 10,000,000 shares authorized Series A preferred stock, 1,000,000 shares authorized, 948,022 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively   948    948 
Common stock, $0.001 par value, 500,000,000 shares authorized, 161,740,712 and 111,101,795 shares issued, issuable, and outstanding at March 31, 2018 and June 30, 2017, respectively   161,741    111,102 
Additional paid-in capital   8,516,596    4,996,756 
Accumulated comprehensive income   22     
Accumulated deficit   (8,247,029)   (4,920,988)
Total Freedom Leaf Inc. stockholders' equity   432,278    187,818 
Non-controlling interests   (6,876)    
Total stockholders’ equity   425,402     
Total liabilities and stockholders' equity  $1,271,104   $990,819 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 4 
 

 

FREEDOM LEAF INC.

and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income

(unaudited)

 

 

   For the three months ended
March 31,
   For the nine months ended
March 31,
 
   2018   2017   2018   2017 
                 
Revenue, net  $56,254   $254,084   $63,913   $823,204 
                     
Operating expenses                    
Direct costs of revenue   81,045    17,428    150,871    88,792 
General and administrative   337,409    247,578    1,186,222    1,170,036 
Depreciation and amortization expense   84,935        108,251    370 
Bad debt expense   221,294        637,817    1,500 
Marketing and selling   54,237    12,600    58,554    32,319 
Total operating expenses   778,920    277,606    2,141,715    1,293,017 
                     
Operating loss   (722,666)   (23,522)   (2,077,802)   (469,813)
                     
Other income (expense)                    
Interest expense   (1,659)   (6,026)   (14,439)   (11,276)
Loss on settlement of debt   (113,936)       (419,098)    
Interest income   7        10,331     
Loss on conversion of debt into common stock   (781,523)       (781,523)    
Gain on extinguishment of liabilities   54,157        54,157     
Change in fair value of embedded conversion features   (36,575)   (2,905)   (59,127)   (2,905)
Beneficial conversion feature   34,178    5,253    (45,416)   (55,014)
Total other income (expense)   (845,351)   (3,678)   (1,255,115)   (69,195)
                     
Provision for income taxes                
                     
Net loss before non-controlling interest   (1,568,017)   (27,200)   (3,332,917)   (539,008)
Loss attributable to non-controlling interest   6,876        6,876     
                     
Net loss attributable to common stockholders  $(1,561,141)  $(27,200)  $(3,326,041)  $(539,008)
                     
Net loss attributable to common stockholders per share - basic and diluted  $(0.01)  $(0.00)  $(0.02)  $(0.01)
                     
Weighted average number of common shares outstanding - basic and diluted   158,509,748    102,022,698    137,114,271    98,283,870 
                     
Exchange differences arising on translating foreign operations  $(22)  $   $(22)  $ 
Total comprehensive loss   (1,561,039)       (3,326,019)    
Total comprehensive loss – Non-controlling interest   (6,978)       (6,898)    
Total comprehensive loss – Controlling interest  $(1,568,017)  $(27,200)  $(3,332,917)  $(539,008)

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

 5 
 

 

FREEDOM LEAF INC.

and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended March 31,

(unaudited)

 

 

         
   2018   2017 
Cash flows from operating activities:          
Net loss  $(3,332,917)  $(539,008)
Adjustments to reconcile net loss to net cash used in operations:          
Depreciation and amortization   108,251    370 
Beneficial conversion feature   187,902    55,014 
Gain on settlement of contingent liabilities   (150,000)    
Loss on common stock issued for accounts payable   189,114     
Issuance of common stock for services   571,858    616,942 
Loss on conversion of debt   710,447     
Change in fair value of embedded conversion features       2,905 
Loss on revaluation of derivative liabilities   59,217      
Bad debt expense   637,817    (1,500)
Changes in operating assets and liabilities:          
Accounts receivable   (21,451)   500 
Inventory   (55,285)   2,465 
Prepaid expense   (119,138)    
Other receivable       (399,286)
Other assets   (40,600)   (229,791)
Accounts payable and accrued expenses   607,198    165,085 
Accounts payable and accrued expenses to related parties   127,499    103,405 
Net cash used in operating activities   (520,088)   (222,899)
           
Cash flows from (used in) investing activities          
Cash acquired in acquisition of GME   3,546     
Intangible asset acquired   (27,938)   (3,897)
Net cash from (used in) investing activities   (24,392)   (3,897)
           
Cash flows from financing activities:          
Proceeds from capital contributed       28,148 
Proceeds from related party       76,940 
Proceeds from sale of common stock   646,058    80,000 
Repayments on notes payable   (97,382)    
Proceeds from notes payable   166,842    46,000 
Net cash provided by financing activities   715,518    231,088 
           
Effects of exchange rates on cash   (7,992)    
           
Net increase in cash   163,046    4,293 
           
Cash at beginning of period   2,498    1,758 
           
Cash at end of period  $165,544   $6,051 
           
Supplemental disclosure of cash flow information:          
           
Cash paid for interest  $   $ 
           
Cash paid for taxes  $   $ 
           
Non-cash investing and financing activities:          
Conversion of debt into common stock  $   $115,065 
Issuance of common stock for accounts payable and accrued expenses  $662,459   $ 
Conversion of common stock into licensing agreement  $   $25,000 
Issuance of common stock for inventory  $27,200   $ 
Financed purchases of property and equipment  $148,500   $ 
Common stock issued in business combination  $396,728   $ 
Exercise of warrants for the issuance of common stock  $215   $ 
Notes assigned between holders  $118,602   $ 
Initial debt discounts  $116,625   $ 
Common stock issued for settlement of debt  $1,346,520   $ 
Common stock issued for rights agreement  $22,000   $ 
Derivatives liability  $   $23,918 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 6 
 

 

Freedom Leaf Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

March 31, 2018

(unaudited)

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

Freedom Leaf Inc. (the “Company,” “we,” “us,” “our,” “Freedom Leaf” or “FRLF”) was incorporated in the State of Nevada on February 21, 2013, under the name of Arkadia International, Inc. The Company originally was engaged in the business of the acquisition of in demand equipment, cars and goods with the intent to resale these in the U.S. territory or export to overseas countries. On October 3, 2014, the Company experienced a change in control. Richard C. Cowan (“Cowan”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between Cowan and Vladimir and Galina Shekhtman (“Sellers”). On the closing date, October 3, 2014, Cowan purchased from the Sellers 6,950,100 shares of the Company’s outstanding restricted common stock for $100,000, representing 93% of the then-outstanding common stock of the Company.

 

On November 6, 2014, the Company merged with Freedom Leaf Inc., a private Nevada corporation. The Company changed its name from Arkadia International, Inc., to Freedom Leaf Inc. As a result of the merger, the private company was dissolved, the sole officer, director and shareholder of the private company, Clifford J. Perry, became an officer and director of the Company, and Mr. Perry received approximately 48.1% of the Company’s common stock post-merger. See Note 2 for related discussion.

 

For financial reporting purposes, the merger was accounted for as a "reverse merger" and recapitalization rather than a business combination, and the private company was deemed to be the accounting acquirer in the transaction, with the Company deemed to be the acquired company for financial reporting purposes. Consequently, the assets and liabilities and the operations that are reflected in the historical consolidated financial statements of the Company prior to the merger are those of the private company, and were recorded at the historical cost basis of the private company, and the consolidated financial statements after completion of the merger include the assets and liabilities of both the predecessor public company and private company, the historical operations of private company, and the operations of both companies from the date of the merger.

 

Cannabis Business Solutions Inc (“Cannabis Business Solutions”), a Nevada corporation, was formed on February 5, 2014, and is a subsidiary of the Company. This subsidiary had nominal activity until it purchased the LaMarihuana.com assets from Valencia Web Technology S.L., B-97183354, effective April 8, 2017 (see Note 2).

 

Leafceuticals Inc (“Leafceuticals”), formerly known as Cannabiz U, Inc., a Nevada corporation, was formed on February 13, 2014, and is a wholly-owned subsidiary of the Company. This subsidiary began active operations in January 2018.

 

Freedom Leaf International Inc. (“Freedom Leaf International”), a Nevada corporation, was formed on November 27, 2015, and is a wholly-owned subsidiary of the Company. This subsidiary has had no activity to date.

 

Freedom Leaf Cares Inc. (“Freedom Leaf Cares”), a Nevada corporation, was formed on October 1, 2014, and is a wholly-owned subsidiary of the Company. Freedom Leaf Cares was dissolved in 2016. Until dissolution, this subsidiary had no activity.

 

Nature of Operations

 

Freedom Leaf Inc. is a Company that is dedicated to health and wellness products derived from legal Hemp. It is comprised of a group of diversified, international, vertically-integrated hemp businesses and cannabis media companies. Freedom Leaf Inc. has been working since 2014 to build a diverse portfolio of related hemp businesses through strategic acquisitions across the industry.

 

 

 7 

 

 

FRLF’s portfolio of acquisitions includes our recently acquired hemp CBD product line Irie CBD; our wholly-owned hemp extraction division Leafceuticals, Inc.; our exclusive health and wellness CBD brand “Hempology;” our hemp greenhouse cultivation with recent acquisition of a facility in Valencia, Spain; our hemp-based rolling paper company Plants to Paper; two of the largest Spanish-speaking cannabis web portals in the world LaMarihuana.com and Marihuana-Medicinal.com; and, of course, our flagship publication, Freedom Leaf Magazine.

 

Through our targeted acquisitions and growth plan execution, the Company has built a solid foundation for our vertically-integrated hemp and cannabis media company to enhance both revenue growth and shareholder value. Our cultivation and extraction divisions allow FRLF to grow and source our own hemp CBD, which allows lower production costs for our wholly-owned CBD product lines, and better gross profit, for our CBD product sales. In addition, our domestic and international media companies permit us to direct organic traffic to our eCommerce sites and retail locations.

 

·Freedom Leaf does not handle, grow, sell, or dispense marijuana or related products in the United States.

 

·Freedom Leaf believes that its European activities are in compliance with relevant EU laws.

 

Basis of Presentation

 

The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Freedom Leaf and its subsidiaries, Cannabis Business Solutions, Leafceuticals, Freedom Leaf Cares, and Freedom Leaf International. All significant inter-company balances and transactions have been eliminated in consolidation.

 

Fair Value Measurements

 

We follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

We currently measure and report at fair value our intangible assets (due to our impairment analysis) and derivative liabilities. The fair value of intangible assets has been determined using the present value of estimated future cash flows method. The fair value of derivative liabilities is measured using the Black-Scholes option pricing method.

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

 

 

 8 

 

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates in the accompanying consolidated financial statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrants and beneficial conversion feature debt discounts, valuation of derivatives, valuation of share-based payments and the valuation allowance on deferred tax assets.

 

Reclassifications

 

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously reported.

 

Inventory

 

Inventory is recorded at the lower of cost or market and the cost of sales are recorded utilizing the first in first out (“FIFO”) method.

 

Accounting for Derivatives

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Revenue Recognition

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. We have early adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

Net Earnings (Loss) Per Share

 

In accordance with ASC 260-10, “Earnings Per Share,” basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares, which may dilute future earnings per share, consist of warrants to purchase 4,618,167 shares of common stock at March 31, 2018. Equivalent shares are not utilized when the effect is anti-dilutive.

 

Effect of Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU No. 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

 

 

 9 

 

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. We have adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements (Topic 205) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance requires management to perform an evaluation each annual and interim reporting period of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within the one-year period after the date that the financial statements are issued. If such conditions are identified, the guidance requires an entity to provide certain disclosures about the principal conditions or events that gave rise to the substantial doubt about the entity’s ability to continue as a going concern, management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations and management’s plans to alleviate or mitigate substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for the first annual period ending after December 15, 2016 and interim periods thereafter.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU on lease accounting. The ASU requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating the ASU, the Company expects the adoption of the ASU to have a material effect on the Company’s financial condition due to the recognition of the lease rights and obligations as assets and liabilities. The Company does not expect the ASU to have a material effect on the Company’s results of operations, and the ASU will have no effect on cash flows.

 

The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a significant effect on the Company’s financial statement.

 

NOTE 2 –DEFINITIVE AGREEMENTS

 

On November 6, 2014, Freedom Leaf Inc., a Nevada corporation and the public company (the “Company,” “Public Company,” “we,” “us,” “our”) entered into a merger agreement with a private Nevada corporation, Freedom Leaf Inc. (the “Private Company”). Prior to the reverse merger, Cowan, the officer and director of the Public Company, had acquired the majority of its outstanding common stock. Clifford J. Perry, the Private Company’s sole officer and director pre-merger (“Perry”), was the owner of record of all of the outstanding common shares of the Private Company (the “Private Company Stock”) prior to the merger. Pursuant to the merger, the Private Company was merged into the Public Company, and Perry, the Private Company’s shareholder, received 83,401.2 shares of Public Company common stock for each share of Private Company stock pre-merger, or 83,401,200 total shares of the Company’s common stock.

 

The closing of the merger was conditioned upon certain, limited customary representations and warranties, as well as the satisfaction or waiver of specified conditions to closing. As the parties satisfied all of the closing conditions, we filed Articles of Merger in Nevada consummating the merger, and shareholders of the Private Company pre-merger (Perry) owned approximately 48.1% of our issued and outstanding common stock post-merger. Following the merger, the Company focused on pursuing Private Company’s historical businesses.

 

The foregoing description of the merger agreement and transaction does not purport to be complete and is qualified in its entirety by the merger agreement, a copy of which has been filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q/A for the period ended December 31, 2014, which is incorporated herein by reference.

 

Accounting Treatment of the Merger

 

For financial reporting purposes, the merger represents a “reverse merger” rather than a business combination, and Private Company is deemed to be the accounting acquirer in the transaction. The merger is being accounted for as a reverse-merger and recapitalization. Private Company is the acquirer for financial reporting purposes and the Public Company (Freedom Leaf Inc., f/k/a Arkadia International, Inc.) is the acquired company. Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the merger will be those of the Private Company and will be recorded at the historical cost basis of the Private Company, and the financial statements after completion of the merger will include the assets and liabilities of the Public Company and the Private Company, the historical operations of the Private Company and operations of both companies from the closing date of the Merger.

 

 

 

 10 

 

 

Licensing Rights

 

On February 8, 2016, the Company and Freedom Leaf Netherlands, B.V. (“FLNL”), a company located in the Netherlands, executed a Memorandum of Understanding (“MOU”), wherein the Company granted FLNL a right of first refusal to license certain rights from the Company described below in exchange for a payment of $25,000, and the parties agreed to negotiate a definite license agreement for such rights with the terms of the definitive agreement incorporating the material terms set forth in the MOU. Such rights include FLNL’s rights to use various trademarks of the Company, primarily “Freedom Leaf,” and other related rights, for use in the Netherlands by FLNL, including FLNL’s right to publish a Freedom Leaf magazine in the Netherlands, sell Freedom Leaf products and perform other activities related to the business of the Company. FLNL is a shareholder (common stock and warrants to purchase additional common stock) of the Company. On December 15, 2016, the Company and FLNL executed the license agreement. The agreement provided for a licensing fee of $250,000 with a payment schedule as follows: $70,869 which has been paid from the date of the MOU until the date of the agreement; $25,000 payment every two months, commencing on April 10, 2017 with the last payment on April 10, 2018, and a final payment of $4,131 on June 10, 2018. As of March 31, 2018, the Company has written the receivable off to bad debt. The Company also provided FLNL with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows:

 

·250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018; and 250,000 warrants between March 2018 and May 2018. See Notes 7 and 12.

 

On December 15, 2016, the Company and Freedom Leaf Iberia, B.V. (“FLI”), a company incorporated under the laws of the Netherlands, executed a license agreement. The licensing agreement provides FLI the distribution rights to the Company’s magazine and other “Freedom Leaf” branded merchandise. The territory of the agreement is Spain and Portugal. The agreement provided for a license fee of $250,000 payable to the Company. The payment schedule provides for a $25,000 payment every two months, beginning on April 20, 2017, concluding on April 20, 2018, with a final payment of $75,000 on June 20, 2018. As the Company is allowing for progress payments, the balance is shown net of imputed interest on the balance sheet. The Company also provided FLI with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows: 250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018; and 250,000 warrants between March 2018 and May 2018. See Notes 8 and 12. As of March 31, 2018, the Company has written the receivable off to bad debt.

 

On March 31, 2017, the Company entered into a license agreement with BBD Healthcare Strategies, LLC, a Florida limited liability company (“BBDHS”), pursuant to which BBDHS received distribution rights to the Company’s magazine and other “Freedom Leaf” branded merchandise for the State of Florida, in consideration of (1) a license fee of $250,000, paid $25,000 at execution, and $25,000 due August 2017, October 2017, December 2017, February 2018, March 2018, April 2018, May 2018 and concluding June 2018, with a final payment of $50,000, (2) ongoing royalties of 5% for sales of Company merchandise purchased from the Company, (3) ongoing royalties of 10% for sales of Company merchandise purchased from a third-party supplier, and (4) ongoing royalties of 33% for Company seminars and conferences. As the Company is allowing for progress payments, the balance is shown net of imputed interest on the balance sheet. The Company also provided BBDHS with warrants to purchase 1,200,000 shares of Company common stock at an exercise price of $0.05, exercisable as follows: 240,000 shares between September 1, 2017 and October 31, 2017, 240,000 shares between November 1, 2017 and December 31, 2017, 240,000 shares between January 1, 2018 and February 28, 2018, 240,000 shares between March 1, 2018 and May 30, 2018, and 240,000 shares between June 1, 2018 and July 30, 2018. See Notes 8 and 12. As of March 31, 2018, the Company has written the receivable off to bad debt.

 

Incubation Agreement

 

On January 18, 2016, the Company and Plants to Paper, LLC (“PTP”), a New Jersey limited liability company, executed an Incubation Agreement. PTP owned the patent pending application 62/245,153 (the “Patent”) with the title being “Rolling Papers and Blunt Wraps made from 100% Marijuana.” PTP agreed to transfer its ownership rights in the patent application to the Company, as well as PTP’s Medical Marijuana / Cannabis/Hemp Industry Incubator program. The Company agreed to supply management services and to fund the early stage development of PTP. The Incubation Agreement is for a period of twelve months. PTP will provide the Company with 20% of the outstanding membership shares of PTP in exchange for its services. The costs of patent registrations in the United States and other countries will be the liability of PTP. As of March 31, 2018, PTP had no activity. On February 1, 2017, the Agreement was modified for the following items: a) to provide 25% of the outstanding membership shares of PTP; b) require that the Patent be assigned to PTP; and c) acknowledge that the ownership rights have not been transferred to the Company as of that date. To-date, ownership rights have not been transferred.

 

 

 

 11 

 

 

Sales Representation Contract

 

On December 22, 2016, the Company and NuAxon BioScience, Inc. (“NuAxon”), a Delaware corporation, executed a Sales Representation Contract. NuAxon is a manufacturer and distributor for bulk extracts, Rebel Herbs brand products, and Intelligence Tree brand products. The contract appoints the Company as NuAxon’s sales representative worldwide. The contract is for a period of one year and shall automatically renew for successive terms of the same duration. The contract provides a commission for sales by the Company at rates as follows: a) bulk extracts is 9% with a 2% bonus on annual sales above $500,000; b) Rebel Herbs and Intelligence Tree brand products is 10% with a 3% bonus on annual sales above $1,000,000. As of March 31, 2018, there have been no sales or commissions earned.

 

Equipment Sales Representative Contract

 

On December 22, 2016, the Company and NuAxon executed an Equipment Sales Representative Contract. NuAxon is a manufacturer and distributor for extraction equipment. The contract appoints the Company as NuAxon’s equipment sales representative worldwide. The contract is for a period of one year and shall automatically renew for successive terms of the same duration. The contract provides a commission for sales by the Company at various rates ranging from 3% to 10%, dependent on the cumulative annual sales. On March 15, 2017, the Company entered into an Exclusive Distribution Agreement with NuAxon to sell NuAxon’s CO2 extraction equipment pursuant to which the Company would be paid increasing commissions depending on gross sales of the equipment. On March 16, 2017, the Company issued a purchase order (the “Purchase Order”) to NuAxon to purchase extraction equipment for one of the Company’s customers. As of March 31, 2018, there were no sales.

 

LaMarihuana Purchase

 

On May 30, 2017, with an effective date of April 8, 2017 as per the Bill of Sale, Cannabis Business Solutions Inc. (the “Buyer”), a wholly-owned Nevada subsidiary of the registrant, Freedom Leaf Inc., entered into an Asset Purchase Agreement with Valencia Web Technology S.L., B-97183354, a Spanish limited liability company (Sociedad de Responsabilidad Limitada) (the “Seller,” or “Valencia”) to purchase the Seller’s assets, including its cash and cash equivalents, equipment, inventory, receivables, and two of its websites www.lamarihuana.com and www.marihuana-medicinal.com (but not including the Seller’s website cannabislandia.com), for a purchase price consisting of a 10% interest in the Buyer, and 3,000,000 shares of common stock of the registrant, valued at $300,000 (the “Initial FRLF Shares”), with additional shares of the registrant’s common stock due six months (October 8, 2017) following closing if, at such time, the average closing price of the registrant’s common stock during the previous five trading days is less than $0.10/share. Such additional shares shall be calculated as follows: $300,000 minus the product of (a) the Initial FRLF Shares multiplied by (b) the average closing price of the registrant’s common stock during the five trading days immediately preceding the True-Up Date (the “True-Up Price”), with such difference divided by the True-Up Price. On October 8, 2017, the Company removed the previously recorded contingent liability and recorded 4,142,857 shares of common stock as issuable, with a value of $126,000. On February 7, 2018, the Company and the Buyer agreed that because of the increase in the value of the Company’s common stock, the Buyer had waived its right to additional shares of common stock as stated herein. Therefore, on February 7, 2018, the Company reversed its recording of the 4,142,857 shares of common stock recorded as issuable. See Note 17.

 

The Company is in the process of meeting international requirements for the complete use of the web sites by the Company. This process is expected to be completed before the end of this fiscal year.

 

NOTE 3 –BUSINESS COMBINATION

 

Green Market Europe Purchase

 

On January 5, 2018 as amended on February 5, 2018, with an effective date of January 5, 2018, the Company consummated its previously-announced acquisition of 100% of the capital stock of Green Market Europe, S.L. (“GME”), a Spanish producer of hemp products. GME’s facilities include: a 21,000 square foot light deprivation greenhouse; a 43,000 square foot indoor growing research facility, and over 200 acres of outdoor production space. The light deprivation allows the increase of the number of yearly crops from 3 to 4 crops a year, and the 43,000 square foot indoor grow facility is used for genetic research and cultivating additional hemp crops. GME is strategically located in Elche, Alicante, an important Spanish business hub, with great year-round weather conditions for agricultural growing and a long tradition of growing hemp. From its inception to-date, GME has had negligible operations.

 

 

 

 12 

 

 

Purchase Consideration:

 

In consideration for the acquisition, the Company paid to GME’s seller $320,205 in cash and Company common stock as follows:

 

(i)$24,805 (which amount was paid by a third party, and to whom the Company owes that amount), and

 

(ii)4,220,000 shares of the Company’s common stock valued on the Company’s Balance Sheet at $295,400.

 

Additionally: (i) additional shares will be issuable if the volume weighted-average price of the Company’s stock between January 5, 2018 and July 3, 2018 is less than $0.10 per share, and (ii) the sellers of GME have the option to repurchase all of the assets of GME for €100 (and the assumption of GME’s liabilities) if the volume weighted-average price of the Company’s stock between January 5, 2018 and January 5, 2019 is less than $0.01 per share.

 

Assets acquired, and liabilities assumed, at fair value:

 

The provisional fair value of the purchase consideration issued to the sellers of GME was allocated to the net tangible assets acquired. We accounted for the acquisition of GME as the purchase of a business under GAAP under the acquisition method of accounting, the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair value of the net assets acquired, net of Liabilities assumed, was approximately $20,285. The excess of the aggregate fair value of the net tangible assets has been treated as Goodwill. The purchase price allocation was based, in part, on management’s knowledge of GME’s business and is preliminary. Once we complete our analysis to finalize the purchase price allocation, which includes finalizing the valuation report from a third-party appraiser and a review of potential intangible assets, it is reasonably possible that, there could be significant changes to the preliminary values below.

 

Consideration given:

 

Common stock shares given  $295,400 
      
Total consideration given  $295,400 
      
Fair value of identifiable assets acquired, and liabilities assumed:     
      
Cash  $3,546 
Accounts receivable   7,430 
Fixed assets, net   64,891 
Intangible assets, net   5,176 
Accounts payable   (71,478)
Acquisition payable   (24,805)
Payable to shareholders   (5,045)
Total identifiable net liabilities   (20,285)
Goodwill   315,685 
Total consideration  $295,400 

 

During March, April and May of 2018, in connection with the Company’s preliminary audit of GME, the Company’s management discovered several irregularities regarding GME’s operations and its sellers’ activities before and after the consummation of the Company’s acquisition of that business. Based on investigation of these discoveries, the Company, effective June 4, 2018, consummated a termination agreement with GME’s seller. In connection with that agreement, GME’s sellers returned to the Company the 4,220,000 shares it had previously issued to the sellers. The Company will write off the approximately $33,000 it had invested cumulatively in GME in addition to the stock issuance.

 

NOTE 4– GOING CONCERN

 

The Company has a net loss attributable to common stockholders for the nine months ended March 31, 2018 of $3,326,041 and working capital deficit as of March 31, 2018 of $134,341 and has used cash in operations of $520,088 for the nine months ended March 31, 2018. In addition, as of March 31, 2018, the Company had a stockholders’ equity and accumulated deficit of $425,402 and $8,247,029, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of the issuance of these financial statements.

 

 

 

 13 

 

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements.

 

There can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this report, there were no pending or threatened lawsuits.

 

Lease Commitment

 

We lease approximately 2,800 square feet of office space in Las Vegas, Nevada, pursuant to a lease that will expire on December 31, 2019. This facility serves as our corporate headquarters. After December 31, 2017, the Company has the option to opt out of the lease.

 

Future minimum lease payments under these leases are as follows:

 

2018  $5,982 
2019   18,943 
      
Total  $24,925 

 

Rent expense for the nine months ended March 31, 2018 and 2017 was $23,334 and $28,021, respectively.

 

NOTE 6 – RELATED PARTIES

 

Cowan, a former director and officer of the Company, has payables and accruals due to him of $313,713 and $269,226 as of March 31, 2018 and June 30, 2017, respectively. The payable, as agreed upon verbally, has a maturity date greater than one year, without any other set terms for repayment. Imputed interest is immaterial.

 

Clifford J. Perry (“Perry”), Chief Executive officer, Chief Financial Officer, and a director of the Company, has payables and accruals due to him of $0 and $21,444 as of March 31, 2018 and June 30, 2017, respectively. Imputed interest is immaterial. On July 31, 2017, the Company issued 5,784,061 shares of common stock to Cliff Perry for accrued compensation of $112,500. See Note 12

 

Raymond P. Medeiros (“Medeiros”), a director of the Company, has payables and accruals due to him of $0 and $0 as of March 31, 2018 and June 30, 2017, respectively. Imputed interest is immaterial. On July 31, 2017, the Company issued 2,699,228 shares of common stock to Raymond Medeiros for accrued compensation of $52,500. See Note 12.

 

On October 31, 2017, the Company issued 850,000 shares of common stock to Paul F. Pelosi, Jr. (“Pelosi”), in regard to his appointment as Chairman of the Board on November 1, 2017, for compensation for the period November 1, 2017 through January 31, 2018. The Company was obligated to issue on February 1, 2018, an additional 1,250,000 options for common stock with an exercise price of $0.04, with an expiration date eighteen months after the issuance. On February 12, 2018, the Company issued 1,250,000 warrants for common stock to Paul Pelosi in satisfaction of this obligation. The warrants have an exercise price of $0.04 and expire August 11, 2018 (see Note 12).

 

 

 

 14 

 

 

On November 10, 2017, the Company sold 967,000 shares of common stock to Pelosi for $14,500, based on a per share price of $0.01499.

 

On January 18, 2018, the Company appointed Richard Groberg, via his company, RSGroberg Consulting, LLC, as its Chief Financial Officer to serve for an initial, two-year term. In consideration of the services to be performed by Groberg, the Company: (i) issued 800,000 shares of common stock, and (ii) $5,000 per month compensation payable: (1) prior to the date that the Company is paying monthly compensation to its directors primarily in cash, in 600,000 shares of common stock (representing the first 12 months’ compensation), and (2) payable in cash thereafter. See Note 17. The 800,000 and 600,000 shares of common stock were issued on January 18, 2018 and valued at $81,200 and $60,900, respectively.

 

On January 18, 2018, Pelosi purchased 1,050,000 shares of common stock for $21,000.

 

NOTE 7 – OTHER RECEIVABLES

 

The Company has three licensing agreements with the following: FLNL, FLI and BBDHS (see Note 2). The receivable, per entity, as recorded in Other Receivables as of March 31, 2018, is as follows:

 

   March 31,
2018
   June 30,
2017
 
FLNL  $176,779   $173,551 
FLI   246,178    240,555 
BBDHS   225,186    223,711 
Subtotal   648,143    637,817 
Less: Allowance   (648,143)     
Net Balance  $   $637,817 

 

As of March 31, 2018, FLNL, FLI and BBDHS are behind on payments of $100,000, $100,000, and $75,000, respectively. The Company and FLI agreed to a legal right of offset in regards to a balance of $60,000 owed by the Company to FLI. The revenue streams as stated herein have been delayed due to unforeseen circumstances. Thus, the Company granted deferment on the payments with each entity. Both FLNL and FLI expected to begin making payment sometime in 2018. As of the date of this report, the Company has not received payment, therefore, the Company has recorded an allowance of $648,143.

 

NOTE 8– FIXED ASSETS

 

The Company has fixed assets related to equipment and capital improvements. The depreciation of the equipment and capital improvements is over a five-year and two-year period, respectively. As of March 31, 2018, and June 30, 2017, the Company had fixed assets, net of accumulated depreciation, of $196,631 and $0, respectively. The fixed assets are as follows:

 

   March 31,   June 30, 
   2018   2017 
Equipment  $221,200   $ 
Total fixed assets   221,200     
Less: Accumulated depreciation   (24,569)    
Fixed assets, net  $196,631   $ 

 

The depreciation expense for the nine months ended March 31, 2018 and 2017, was $24,569 and $0, respectively.

 

NOTE 9 – INTANGIBLE ASSETS

 

The Company has intangible assets related to website development. The amortization of the intangible assets is over a five-year period. As of March 31, 2018, and June 30, 2017, the Company had intangible assets, net of accumulated amortization, of $316,955 and $10,820, respectively. The intangible assets are as follows:

 

   March 31,   June 30, 
   2018   2017 
Website development  $401,980   $12,245 
Total intangible assets   401,980    12,245 
Less: Accumulated amortization   (85,025)   (1,425)
Intangible assets, net  $316,955   $10,820 

 

 

 15 

 

 

The amortization expense for the nine months ended March 31, 2018 and 2017, was $83,722 and $370, respectively.

 

The following table presents the amortization for the next five years:

 

2018  $5,136 
2019   15,127 
2020   1,044 
2021   1,044 
2022 and thereafter   2,422 
Total  $24,773 

 

NOTE 10 – DERIVATIVES

 

Embedded Conversion Option Derivatives

 

Due to the conversion terms of certain promissory notes, the embedded conversion options met the criteria to be bifurcated and presented as derivative liabilities. The Company calculated the estimated fair values of the liabilities for embedded conversion option derivative instruments at the original note inception date and settlement dates and at June 30, 2017, using the Black-Scholes option pricing model using the share prices of the Company’s stock on the dates of valuation and using the following ranges for volatility, expected term and the risk-free interest rate at each respective valuation date, no dividend has been assumed for any of the periods:

 

   

March 31,

2018

   

June 30,

2017

   

Note

Inception

Date

 
Volatility     N/A       141%       170% - 232%  
Expected Term     N/A       0.33 - 0.96 years       0.75 - 1.0 years  
Risk-Free Interest Rate     N/A       0.84%       1.07% - 1.33%  

 

The following reflects the initial fair value on the note inception date and changes in fair value through March 31, 2018, which reflects that all promissory notes were converted and/or paid leaving no outstanding promissory notes as of March 31, 2018:

 

Embedded conversion option derivative liability fair value on June 30, 2017  $52,757 
Note modifications adjustment   43,866 
Adjustment for extinguishment of notes and conversion of notes   (91,653)
Change in fair value in fiscal year 2018   (4,970)
Embedded conversion option derivative liability fair value on March 31, 2018  $ 

 

NOTE 11 – CONVERTIBLE NOTES PAYABLE, NET OF PREMIUMS AND NOTES PAYABLE

 

Convertible notes, net of discounts and notes payable                        
   March 31, 2018   June 30, 2017 
           Principal,           Principal, 
       Debt   net of       Debt   net of 
   Principal   Discounts   Discounts   Principal   Discounts   Discounts 
PureEnergy  $   $   $   $15,475   $(7,489)  $7,986 
PureEnergy               13,480    (5,565)   7,915 
PowerUp               75,000    (39,330)   35,670 
PowerUp               38,000    (18,893)   19,107 
Total  $   $   $   $141,955   $(71,277)  $70,678 

 

 

 

 16 

 

 

On July 7, 2015, the Company executed a convertible promissory note for $5,000 with Bruce Perlowin. The note is for one year, 12% interest rate, and convertible at $0.10 per share. The current price at that date was $0.085, which is less than the conversion price. The stock price for our common stock as of September 30, 2015 was $0.40. Our common stock is thinly traded therefore our price, as management has determined, is not indicative of our valuation. In October 2015, the Company issued common stock for services to unrelated parties and the common stock was values at $0.20, therefore, the $0.20 was used for valuation purposes for this note. A beneficial conversion feature of $5,000 was recorded and subsequently amortized. The Company has recorded accrued interest of $467 as of March 31, 2018. On April 15, 2016, Mr. Perlowin converted the principal of this promissory note into 50,000 shares of common stock. The accrued interest was not converted.

 

On August 12, 2015, the Company executed a convertible promissory note for $5,000 with Bruce Perlowin. The note is for one year, 12% interest rate, and convertible at $0.10 per share. The current price at that date was $0.10, which is less than the conversion price. The stock price for our common stock as of September 30, 2015 was $0.40. Our common stock is thinly traded therefore our price, as management has determined, is not indicative of our valuation. In October 2015, the Company issued common stock for services to unrelated parties and the common stock was values at $0.20, therefore, the $0.20 was used for valuation purposes for this note. A beneficial conversion feature of $5,000 was recorded and subsequently amortized. The Company has recorded accrued interest of $408 as of March 31, 2018. On April 15, 2016, Mr. Perlowin converted the principal of this promissory note into 50,000 shares of common stock. The accrued interest was not converted.

 

On August 20, 2015, the Company executed a convertible promissory note for $12,500 with Svetlana Ogorodnikova. The note matures on February 19, 2016, 12% interest rate, and convertible at $0.10 per share. The current price at that date was $0.085, which is less than the conversion price. The stock price for our common stock as of December 31, 2015 was $0.40. Our common stock is thinly traded therefore our price, as management has determined, is not indicative of our valuation. In October 2015, the Company issued common stock for services to unrelated parties and the common stock was values at $0.20, therefore, the $0.20 was used for valuation purposes for this note. A beneficial conversion feature of $12,500 was recorded and subsequently amortized. The Company has recorded accrued interest of $986 as of March 31, 2018. On February 19, 2016, Ms. Ogorodnikova granted the Company an extension on the due date to June 30, 2016. On April 15, 2016, Ms. Ogorodnikova converted the principal of this promissory note into 125,000 shares of common stock. The accrued interest was not converted.

 

On November 1, 2016, the Company executed a collateralized secured promissory note with Eagle Equities, LLC (“Eagle”) for $25,000. The Company netted $23,000 due to legal fees of $2,000. The note has a conversion discount of 45% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $25,000 and as of December 31, 2017, had recorded $25,000 of amortization. The note matures on November 1, 2017 and bears interest at 8%. On April 26, 2017, Eagle sold its convertible note to PureEnergy 714 LLC (“PureEnergy”) with no change in terms. As of March 31, 2018, there is $0 of accrued interest. On June 29, 2017, the Company issued 791,140 shares of common stock to PureEnergy for the conversion of $12,501. On July 19, 2017, the Company issued 748,934 shares of common stock to PureEnergy related to the conversion of $13,481.

 

On May 23, 2017, the Company executed a convertible promissory note with PureEnergy for $15,475. The note has a conversion discount of 45% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $8,481. The note matures on February 23, 2018 and bears interest at 8%. On October 30, 2017, the balance of the note and the accrued interest was converted into 1,006,768 shares of common stock. See Note 12.

 

On May 10, 2017, the Company executed a convertible promissory note with Power Up for $75,000. The note has a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The note matures on February 23, 2018 and bears interest at 8%. On September 28, 2017, Pure Energy purchased the May 10, 2017 convertible promissory note between the Company and Power Up. The Power Up convertible promissory note was for $78,427. The Company and Pure Energy entered into a revised convertible promissory note to replace the Power Up convertible promissory note as stated below. On November 9, 2017, Pure Energy converted the entire note and accrued interest into 5,764,490 shares of common stock. See Note 12. On January 26, 2018, the Company issued to Pure Energy 1,933,848 shares of common stock in consideration of its conversion of a second convertible promissory note for $33,842 (see Note 11) that the Company issued to Pure Energy on September 27, 2017 in conjunction with Pure Energy’s payoff of the May 10, 2017 Power Up convertible note.

 

On June 20, 2017, the Company executed a convertible promissory note with Power Up for $38,000. The note has a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $19,611 and as of the date of pay off, had recorded $6,609 of amortization. The note matures on February 23, 2018 and bears interest at 8%. On December 15, 2017, the principal and accrued interest was paid in full.

 

 

 

 17 

 

 

On July 20, 2017, the Company executed a convertible promissory note with Power Up for $38,000. The note has a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $14,829 and as of March 31, 2018, had recorded $7,455 of amortization. The note matures on August 11, 2018 and bears interest at 8%. As of March 31, 2018, there is $0 of accrued interest. On January 19, 2018, Pure Energy converted into 2,008,740 shares of Company common stock: (i) the principal balance of the $38,000 convertible promissory note it previously acquired from Power Up and (ii) $2,175 of accrued interest in connection with that note ($40,175 in total). That note, executed by the Company on July 20, 2017, had a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. In conjunction with its conversion of that note, on January 19, 2018, Pure Energy also received 800,918 shares of common stock – (i) $19,826.19 in conjunction with the settlement amount owed by the Company to Power Up at the time Pure Energy acquired that note from Power Up in connection with that note, and (ii) $3,000 as a transaction fee ($22,826.19 in total).

 

On August 11, 2017, the Company executed a convertible promissory note with LG Capital (“LG”) for $42,000. The note has a conversion discount of 35% based on the lowest closing price of the 12 days prior to conversion. On February 1, 2018, the Company paid LG Capital $58,813 to retire the convertible promissory note it issued to LG Capital on August 11, 2017 for $42,000. The repayment amount included $1,565 of accrued interest and a payment premium of $15,248.

 

On September 26, 2017, the Company executed a convertible promissory note with Power Up for $53,000. The note has a conversion discount of 35% based on the lowest closing price of the 10 days prior to conversion. On February 8, 2018, the Company paid Power Up $71,913 to retire in full this convertible note.

 

On September 27, 2017, the Company executed a convertible promissory note with Pure Energy for $78,427 to replace the May 10, 2017 convertible note with Power Up, as reflected above. The note has a conversion discount of 35% based on the lowest closing price of the 12 days prior to conversion. On November 9, 2018, the principal and accrued interest was converted into 5,765,490 shares of common stock. (See Note 12.) In conjunction with the payoff of the May 10, 2017 Power Up convertible note, the Company incurred a prepayment penalty of $28,496, which Pure Energy paid to Power Up. The Company issued a second convertible promissory note to Pure Energy, in consideration of its payment to Power Up, for $33,842, which included the prepayment penalty and legal fees of $5,346. On January 26, 2018, the Company issued to Pure Energy 1,933,848 shares of common stock in consideration of its conversion of a second convertible promissory note for $33,842 (see Note 12).

 

On January 17, 2018, Pure Energy acquired from Power Up the $38,000 note executed by the Company on July 20, 2017. On January 19, 2018, Pure Energy converted into 2,008,740 shares of Company common stock: (i) the principal balance of the $38,000 convertible promissory note it acquired from Power Up on January 17, 2018 and (ii) $2,175 of accrued interest in connection with that note ($40,175 in total) (see Note 12).

 

NOTE 12 – STOCKHOLDERS’ EQUITY

 

Series A Preferred Stock

 

On May 24, 2016, the Board of Directors of the Company authorized amending the Company’s Articles of Incorporation to authorize 10,000,000 shares of “blank check” preferred stock and designate 1,000,000 of the shares as Series A preferred stock. Each share of the Series A preferred stock is entitled to 500 votes and is convertible into 100 shares of common stock.

  

Common Stock

 

The Company was authorized to issue up to 75,000,000 shares of common stock, par value $0.001 per share. On January 21, 2015, the Company increased its authorized capital to 500,000,000 shares of common stock. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

 

In the first quarter of fiscal year 2018, the Company issued 1,793,195 shares of common stock which were recorded as issuable as of June 30, 2017.

 

On July 19, 2017, the Company issued 748,934 shares of common stock to PureEnergy related to the conversion of $13,481 of a convertible promissory note.

 

On July 31, 2017, the Company issued 5,784,061 shares of common stock to Cliff Perry for accrued compensation of $112,500. See Note 6.

 

 

 

 18 

 

 

On July 31, 2017, the Company issued 2,699,228 shares of common stock to Raymond Medeiros for accrued compensation of $52,500. See Note 6.

 

On August 23, 2017, the Company issued 500,000 shares of common stock to Frank Dobrucki for services valued at $40,750.

 

On August 14, 2017, the Company issued 500,000 shares of common stock to Nuaxon Bioscience as part of the agreement for exclusive rights to market and sell their equipment. The shares were valued at $22,000.

 

On August 17, 2017, the Company issued 345,451 shares of common stock to Lakeport Business Services, Inc. for accounts payable $9,450. The shares were valued at $24,182.

 

On August 25, 2017, the Company issued 600,000 shares of common stock to Christopher Thompson as a bonus in August 2017. The shares were valued at $48,900.

 

On August 25, 2017, the Company issued 550,000 shares of common stock to Joshua Halford for services in August 2017. The shares were valued at $44,825.

 

On August 28, 2017, the Company issued 1,061,500 shares of common stock to Christopher Sloan for services in May 2017 (661,500 shares) and for accrued expenses of $23,075 (400,000 shares of common stock). The shares were valued at $137,535.

 

On August 28, 2017, the Company issued 500,303 shares of common stock to Neil Dutson for services valued at $37,203.

 

On August 29, 2017, the Company issued 100,000 shares of common stock to Marc Hatch for services valued at $7,430.

 

On August 29, 2017, the Company issued 100,000 shares of common stock to Marc Hatch for services valued at $7,430.

 

On October 6, 2017, the Company issued 400,000 shares of common stock to Jason Edwards for services in October 2017 valued at $16,280.

 

On October 6, 2017, the Company issued 600,000 shares of common stock to Michael Ostrander for services in October 2017 valued at $24,420.

 

On October 7, 2017, due to the agreement with Valencia (see Note 2), the Company owed Valencia an additional 4,142,857 shares of common stock, which were recorded as issuable. The Company recorded a contingent liability of $174,000 associated with this obligation. On January 29, 2018, because of the increase of the Company’s common stock, Valencia agreed to the accept the initially issued 3,000,000 shares of common stock as satisfaction of the obligation to pay to Valencia in connection with the Company’s May 30, 2017 Asset Purchase Agreement with Valencia to acquire certain of its assets without the need to issue additional true-up shares of the Company’s common stock. The January 29, 2018 agreement relieved the Company of the contingent liability of issuing additional shares. See Note 17.

 

On October 23, 2017, the Company issued 1,001,250 shares of common stock to Timothy Puetz for services in October 2017 valued at $30,038.

 

On October 23, 2017, the Company issued 1,000,000 shares of common stock to Breadfruit Tree, Inc. for inventory received in October 2017 valued at $27,200.

 

On October 26, 2017, the Company issued 255,000 shares of common stock to Ronald Voight for services in October 2017 valued at $7,650.

 

On October 28, 2017, the Company issued 273,333 shares of common stock to Lakeport Business Services, Inc. for services in October 2017 valued at $8,200.

 

On October 28, 2017, the Company issued 30,000 shares to Neil Dutson for leasehold improvement performed in October 2017 valued at $900.

 

On October 30, 2017, the Company issued 122,500 shares of common stock to legal counsel for services in October 2017 valued at $8,575. 

 

On October 31, 2017, the Company issued 850,000 shares of common stock to Paul F. Pelosi, Jr. (“Pelosi”) valued at $26,285, in regard to his appointment as Chairman of the Board on November 1, 2017, for compensation for the period November 1, 2017 through January 31, 2018. The Company was obligated to issue on February 1, 2018, an additional 1,250,000 options for common stock with an exercise price of $0.04, with an expiration date eighteen months after issuance. On February 12, 2018, the Company issued 1,250,000 warrants for common stock to Paul Pelosi in satisfaction of this obligation (see Note 13). The warrants have an exercise price of $0.04 and expire August 11, 2018.

 

 

 

 19 

 

 

On October 25, 2017, the Company issued 250,000 shares of common stock to Frank Dobrucki for services in October 2017 valued at $7,725.

 

On November 2, 2017, the Company issued 250,000 shares of common stock to Victor Park, a vendor, for services in October 2017 valued at $6,800.

 

On November 3, 2017, the Company issued 1,006,768 shares of common stock to PureEnergy for the conversion of $15,475 of a convertible promissory note (see Note 11).

 

On November 9, 2017, the Company issued 5,764,490 shares of common stock to Pure Energy for the conversion of $80,077 of principal and accrued interest of a convertible promissory note (see Note 11).

 

On November 9, 2017, the Company sold 4,785,459 shares of common Stock to Pure Energy for $83,745.53, based on a per share price of $0.0175.

 

On November 10, 2017, the Company sold 967,000 shares of common stock to Pelosi for $14,500, based on a per share price of $0.01499.

 

On November 28, 2017, the Company issued 730,769 shares of common Stock to Michael Ostrander for services in October 2017 and November 2017. The shares for October 2017, which were effective October 1, 2017, were 500,000, whereas the shares for November 2017, which were effective November 1, 2017, were 230,769. The shares were valued at $40,119.

 

On November 30, 2017, the Company recorded 600,000 shares of common stock as issuable to Alan Stone & Co. (“Stone”) in connection with various consulting services provided in 2017. The shares were valued at $29,400.

 

On January 5, 2018 as amended on February 5, 2018, with an effective date of January 5, 2018, the Company consummated its previously-announced acquisition of 100% of the capital stock of Green Market Europe, S.L. (“GME”), a Spanish producer of hemp products. In partial consideration for the acquisition, the Company paid to GME’s seller 4,220,000 shares of the Company’s common stock valued at $295,400.

 

On January 15, 2018, the Company issued to Stone 600,000 shares of common stock which were recorded as issuable as of December 31, 2017.

 

On January 17, 2018, Pure Energy acquired 526,315 shares of the Company’s common stock for $25,000.

 

On January 18, 2018, in connection with the Company’s appointment of Richard Groberg (“Groberg”) as its Chief Financial Officer to serve for an initial, two-year term, the Company (i) issued Groberg’s company, RSGroberg Consulting, LLC, 800,000 shares of common stock, and (ii) $5,000 per month compensation payable: (1) prior to the date that the Company is paying monthly compensation to its directors primarily in cash, in 600,000 shares of common stock (representing the first 12 months’ compensation), and (2) payable in cash thereafter. The common stock received was valued at $81,200 and $60,900, respectively.

 

On January 19, 2018, Pure Energy converted into 2,008,740 shares of Company common stock: (i) the principal balance of the $38,000 convertible promissory note it acquired from Power Up on January 17, 2018 and (ii) $2,175 of accrued interest in connection with that note ($40,175 in total). The Power Up note, executed by the Company on July 20, 2017, had a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The common stock received was valued at $190,027 and resulted in the Company recording a loss of $157,340.

 

On January 19, 2018, in conjunction with its conversion of that note, Pure Energy received 800,918 shares of common stock – (i) $19,826.19 in conjunction with the settlement amount owed by the Company to Power Up at the time Pure Energy acquired that note from Power Up in connection with that note, and (ii) $3,000 as a transaction fee ($22,826 in total). The common stock received was valued at $89,703 and resulted in the Company recording a loss of $66,877.

 

On January 22, 2018, the Company issued 60,616 shares of common stock to Joseph Gurreri, an employee, in consideration of $8,550 of accrued wages. The common stock received had a value of $8,850

 

On January 22, 2018, Pelosi purchased 1,050,000 shares of common stock for $21,000.

 

On January 22, 2018, the Company issued 82,192 shares of common stock to Steven Bloom in connection with consulting services provided in 2017 totaling $12,000.

 

 

 

 20 

 

 

On January 22, 2018, the Company issued 16,952 shares of common stock to the Company’s legal counsel, in connection with services rendered totaling $2,475.

 

On January 26, 2018, the Company issued to Pure Energy 1,933,848 shares of common stock in consideration of its conversion of a second convertible promissory note for $33,842 (see Note 11) that the Company issued to Pure Energy on September 27, 2017 in conjunction with Pure Energy’s payoff of the May 10, 2017 Power Up convertible note. The common stock received was valued at $580,154 and resulted in the Company recording a loss of $558,722.

 

On January 22, 2018, the Company issued Reliable Steel 229,671 shares of common stock for a portion of its debt of $33,532.

 

On January 22, 2018, the Company issued 226,497 shares of common stock to Christopher Thompson, an employee, in connection with services provided in 2017 valued at $33,069.

 

On January 5, 2018 and February, respectively the Company issued to Michael Ostrander: (i) 150,000 shares of common stock for services performed in December 2017 valued at $10,500, and (ii) 56,930 shares of common stock for services performed in January 2018 valued at $16,794.

 

On January 31, 2018, the Company issued to Stone 600,000 shares of common stock which were recorded as issuable as of December 31, 2017.

 

On January 31, 2018, the Company issued 122,466 shares of common stock to Christopher Sloan, a former employee of the Company, in connection with services rendered by him to the Company in 2017 totaling $39,740.

 

On January 31, 2018, the Company issued 47,945 shares of common Stock to Lakeport Business Services, Inc. in connection with services rendered to the Company in 2018 valued at $7,000. The stock was valued at $15,558 based on the current stock price.

 

On January 31, 2018, Pure Energy purchased 838,126 shares of common stock for $83,813.

 

On February 7, 2018, Neil Dutson acquired 624,000 shares of common stock for $78,000.

 

On February 7, 2018, Weintraub Law Group, LLC (“Weintraub”) surrendered 52,779 warrants at a value of $0.3048 per share, $16,090 in total, to effect the cashless exercise of warrants to acquire 215,378 shares of common stock at $0.06 per share. The Company had issued to Weintraub 268,167 warrants to acquire common stock and 268,167 shares of common stock on October 17, 2016 for the settlement of payables of $15,065.

 

On February 9, 2018, Douglas Montgomery, Greg Montgomery and Lesley Montgomery acquired from the Company 160,000, 80,000 and 160,000, respectively, shares of the Company’s common stock, in each case for a purchase price of $0.125 per share, for total proceeds of $50,000. 

 

On February 21, 2018, the Company issued 83,760 shares of common Stock to Lakeport Business Services, Inc. in connection with services rendered to the Company in 2018 valued at 18,000 based on the current stock price.

 

On March 6, 2018 Vincent Moreno acquired 500,000 shares of common stock for $50,000.

 

On March 7, 2018, Neil Dutson acquired 909,090 shares of common stock for $100,000.

 

On March 7, 2018, Esteemed Consultants acquired 909,091 shares of common stock for $100,000.

 

On March 14, 2018, Rex Anthony Carrol acquired 272,727 shares of common stock for $30,000.

 

On March 15, 2018, Vision Concepts acquired 74,074 shares for $10,000.

 

During the quarter ended March 31, 2018, the Company issued 503,535 shares of common stock to NuAxon BioScience, Inc. on behalf of Jason Edwards for services in November 2017 through March 2018 valued at $48,117.

 

 

 

 21 

 

 

Warrants

 

On November 2, 2015, the Company issued 1,000,000 warrants for common stock to Freedom Leaf Iberia, B.V., in regard to a contemplated future transaction between the Company and Freedom Leaf Iberia, B.V. The warrants expire on May 2, 2016. The exercise price is $0.02; and the warrant has a cashless exercise option. The warrants were valued at $0.20 per share, as defined in the section. The Company recorded an expense of $200,000. On May 2, 2016, Freedom Leaf Iberia exercised a cashless conversion of its 1,000,000 warrants for common stock of the Company into 889,868 shares of common stock of the Company.

 

On November 2, 2015, the Company issued 1,000,000 warrants for common stock to Freedom Leaf Netherlands, B.V., in regard to a contemplated future transaction between the Company and Freedom Leaf Netherlands, B.V. The warrants expire on May 2, 2016. The exercise price is $0.02, and the warrant has a cashless exercise option. The warrants were valued at $0.20 per share, as defined in the section. The Company recorded an expense of $200,000. On May 2, 2016, Freedom Leaf Netherlands, B.V. exercised a cashless conversion of its 1,000,000 warrants for common stock of the Company into 889,868 shares of common stock of the Company.

 

On November 2, 2015, the Company issued 500,000 warrants for common stock to a subcontractor as an incentive to their services. The warrants mature on May 2, 2016. The exercise price is $0.02, and the warrant has a cashless exercise option. The warrants were valued at $0.20 per share, as defined in the section. The Company recorded an expense of $100,000. On February 2, 2016, Dobrucki exercised a warrant for 500,000 shares of common stock for $10,000, the exercise price of the warrants at $0.02 per share.

 

On December 14, 2015, the Company executed a convertible promissory note for $100,000 with Swiss Allied. The Company issued Swiss Allied four warrants as an incentive to the note, each for 20,000,000 shares of the Company’s common stock, for a total of 80,000,000 warrants. Each warrant has an exercise price of $0.005 per share. The four warrants, each for 20,000,000 shares of common stock, mature on March 31, 2016, June 30, 2016, October 31, 2016, and March 31, 2017, respectively. The warrants, as an incentive to the note, should have a beneficial conversion feature. As the note’s beneficial conversion feature is at the maximum, there is no beneficial conversion feature to record. If Swiss Allied exercises all warrants, the Company would receive an additional $400,000 for said shares of common stock. If Swiss Allied does not exercise all 80,000,000 warrants, by the maturation dates, as described herein, the exercise price shall be adjusted to $0.06, an increase of $0.055 per share as a penalty, which is payable to the Company at the time Swiss Allied requests to have the Rule 144 restriction removed. The interest rate for each loan tranche is 8% and is accrued with a payment date of December 15, 2016 for the first tranche and January 15, 2017 for the second tranche. The conversion price for the $100,000, which may happen any time prior to December 14, 2016, shall be the greater of $0.03 or 50% of the lowest closing price on the primary trading market on which the Company’s common stock is quoted for the five trading days immediately prior to, but not including, the conversion date, assuming that Swiss Allied has not exercised all 80,000,000 warrants for common stock. The conversion price for the $100,000, assuming that Swiss Allied has exercised all 80,000,000 warrants for common stock, shall be $0.005 per share. Swiss Allied has a right of first refusal on any future funding to the Company. Swiss Allied has the right to name a party to serve as a member of the Company’s board of directors if Swiss Allied owns at least 40,000,000 shares of the Company’s common stock. If Swiss Allied owns at least 80,000,000 shares of the Company’s common stock, they have the right to name two parties to the Company’s board of directors. The two directors will remain as long as Swiss Allied owns 55,000,000 shares of the Company’s common stock.

 

On October 17, 2016, the Company issued 268,167 shares of common stock and 268,167 warrants for common stock to Weintraub Law Group, LLC for the settlement of payables of $15,065.

 

On December 15, 2016, the Company and FLNL executed a license agreement (see Note 2). As part of the agreement, the Company provided FLNL with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows: 250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018, and; 250,000 warrants between March 2018 and May 2018. The warrants will be expensed according to their respective vesting schedule.

 

On December 15, 2016, the Company and FLI executed a license agreement (see Note 2). The Company provided FLI with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows: 250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018, and; 250,000 warrants between March 2018 and May 2018. The warrants will be expensed according to their respective vesting schedule.

 

 

 

 22 

 

 

On January 16, 2017, the Company issued 1,000,000 warrants for common stock to Vincent Moreno for future consulting services. The warrants have an exercise price of $0.05 and expire in five years.

 

On January 30, 2017, the Company entered into an agreement with CorporateAds.com, LLC for services. The compensation provides a minimal $500 payment, 150,000 shares of common stock, and 150,000 warrants for common stock. The warrants have an exercise price of $0.10 per share with an expiration date eighteen months after issuance. The agreement is for 15 days and has an auto renewal feature for an additional 75 days. During the 75-day period, the Company will pay $500 for each additional 15 days. On February 1, 2017, both parties agreed to an addendum to the agreement to change the exercise price of $0.10 for the warrants to the following: 50,000 of the warrants have an exercise price of $0.10 per share; 50,000 of the warrants have an exercise price of $0.125 per share; and 50,000 of the warrants have an exercise price of $0.15 per share.

 

On February 12, 2018, the Company issued 1,250,000 warrants for common stock to Paul Pelosi in lieu of a prior agreement for the Company to issue to Pelosi 1,250,000 options (see Note 12). The warrants have an exercise price of $0.04 and expire August 11, 2018.

 

   March 31, 2018   March 31, 2017   Warrants Inception Date 
Expected volatility   260%    231%    193% - 261% 
Expected dividends            
Expected term    2 - 9 months      21 months      0.25 - 1.76  
Risk-free interest rate   1.93%    1.15%    0.98% - 1.82% 

 

Stock Option Plan

 

On June 27, 2016, the Board of Directors approved the 2016 Stock Option Plan which has reserved 10,000,000 shares of common stock. There are no stock options outstanding as of March 31, 2018.

 

NOTE 13 – CONCENTRATIONS

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

 

The Company places its temporary cash investments with financial institutions insured by the FDIC. No amounts exceeded federally insured limits as of March 31, 2018. There have been no losses in these accounts through, March 31, 2018.

 

Concentration of Revenue

 

For the nine months ended March 31, 2018, the Company had no material customer.

 

Concentration of Supplier

 

The Company does not rely on any particular suppliers for its services.

 

Concentration of Intellectual Property

 

The Company owns or has filed for the trademarks “Freedom Leaf,” “Hemp Inspired,” “Cannabizu,” and “Cannabiz” as filed with the United States Patent and Trademark Office. The Company has filed for “Freedom Leaf” in Jamaica and Uruguay.

 

 

 

 

 23 
 

 

NOTE 14 – SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.

 

On April 3, 2018, Esteemed Consultants, Inc. acquired from the Company 1,000,000 shares of the Company’s common stock for a purchase price of $0.075 per share, for total proceeds of $75,000.

 

On April 16, 2018, Leafceuticals consummated the acquisition, with an effective date of April 1, 2018, of substantially all of the assets of: Earth Born, Inc., a California corporation (“Earth Born California”), Earth Born, Inc., a Delaware corporation (“Earth Born Delaware”), Irie Living, a California nonprofit mutual benefit corporation (“Irie”), and Genesis Media Works, LLC, a Utah limited liability company doing business as “Terra’s Way,” “Irie Hemp Company,” “Earth Born Botanicals,” and “Santa Cruz Hemp Company” (“Genesis” and together with Earth Born California, Earth Born Delaware, and Irie, collectively referred to herein as the “Sellers” or IRIE). Irie CBD is a California-based product line owned by the Sellers that has been operating since 2015 that formulates, manufactures and distributes CBD tinctures, CBD edibles, CBD topicals and CBD concentrates to retail markets across the country. IRIE boasts an inventory of more than 25 different products and recorded approximately $1.5 million of revenue in 2017. IRIE also leases a full manufacturing and processing facility in Oakland, California. In addition to the IRIE CBD line and associated assets and trademarks, the acquisition also includes the product lines, websites and other assets of Earth Born California, Earth Born Delaware, Irie, and Genesis.

 

In connection with this acquisition, Leafceuticals assumed approximately $100,000 of liabilities associated with the assets and paid the Sellers’ principals $2,200,000 (subject to adjustment), as follows: $356,080 in cash and $1,843,920 via the issuance of an aggregate of 8,118,886 shares of the Company’s common stock. The purchase price is to be reduced if: (i) the Sellers’ aggregate pre-closing revenues for the year ending December 31, 2017, were less than $1,500,000 or (ii) the Buyer’s average monthly revenues resulting from the Acquisition of the Assets for the three months following closing are less than $120,000 per month. Additionally, 1,250,000 of the Shares were to be escrowed for four months following Closing as the Buyer’s security for (i) any indemnification claims against the Sellers pursuant to the Agreement, or (ii) any pre-closing or post-closing revenue deficiency resulting in the purchase price reductions described above.

 

On April 2, 2018, JRKH Investments, LLC purchased 54,745 shares of common stock of the Company for a purchase price of $0.091 per share, for total proceeds of $5,000.

 

On April 2, 2018, the Company retained KSW Group, LLC as an independent contractor to render various services related to launching and managing various eCommerce initiatives for the Company. In connection with that appointment, the Company: (i) agreed to pay KSW monthly sales commissions based on net revenues generated by KSW, and (ii) issued to KSW 450,000 shares of the Company’s Rule 144 Common Stock. The closing price of the Company’s common stock on the issuance date of April 2, 2018 was $0.135 per share.

 

On April 11, 2018, Kahn Family Partnership purchased 4,444,444 shares of common stock of the Company for a purchase price of $0.09 per share, for total proceeds of $400,000. On that date, the Company also issued to Kahn Family Partnership a warrant to acquire 4,444,444 shares of common stock at an exercise price of $0.13 per share. The warrant expires on April 11, 2020.

 

On April 30, 2018, the Company appointed Nevada State Senator Richard Segerblom as a member of the Company’s Board of Directors and issued to Senator Segerblom (i) $50,000 in common stock to vest monthly for one year, with a value of $0.159 per share, for a total of 314,465 shares of common stock, and (ii) an eighteen-month warrant to acquire 500,000 shares of common stock at an exercise price of $0.10 per share.

 

On April 30, 2018, with an effective date of April 1, 2018, the Company entered into separate consulting agreements with Karen Lane and Ricky Potts, each of whom were owners of Irie. Pursuant to these two agreements, each agreed to continue to provide senior management services relating to the operation of Irie under the ownership of the Company for at least nine months. In connection with these two agreements, the Company granted to each 500,000 shares of common stock of the Company, vesting monthly over a period of nine months, with the vesting beginning on the effective date. The shares were valued at $61,500 for each based on the closing price of the stock on the most recent trading day prior to April 1, 2018. The Company also agreed to a monthly compensation to each of $4,000 per month, payable using the Company’s common stock. The determination of the number of shares of stock will be calculated monthly based on the average of the OTC closing price based on the last five trading days of each month, as applicable.

 

 

 

 24 

 

 

On May 10, 2018, the Company appointed its CFO, Richard Groberg, as a member of the Company’s Board of Directors. In consideration of his appointment, the Company agreed to issue to Mr. Groberg’s entity (1) $50,000 in common stock to vest monthly over a one-year period, at a value of $0.16 per share, for a total of 312,500 shares, and (2) an eighteen-month warrant to acquire 500,000 shares of common stock of the Company at an exercise price of $0.10 per share.

 

On May 14, 2018, the Company sold 1,250,000 shares to each Caesar Capital Group (“Cesar”) and Joseph W and Patricia G Abrams Family Trust dtd 3/95 (“Abrams”) for $200,000 in total, based on a per share price of $0.08.

 

In a related transaction, the Company is issuing to Caesar and Abrams 6,000,000 shares of the Company’s common stock (based on a value of $0.25 per share, or $1,500,000) in exchange for a 25% ownership interest in Cicero Transact Group, LLC (“Cicero”), a company that is launching an innovative, online business-to-business deal platform. The Company intends to work with Cicero in regard to opportunities in the cannabis industry. Additionally, Michael Woloshin (“Woloshin”), a principal of Caesar, and Abrams, intend to work with the Company in an advisory capacity.

 

On May 15, 2018, the Company issued to Cowan a License Agreement that grants him exclusive licensee distribution rights to the Freedom Leaf Inc magazine, as well as other “Freedom Leaf” branded merchandise and services. In consideration of such license, Cowan cancelled $240,000 of payables owed to him by the Company. Also, in connection with this transaction, the Company issued to Cowan a warrant exercisable between July 1, 2018 and November 15, 2019.

 

During March through May 2018, in connection with the Company’s audit of GME, Company’s management discovered several irregularities regarding GME’s operations and its sellers’ activities before and after the consummation of the Company’s acquisition of that business. Based on investigation of these discoveries, the Company, effective on June 4, 2018, consummated a termination agreement with GME’s sellers. In connection with that agreement, GME’s sellers committed to return to the Company the 4,220,000 shares it previously issued to the sellers. The Company will write off approximately $33,000 it had invested cumulatively in GME in addition to the stock issuance. 

 

The Company, on May 17, 2018, entered into a binding letter of intent to acquire an existing, approximately 430,000 square foot facility, that it intends to convert from a Poinsettia production facility into a light deprivation hemp production greenhouse. The total purchase price, including approximately €350,000 of rare, botanical plants and other greenhouse supplies that the Company acquired for €100,000 and intends to sell, is: €4,100,000 (approximately US$4.8million). The purchase consideration will be paid as follows: (i) €20,000 down, which amount already has been paid by the Company; (ii) €20,000 a month for 25 months, and (iii) €100,000 per month thereafter until paid in full. The Company intends to consummate this acquisition on or about July 2, 2018. Located in Valencia, the third largest city in Spain with an average of 300 days of sun per year and agricultural setting, the facility previously was one of the biggest Poinsettia producers in Europe. At its peak, it produced millions of Poinsettia clones and had more than 80 greenhouse workers working 24/7. The Company chose this facility due to the similarities in growing Poinsettias and Hemp and because of its light cycles and heavy machinery specific to industrial plant production. This turn-key facility includes: approximately 430,000 square feet of light deprivation greenhouse, growing supplies, polished concrete, and triple galvanized steel framework. It its fully equipped with an automated irrigation system, a mist system, a refrigerated storage area, a light deprivation system to maximize number of crops per year, a Dutch, hydroponic set up and heating system, its own gas pipe, and five sources of irrigation water with reservoir. The facility also has office space that the Company intends to utilize to house: (i) our Spanish Media department (lamarihuana.com) and (ii) a warehouse. The purchase also includes outdoor space and the necessary structural steel sufficient to erect a new 64,000 sq. ft galvanized steel frame facility the Company intends to build to use as a GMP extraction, formulation and bottling facility. The Company intends to retain the predecessor operation’s key employees to maintain the growing facilities. Management’s goal is for this facility to become a leading greenhouse producer of cannabinoids in Europe. The Company’s goal is to grow up to two million grams of EU-certified Industrial Hemp in its first year of operations and then to expand significantly in subsequent years. The Company also expects to utilize this facility to increase its Hemp research, tissue culture and extraction capabilities in the following years.

 

On June 7, 2018, the Company retained Joseph Abrams, an individual acting as an independent contractor, to serve as a member of the Company’s Advisory Board and, in connection with that appointment, issued to Abrams: 312,500 of the Company’s common stock per year. The first year’s stock will be issued immediately and shall vest monthly over one year and will be valued at $0.16 per share, valuing the grant at $50,000. For the second year, the stock will be issued on June 9, 2019, and will be based on the closing price of the Company’s common stock on OTC Markets on June 8, 2019.

 

 

 

 

 25 

 

 

On June 21, 2018, the Company consummated the acquisition of intellectual property relating to a proprietary formula for the compounding of a nutraceutical non-liquid to inhibit the accumulation of LDL cholesterol (and an underlying patent-pending application regarding the formula) developed by Healthy Discovery Associates Corp., a Florida corporation. The patent-pending application is for a formula for a dietary supplement, which should not require a United States Food and Drug Administration (“FDA”) approval. The Company acquired the intellectual property regarding the formula and patent-pending application for 1,600,000 shares of common stock at a value of $0.25 per share, subject to a leak-out agreement and a price adjustment if the average trading price of the Company’s common stock for the five days subsequent to the six-month anniversary of the consummation of this transaction does not exceed $0.25 per share.

 

NOTE 15 – RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

 

Balance Sheet and Statement of Operations

 

The Company restated its previously issued consolidated financial statements included in the original Quarterly Report on Form 10-Q for the six months ended December 31, 2017 and the three months ended September 30, 2017 to reflect the effects of accounting and reporting errors resulting from a deficiency in its accounting and financial statement preparation process. This error and the related adjustments resulted in an understatement of net loss of $314,903 for the six months ended December 31, 2017 and the overstatement of $29,707 in derivative liabilities, the understatement of $344,610 in additional paid-in capital and the overstatement of $314,903 in accumulated deficits as of December 31, 2017.  This error and the related adjustments resulted in an understatement of net loss of $143,789 for the three months ended September 30, 2017 and the overstatement of $115,975 in derivative liabilities, the understatement of $31 in common stock, the overstatement of $259,764 in additional paid-in capital and the overstatement of $143,789 in accumulated deficits as of September 30, 2017. 

 

The following tables present the impact of the financial statement error for the consolidated financials of Freedom Leaf Inc.:

 

Balance Sheet                        
   December 31, 2017   September 30, 2017 
   As previously           As previously         
   reported   Adjustments   As restated   reported   Adjustments   As restated 
Liabilities and Stockholders'                              
Equity (Deficit)                              
                               
Derivative liabilities  $47,289   $(29,707)  $17,582   $157,743   $(115,975)  $41,768 
                               
Common stock                 $124,591   $31   $124,622 
Additional paid-in capital  $6,110,832   $344,610   $6,455,442   $5,444,594   $259,764   $5,704,327 
Accumulated deficit  $(6,370,985)  $(314,903)  $(6,685,888)  $(5,628,572)  $(143,789)  $(5,772,361)

 

Statement of Operations                    
    For the Six Months Ended December 31, 2017   For the Three Months Ended September 30, 2017
Net loss attributable to common shareholders   $(1,449,997)  $(314,903)  $(1,764,900)  $(707,584)  $(143,789)  $(851,373)

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

 

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

 

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

 

Company Overview

 

The Company was originally incorporated in Nevada under the name Arkadia International, Inc. on February 21, 2013.

 

On October 3, 2014, the Company experienced a change in control. Richard C. Cowan acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between Mr. Cowan and Vladimir and Galina Shekhtman (“Sellers”). On the closing date, October 3, 2014, pursuant to the terms of the agreements with the sellers, Cowan purchased from the Sellers 6,950,100 shares of the Company’s outstanding restricted common stock for $100,000, representing 93% of the then-outstanding common stock of the Company.

  

On November 4, 2014, the Company's Board of Directors declared a twelve for one forward stock split of all outstanding shares of the Company’s common stock. As the stock split was approved by FINRA, the common share and per common share data in these financial statements and related notes hereto have been retroactively adjusted to account for the effect of the stock split. The total number of authorized common shares and the par value thereof was not changed by the split.

 

On November 6, 2014, the Company merged with Freedom Leaf Inc., a private Nevada corporation. The Company changed its name from Arkadia International, Inc., to Freedom Leaf Inc. As a result of the merger, the private company was dissolved, the sole officer, director and shareholder of the private company, Clifford J. Perry, became an officer and director of the Company, and Mr. Perry received approximately 48.1% of the Company’s common stock post-merger.

 

Prior to the merger, we were a startup company that originally intended to engage in the business of the acquisition of in demand equipment, cars, and goods with the intent to resell these in the in the U.S. territories or export to overseas countries.

 

Until the recently-consummated IRIE acquisition, we have been devoting most of our efforts to the news, arts and entertainment niche, with both “in print” and online publications, as well as offering products and services to the cannabis industry. In connection with the IRIE acquisition and recent launch of various CBD products through our Leafceuticals subsidiary, we are increasing our focus on utilizing our web sites and other means to sell CBD products.

 

Plan of Operation

 

Freedom Leaf Inc. is a company that is dedicated to health and wellness products derived from legal Hemp. It is comprised of a group of diversified, international, vertically-integrated hemp businesses and cannabis media companies. Freedom Leaf Inc. has been working since 2014 to build a diverse portfolio of related hemp businesses and cannabis media through strategic acquisitions across the industry.

 

 

 

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FRLF’s portfolio of acquisitions includes our recently acquired hemp CBD product line Irie CBD; our wholly-owned hemp extraction division Leafceuticals, Inc.; our exclusive health and wellness CBD brand Hempology; our hemp-based rolling paper company Plants to Paper; two of the largest Spanish-speaking cannabis web portals in the world LaMarihuana.com and Marihuana-Medicinal.com; and, of course, our flagship publication, Freedom Leaf Magazine.

 

Through our targeted acquisitions and growth plan execution, the Company has built a solid foundation for our vertically-integrated hemp company to enhance both revenue growth and shareholder value. Our cultivation and extraction divisions allow FRLF to grow and source our own hemp CBD, which allows lower production costs for our wholly-owned CBD product lines, and better gross profit, for our CBD product sales. In addition, our domestic and international media companies permit us to direct organic traffic to our eCommerce sites and retail locations.

 

·         Freedom Leaf does not handle, grow, sell, or dispense marijuana or related products in the United States.

 

·         Freedom Leaf believes that its European activities are in compliance with relevant EU laws.

 

Results of Operations

 

For the Three Months Ended March 31, 2018 and March 31, 2017

 

Revenues

 

Our revenue was $56,254 for the three months ended March 31, 2018, compared to $254,084 for the three months ended March 31, 2017. Revenue, by class, is as follows:

 

   For the three months ended 
Revenues:  March 31, 
   2018   2017 
Magazine related  $   $9,157 
Licensing fees       226,685 
Equipment sales commissions       18,242 
CBD oil   30,000     
Sale of products   26,254     
Total  $56,254   $254,084 

 

Note that, the Company has been shifting its focus away from licensing revenues, its primary source of revenue in fiscal 2017, and toward the sale of products. Since the merger until the recently-consummated IRIE acquisition, we have been devoting most of our efforts to the news, arts and entertainment niche, with both “in print” and online publications, as well as offering products and services to the cannabis industry. In connection with the IRIE acquisition and recent launch of various CBD products through our Leafceuticals subsidiary, we are increasing our focus on utilizing our web sites and other means to sell CBD products.

 

Operating Expenses

 

Direct costs of revenues were $81,045 and $17,428 for the three months ended March 31, 2018 and 2017, respectively. Direct costs of revenues, by class, is as follows:

 

   For the three months ended 
Direct costs of revenue:  March 31, 
   2018   2017 
Magazine related  $25,102   $17,428 
Extraction costs   55,943     
Total  $81,045   $17,428 

 

 

 

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For the three months ended March 31, 2018 our general and administrative expenses and marketing and selling expenses were $697,875 compared to $260,178 for the three months ended March 31, 2017, resulting in an increase of $437,697, attributable primarily to stock-based compensation of $155,781 for the three months ended March 31, 2018, compared to $83,750 for the three months ended March 31, 2017, and bad debt expense of $221,294 for the three months ended March 31, 2018, compared to $0 for the three months ended March 31, 2017.

 

Other income (expenses)

 

Other income (expense) was an expense of $845,351 for the three months ended March 31, 2018, compared to an expense of $3,678 for the three months ended March 31, 2017. The expense for 2018 is primarily comprised of loss on settlement of debt ($113,936) and loss on conversion of debt into common stock ($781,523).

 

Net loss attributable to common shareholders was $1,561,141 for the three months ended March 31, 2018, compared to net loss of $27,200 for the three months ended March 31, 2017. The higher net loss for the three months ended March 31, 2018 as compared to the same period in 2017 is largely attributable to: (1) one-time expenses relate to the launch of CBD sales, such as pre-production research and development costs; (2) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales, and (3) lower revenues – as the Company has shifted its focus from licensing revenues to product sales.

  

For the Nine Months Ended March 31, 2018 and March 31, 2017

 

Revenues

 

Our revenue was $63,913 for the nine months ended March 31, 2018, compared to $823,204 for the nine months ended March 31, 2017. Comparative Revenues decreased as the Company has shifted away from generating revenues for License Fees and toward product sales. Revenue, by class, is as follows:

 

   For the nine months ended 
Revenues:  March 31, 
   2018   2017 
Magazine related  $5,826   $29,101 
Referral fees       11,474 
Licensing fees       763,549 
Equipment sales commissions       18,242 
Seminar and training       838 
CBD oil   30,000     
Sale of products   28,087     
Total  $63,913   $823,204 

 

Operating Expenses

 

Direct costs of revenues were $150,871 and $88,792 for the nine months ended March 31, 2018 and 2017, respectively. The higher operating expenses for the three months ended March 31, 2018 as compared to the same period in 2017 is largely attributable to both: (1) one-time expenses relate to the launch of CBD sales, such as pre-production research and development costs, and (2) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales.

  

Direct costs of revenues, by class, is as follows:

 

   For the nine months ended 
Direct costs of revenue:  March 31, 
   2018   2017 
Magazine related  $77,218   $88,792 
Extraction costs   55,943     
Sale of products   7,710     
Total  $150,871   $88,792 

 

 

 

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For the nine months ended March 31, 2018, our general and administrative expenses and marketing and selling expenses were $1,990,844 compared to $1,204,225 for the nine months ended March 31, 2017, resulting in an increase of $786,619, attributable primarily to stock-based compensation of $571,858 for the nine months ended March 31, 2018, compared to $616,942 for the nine months ended March 31, 2017, and bad debt expense of $648,142 for the nine months ended March 31, 2018, compared to $500 for the nine months ended March 31, 2017. As a result, net loss attributable to common shareholders was $3,326,041 for the nine months ended March 31, 2018, compared to net loss of $539,008 for the nine months ended March 31, 2017.

 

Other income (expenses)

 

Other income (expense) was an expense of $1,255,115 for the nine months ended March 31, 2018, compared to an expense of $69,195 for the nine months ended March 31, 2017. The expense for 2018 is primarily comprised of loss on settlement of debt ($419,098) and loss on conversion of debt into common stock ($781,523).

 

Net loss attributable to common shareholders was $3,326,041 for the nine months ended March 31, 2018, compared to net loss of $539,008 for the nine months ended March 31, 2017.

 

Liquidity and Capital Resources

 

Overview

 

As of March 31, 2018, the Company had $165,544 in cash. We do not have sufficient resources to effectuate our business. We expect to incur a minimum of $50,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees.

 

Liquidity and Capital Resources during the nine months ended March 31, 2018 compared to the nine months ended March 31, 2017

 

We used cash in operations of $520,088 for the nine months ended March 31, 2018, compared to cash used in operations of $222,899 for the nine months ended March 31, 2017. The negative cash flow from operating activities for the nine months ended March 31, 2018 is attributable to the Company's net loss attributable to common shareholders of $3,326,041 primarily due to the issuance of common stock for services ($571,858) and bad debt expense ($648,142). Cash used in operations of $222,899 for the nine months ended March 31, 2017 is attributable to the Company's net loss of $539,008 offset primarily by increase in stock-based compensation of $616,942.

 

We used cash in investing or financing activities of $24,392 and $3,897 for the nine months ended March 31, 2018 and 2017.

 

We had cash provided by financing activities of $715,518 for the nine months ended March 31, 2018, compared to $231,088 for the same period in 2017.

 

We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

 

Going Concern

 

The accompanying financial statements and the factors within it, have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and the ability of the Company to continue as a going concern for a reasonable period of time. The Company sustained net losses attributable to common shareholders of $3,326,041 and cash used in operating activities of $520,088 for the nine months ended March 31, 2018. The Company had working capital deficit, stockholders’ equity and accumulated deficit of $134,341, $425,402 and $8,247,029, respectively, at March 31, 2018. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern for a period of one year from the date of issuance of these financial statements.

 

 

 

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Off Balance Sheet Arrangements

 

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

  

Critical Accounting Policies

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

 

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended June 30, 2017, included in our Annual Report on Form 10-K as filed on October 19, 2017, for a discussion of our critical accounting policies and estimates.

 

NON-GAAP FINANCIAL MEASURES

 

Adjusted Net Earnings

 

In addition to reporting net loss from operations as defined under generally accepted accounting principles (“GAAP”), the Company presents adjusted net earnings from operations (adjusted net earnings), which is a non-GAAP performance measure. Adjusted net earnings consist of net loss from operations after adjustment for those items shown in the table below. Adjusted net earnings does not represent, and should not be considered an alternative to, GAAP measurements such as net loss from operations (its most comparable GAAP financial measure), and the Company’s calculations thereof may not be comparable to similarly titled measures reported by other companies. By eliminating the items shown below, the Company believes that the measure is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies. The Company’s management does not view adjusted net earnings in isolation and also uses other measurements, such as net loss from operation and revenues to measure operating performance. The following table provides a reconciliation of net loss from operations, the most directly comparable GAAP measure, to adjusted net earnings for the periods presented:

 

Adjusted Net Loss  For the Nine Months Ended 
   March 31, 
   2018   2017 
         
Net loss attributable to common shareholders  $(3,326,041)  $(539,008)
Loss on settlement of debt   (419,098)    
Gain on conversion of debt into common stock   (781,523)    
Gain on extinguishment of liabilities   54,157    
Change in fair value of embedded conversion features   (59,127)   (2,905)
Beneficial conversion feature expense   (45,416)   (55,014)
           
Adjusted net loss  $(2,075,034)  $(481,089)
           
Weighted average shares outstanding - basic and diluted   137,114,271    98,283,870 
           
Adjusted basic and diluted net loss per share  $(0.02)  $(0.00)

 

 

 

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Adjusted EBITDA

 

In addition to reporting net loss from operations as defined under GAAP, the Company also presents adjusted net earnings before interest, income taxes, depreciation, depletion, and amortization from operations (adjusted EBITDA), which is a non-GAAP performance measure. Adjusted EBITDA consists of net loss from operations after adjustment for those items shown in the table below. Adjusted EBITDA does not represent, and should not be considered an alternative to, GAAP measurements such as net loss from operations (its most comparable GAAP financial measure), and the Company’s calculations thereof may not be comparable to similarly titled measures reported by other companies.

 

By eliminating the items shown below, the Company believes the measure is useful in evaluating its fundamental core operating performance. The Company also believes that adjusted EBITDA is useful to investors because similar measures are frequently used by securities analysts, investors, and other interested parties in their evaluation of companies. The Company’s management uses adjusted EBITDA to manage its business, including in preparing its annual operating budget and financial projections. The Company’s management does not view adjusted EBITDA in isolation and also uses other measurements, such as net loss from operations and revenues to measure operating performance. The following table provides a reconciliation of net loss from operations, the most directly comparable GAAP measure, to adjusted EBITDA for the periods presented:

 

Adjusted EBITDA  For the Nine Months Ended 
   March 31, 
   2018   2017 
         
Net loss attributable to common shareholders  $(3,326,041)  $(539,008)
Interest expense   (14,439)   (11,276)
Interest income   10,331     
Depreciation and amortization   108,247    370 
Stock-based compensation   (645,618)   (616,942)
Bad debt expense   (648,142)   (500)
Loss on settlement of debt   (419,098)    
Loss on conversion of debt into common stock   (781,523)    
Gain on extinguishment of liabilities   54,157     
Change in fair value of embedded conversion features   (59,127)   (2,905)
Beneficial conversion feature expense   (45,416)   (55,014)
           
Adjusted EBITDA  $(885,413)  $147,259 
           
Weighted average shares outstanding - basic and diluted   137,114,271    98,283,870 
           
Adjusted basic and diluted net loss per share  $(0.01)  $0.00 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

  

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits 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, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.

 

 

 

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As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

 

1. The Company intends to appoint additional independent directors;
2. Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
3. Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4. Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

  

To remediate our internal control weaknesses, management intends to implement the following measures:

 

  · The Company will add sufficient number of independent directors to the board and appoint additional member(s) to the Audit Committee.
  · The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.
  · The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.
  · Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

 

The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

 

Changes in Internal Control Over Financial Reporting

 

There are no changes in our internal controls over financial reporting other than as described elsewhere herein.

  

Limitations on the Effectiveness of Controls

 

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

 

 

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

There are no pending legal proceedings in which we are a party or in which any of our directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us. Our property is not the subject of any pending legal proceedings.

 

Item 1A. Risk Factors

 

Not required.

 

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

 

During the quarter ending March 31, 2018, the Company issued the following unregistered securities. These securities were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, Regulation D promulgated thereunder as there was no general solicitation, and the transactions did not involve a public offering.

 

On January 5, 2018 as amended on February 5, 2018, with an effective date of January 5, 2018, the Company consummated its previously-announced acquisition of 100% of the capital stock of Green Market Europe, S.L. (“GME”), a Spanish producer of hemp products. In partial consideration for the acquisition, the Company paid to GME’s seller 4,220,000 shares of the Company’s common stock valued at $295,400.

 

On January 15, 2018, the Company issued to Stone 600,000 shares of common stock which were recorded as issuable as of December 31, 2017.

 

On January 17, 2018, Pure Energy acquired 526,315 shares of the Company’s common stock for $25,000.

 

On January 18, 2018, in connection with the Company’s appointed of Richard Groberg (“Groberg”), via his company, RSGroberg Consulting, LLC, as its Chief Financial Officer to serve for an initial, two-year term, the Company: (i) issued 800,000 shares of common stock, and (ii) $5,000 per month compensation payable: (1) prior to the date that the Company is paying monthly compensation to its directors primarily in cash, in 600,000 shares of common stock (representing the first 12 months’ compensation), and (2) payable in cash thereafter. The common stock received was valued at $81,200 and $60,900, respectively.

 

On January 19, 2018, Pure Energy converted into 2,008,740 shares of Company common stock: (i) the principal balance of the $38,000 convertible promissory note it previously acquired from Power Up and (ii) $2,175 of accrued interest in connection with that note ($40,175 in total). That note, executed by the Company on July 20, 2017, had a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The common stock received was valued at $190,027 and resulted in the Company recording a loss of $157,340.

 

On January 19, 2018, in conjunction with its conversion of that note, Pure Energy received 800,918 shares of common stock – (i) $19,826.19 in conjunction with the settlement amount owed by the Company to Power Up at the time Pure Energy acquired that note from Power Up in connection with that note, and (ii) $3,000 as a transaction fee ($22,826 in total). The common stock received was valued at $89,703 and resulted in the Company recording a loss of $66,877.

 

On January 22, 2018, the Company issued 60,616 shares of common stock to Joseph Gurreri, an employee, in consideration of $8,550 of accrued wages. The common stock received had a value of $8,850.

 

On January 22, 2018, Pelosi purchased 1,050,000 shares of common stock for $21,000.

 

On January 22, 2018, the Company issued 82,192 shares of common stock to Steven Bloom in connection with consulting services provided in 2017 totaling $12,000.

 

 

 

 36 

 

 

On January 22, 2018, the Company issued 16,952 shares of common stock to the Company’s legal counsel, in connection with services rendered totaling $2,475.

 

On January 26, 2018, the Company issued to Pure Energy 1,933,848 shares of common stock in consideration of its conversion of a second convertible promissory note for $33,842 (see Note 11) that the Company issued to Pure Energy on September 27, 2017 in conjunction with Pure Energy’s payoff of the May 10, 2017 Power Up convertible note. The common stock received was valued at $580,154 and resulted in the Company recording a loss of $558,722.

 

On January 22, 2018, the Company issued Reliable Steel 229,671 shares of common stock for a portion of its debt of $33,532.

 

On January 22, 2018, the Company issued 226,497 shares of common stock to Christopher Thompson, an employee, in connection with services provided in 2017 valued at $32,842.

 

On January 5, 2018 and February, respectively the Company issued to Michael Ostrander: (i) 150,000 shares of common stock for services performed in December 2017 valued at $12,350, and (ii) 56,930 shares of common stock for services performed in January 2018 valued at $16,737.

 

On January 31, 2018, the Company issued to Stone 600,000 shares of common stock which were recorded as issuable as of December 31, 2017.

 

On January 31, 2018, the Company issued 122,466 shares of common stock to Christopher Sloan, a former employee of the Company, in connection with services rendered by him to the Company in 2017 totaling $39,740.

 

On January 31, 2018, the Company issued 47,945 shares of common Stock to Lakeport Business Services, Inc. in connection with services rendered to the Company in 2018 valued at $7,000. The stock was valued at $15,558 based on the current stock price.

 

On January 31, 2018, Pure Energy purchased 838,126 shares of common stock for $83,813.

 

On February 1, 2018, Neil Dutson acquired 624,000 shares of common stock for $78,000.

 

On February 7, 2018, Weintraub Law Group, LLC (“Weintraub”) surrendered 52,779 warrants at a value of $0.3048 per share, $16,090 in total, to effect the cashless exercise of warrants to acquire 215,378 shares of common stock at $0.06 per share. The Company had issued to Weintraub 268,167 warrants to acquire common stock and 268,167 shares of common stock on October 17, 2016 for the settlement of payables of $15,065.

 

On February 9, 2018, Douglas Montgomery, Greg Montgomery and Lesley Montgomery acquired from the Company 160,000, 80,000 and 160,000, respectively, shares of the Company’s common stock, in each case for a purchase price of $0.125 per share, for total proceeds of $50,000. 

 

On February 21, 2018, the Company issued 83,760 shares of common Stock to Lakeport Business Services, Inc. in connection with services rendered to the Company in 2018 valued at 18,000 based on the current stock price.

 

On March 6, 2018 Vincent Moreno acquired 500,000 shares of common stock for $50,000.

 

On March 7, 2018, Neil Dutson acquired 909,090 shares of common stock for $100,000.

 

On March 7, 2018, Esteemed Consultants acquired 909,091 shares of common stock for $100,000.

 

On March 14, 2018, Rex Anthony Carrol acquired 272,727 shares of common stock for $30,000.

 

On March 15, 2018, Vision Concepts acquired 74,074 shares for $10,000.

 

On March 31, 2018, the Company issued 503,535 shares of common stock to NuAxon BioScience, Inc. on behalf of Jason Edwards for services in November 2017 through March 2018 valued at $48,117.

 

 

 

 37 

 

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

On April 30, 2018, Richard S. “Tick” Segerblom was appointed as a member of the Board of Directors of the Company.

 

Mr. Segerblom, age 70, an attorney and politician, has been a Nevada State Senator representing District 3, which encompasses a portion of Clark County and portion of the City of Las Vegas, since 2012. Senator Segerblom was Chairman of the Nevada Democratic Party from 1990-1994, and he was first elected to the Nevada Assembly to represent Assembly District 9 in 2006. Senator Segerblom has not been a director of any other public companies during the prior 5 years.

 

In consideration of Senator Segerblom’s first year of service as a member of the Board of Directors of the Company, Senator Segerblom will be paid 314,465 restricted shares of the Company’s common stock, and he will receive a warrant to purchase 500,000 shares of the Company’s common stock at $0.10 per share, exercisable for a period of 18 months.

 

On May 10, 2018, Richard Groberg, the Company’s Chief Financial Officer, was appointed as a member of the Company’s Board of Directors.

 

From July 2015 through the present date, Mr. Groberg, age 60, has served in various management roles at Ever Well Health Systems, Care and Residence, which owns operates and manages healthcare facilities for patients with mental health issues. From January 2014 to July 2015, Mr. Groberg was the CFO and Vice President of Dixie Foods International, Inc., which develops, owns and operates quick service and fast casual restaurants in multiple regions; and from March 2012 to June 2015, Mr. Groberg was the President of Harrison James, LLC, a boutique iBank and management company. Also, from March 2012 through the present date, Mr. Groberg has been the managing member of RSGroberg Consulting, LLC, a consulting company providing CFO-related services to private equity firms, angel groups, and other private enterprises. Mr. Groberg has a B.A. in English from Emory University and an M.B.A. in Finance from Fordham University.

 

In consideration of Mr. Groberg’s first year of service as a member of the Board of Directors of the Company, Mr. Groberg’s entity, RSGroberg Consulting, LLC, be paid 312,500 restricted shares of the Company’s common stock, and he will receive a warrant to purchase 500,000 shares of the Company’s common stock at $0.10/share, exercisable for 18 months.

 

On May 11, 2018, the Company entered into an equity exchange agreement with Ceasar Capital Group, LLC (“Ceasar”) and the Joseph W and Patricia G Abrams Family Trust dtd 3/95 (“Abrams” and Ceasar and Abrams collectively the “Sellers”) pursuant to which the Company agreed to issue to Caesar and Abrams 6,000,000 shares of the Company’s common stock in exchange for the Sellers transferring a 25% ownership interest in Cicero Transact Group, Inc., a Delaware corporation (“Cicero”) launching an innovative, online business-to-business deal platform.

 

On June 21, 2018, the Company consummated the acquisition of intellectual property relating to a proprietary formula for the compounding of a nutraceutical non-liquid to inhibit the accumulation of LDL cholesterol (and an underlying patent-pending application regarding the formula) developed by Healthy Discovery Associates Corp., a Florida corporation. The patent-pending application is for a formula for a dietary supplement, which should not require a United States Food and Drug Administration (“FDA”) approval. The Company acquired the intellectual property regarding the formula and patent-pending application for 1,600,000 shares of common stock at a value of $0.25 per share, subject to a leak-out agreement and a price adjustment if the average trading price of the Company’s common stock for the five days subsequent to the six-month anniversary of the consummation of this transaction does not exceed $0.25 per share.

 

 

 

 38 

 

 

Item 6. Exhibits

 

Number   Description
     
3.1   Articles of Incorporation (incorporated by reference to our Registration Statement on Form S-1, filed on July 22, 2013)
3.2   Bylaws (incorporated by reference to our Registration Statement on Form S-1, filed on July 22, 2013)
3.3   Articles of Merger (incorporated by reference to our Current Report on Form 8-K, filed on February 25, 2015)
3.4   Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K, filed on June 9, 2016)
10.1   Merger Agreement dated November 6, 2014 (incorporated by reference to our Form 10-Q/A for the period ended December 31, 2014, filed on September 11, 2015)
10.2   Audit for the Period Ended November 6, 2014 of Freedom Leaf Inc., the private company (incorporated by reference to our Form 10-Q/A for the period ended December 31, 2014, filed on September 11, 2015)
10.3   License Agreement with Freedom Leaf Iberia, B.V. (incorporated by reference to our Form 8-K filed on February 28, 2017)
10.4   License Agreement with Freedom Leaf Netherlands, B.V. (incorporated by reference to our Form 8-K filed on February 28, 2017)
10.5   Distribution Agreement with NuAxon Bioscience, Inc. (incorporated by reference to our Form 8-K filed on March 17, 2017)
10.6   License Agreement with BBD Healthcare Strategies, LLC (incorporated by reference to our Form 8-K filed on April 3, 2017)
10.7   LaMarihuana.com Asset Purchase Agreement (incorporated by reference to our Form 8-K filed on May 31, 2017)
10.8   LaMarihuana.com Asset Purchase Agreement Partial Waiver (incorporated by reference to our Form 10-Q filed on February 21, 2018)
10.9   Green Market Europe Purchase Agreement (incorporated by reference to our Form 8-K filed on February 7, 2018)
10.10   Green Market Europe Purchase Agreement Amendment (incorporated by reference to our Form 8-K filed on February 7, 2018)
10.11   Irie CBD Asset Purchase Agreement dated March 3, 2018 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on March 8, 2018)
10.12 (1)   Cicero Exchange Agreement dated May 11, 2018
31.1 (1)   Certification of Principal Executive Officer of Freedom Leaf Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 (1)   Certification of Principal Accounting Officer of Freedom Leaf Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 (1)   Certification of Principal Executive Officer of Freedom Leaf Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
32.2 (1)   Certification of Principal Accounting Officer of Freedom Leaf Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
101.INS   XBRL Taxonomy Extension Instance Document
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

__________

(1) Filed herewith

 

 

 

 39 
 

 

SIGNATURES

 

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

 

  Freedom Leaf Inc.
   
   
Dated: June 29, 2018 By: /s/ Clifford J. Perry
  Clifford J. Perry
  Chief Executive Officer 
   
Dated: June 29, 2018 By: /s/ Richard Groberg
  Richard Groberg
  Chief Financial Officer
   

 

 

 

 

 

 

 40 

 

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Exhibit 10.12

 

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (this "Agreement") is dated as of May 11, 2018, between Caesar Capital Group, LLC (“Caesar”), Joseph W and Patricia G Abrams Family Trust dtd 3/95 (“Abrams”), and Freedom Leaf Inc. (“FRLF”).

 

RECITALS

 

WHEREAS, Caesar and Abrams are the owners of 100% of the issued and outstanding common shares of Cicero Transact Group, Inc., a Delaware corporation (“Cicero” or the “Company”), consisting of 4,000 shares of common stock; and

 

WHEREAS, Caesar and Abrams desire to enter into an equity exchange with FRLF, whereby Caesar and Abrams shall each assign 500 shares of Cicero common stock to FRLF, which is equal to a Twenty-Five Percent (25%) equity interest in Cicero, in exchange for Six Million (6,000,000) shares of FRLF common stock, to be issued as 3,000,000 shares of common stock to each of Caesar and Abrams.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby agreed and acknowledged, the parties hereby agree as follows:

 

AGREEMENT

 

1.    Securities Exchange.

 

(a)             In consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, Caesar and Abrams agree to each assign to FRLF 500 shares of Cicero common stock, which is equal to a Twenty-Five Percent (25%) equity interest in Cicero in aggregate, (the Cicero Equity), in exchange for Six Million (6,000,000) shares of common stock of FRLF (the "FRLF Equity"), which is to be issued as 3,000,000 shares of common stock to each of Caesar and Abrams. Caesar, Abrams and FRLF agree to take all actions which are necessary in order to assign the Cicero Equity and issue the FRLF Equity, and the Additional FRLF Equity (if necessary), respectively. If, on the six month anniversary of this Agreement, the FRLF Equity has a Market Value of less than $1,500,000, FRLF shall cause additional shares (the Additional FRLF Equity) of common stock to be issued equally to Caesar and Abrams such that the aggregate value of the FRLF Equity and the Additional FRLF Equity equal $1,500,000. The term Market Value, shall be defined as the closing price of the FRLF common stock on the trading day immediately prior to the six month anniversary date of this Agreement. If FRLF fails to issue the Additional FRLF Equity within three business days of the six month anniversary date of this Agreement, it shall be considered a breach of this Agreement by FRLF.

 

(b)            The closing under this Agreement (the "Closing") shall take place upon the satisfaction of each of the conditions set forth in Sections 4 and 5 hereof (the "Closing Date").

 

(c)            At the Closing, Caesar and Abrams shall assign to FRLF the Cicero Equity, and FRLF shall issue to Cicero, a certificate evidencing the FRLF Equity. The Cicero Equity and the FRLF Equity are intended to have the exact same value, where the same aggregate price is being exchanged.

 

(d)            Each Party understands that (i) the sale or re- sale of the Cicero Equity and FRLF Equity, respectively, has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the shares assigned and issued may not be transferred unless (a) the share are sold pursuant to an effective registration statement under the 1933 Act, (b) each Party shall have delivered to the other Party, at the cost of the Party requesting free trading status, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, (c) the shares are sold or transferred to an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) ("Rule 144")) of the Party holding the shares who agrees to sell or otherwise transfer the shares only in accordance with this Section 2(f); (ii) any sale of such shares made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such shares under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither Party nor any other person is under any obligation to register such Shares under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).

 

 

 

 1 

 

 

2.   Representations, Warranties and Covenants of Caesar and Abrams. Caesar and Abrams, severally, hereby make the following representations and warranties to FRLF, and covenants for the benefit of FRLF:

 

(a)                This Agreement has been duly authorized, validly executed and delivered by Caesar and Abrams, and is a valid and binding agreement and obligation of Caesar and Abrams enforceable against Caesar and Abrams in accordance with its terms, subject to limitations on enforcement by general principles of equity and by bankruptcy or other laws affecting the enforcement of creditors' rights generally, and Caesar and Abrams have full power and authority to execute and deliver the Agreement and the other agreements and documents contemplated hereby and to perform their obligations hereunder and thereunder.

 

(b)            Caesar and Abrams understand that the FRLF Equity is being issued in reliance on specific provisions of Federal and state securities laws and that FRLF is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Caesar and Abrams set forth herein for purposes of qualifying for exemptions from registration under the Securities Act of 1933, as amended (the "Securities Act ") and applicable state securities laws.

 

(c)            Caesar and Abrams are each an "accredited investor" as defined under Rule 501 of Regulation D promulgated under the Securities Act.

 

(d)            Caesar and Abrams and their affiliates (collectively, the "Covered Persons"), are not subject to any of the "Bad Actor" disqualifications described in Rule 506(d)(l)(i) to (viii) under the Securities Act (a "Disqualification Event”'), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). Cicero has exercised reasonable care to determine whether any Covered Person is subject to a Disqualification Event.

 

(e)            Caesar and Abrams are and will be acquiring the FRLF Shares for each of their own respective accounts, for investment purposes, and not with a view to any resale or distribution in whole or in part, in violation of the Securities Act or any applicable securities laws.

 

(f)             The issuance of the FRLF Equity is intended to be exempt from registration under the Securities Act, by virtue of Section 4(a)(2) and/or 4(a)(5) thereof. Caesar and Abrams understand that the Securities purchased hereunder are "restricted securities," as that term is defined in the Securities Act and the rules thereunder, have not been registered under the Securities Act, and that none of the FRLF Equity can be sold or transferred unless they are first registered under the Securities Act and such state and other securities laws as may be applicable or FRLF receives an opinion of counsel reasonably acceptable to FRLF that an exemption from registration under the Securities Act is available (and then the FRLF Equity may be sold or transferred only in compliance with such exemption and all applicable state and other securities laws).

 

Caesar and Abrams own and hold, beneficially and of record, the entire right, title, and interest in and to the Cicero Equity free and clear of all rights and Encumbrances (as defined below). Caesar and Abrams have full power and authority to vote, transfer and dispose of the Cicero Equity free and clear of any right or Encumbrance other than restrictions under the Securities Act and applicable state securities laws. "Encumbrances" shall mean any security or other property interest or right, claim, lien, pledge, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement, interest or other right or claim of third parties, whether perfected or not perfected, voluntarily incurred or arising by operation of law, and including any agreement (other than this Agreement) to grant or submit to any of the foregoing in the future.

 

 

 

 

 2 

 

 

3.    Representations, Warranties and Covenants of FRLF. FRLF represents and warrants to Caesar and Abrams, and covenants for the benefit of Caesar and Abrams, as follows:

 

(a)             FRLF has been duly incorporated and is validly existing and in good standing under the laws of the state of Nevada, with full corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure to register or qualify would not have a Material Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" shall mean any material adverse effect on the business, operations, properties, prospects, or financial condition of FRLF and its subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of FRLF to perform any of its obligations under this Agreement in any material respect.

 

(b)            The FRLF Equity has been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the FRLF shall be validly issued and outstanding, fully paid and non-assessable, free and clear of all liens, encumbrances and rights of refusal of any kind.

 

(c)             This Agreement has been duly authorized, validly executed and delivered on behalf of FRLF and is a valid and binding agreement and obligation of FRLF enforceable against FRLF in accordance with its terms, subject to limitations on enforcement by general principles of equity and by bankruptcy or other laws affecting the enforcement of creditors' rights generally, and FRLF has full power and authority to execute and deliver the Agreement and the other agreements and documents contemplated hereby and to perform its obligations hereunder and thereunder.

 

(d)             The execution and delivery of the Agreement and the consummation of the transactions contemplated by this Agreement by FRLF, will not (i) conflict with or result in a breach of or a default under any of the terms or provisions of, (A) FRLF's certificate of incorporation or by-laws, or (B) of any material provision of any indenture, mortgage, deed of trust or other material agreement or instrument to which FRLF is a party or by which it or any of its material properties or assets is bound, (ii) result in a violation of any provision of any law, statute, rule, regulation, or any existing applicable decree, judgment or order by any court, Federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over FRLF, or any of its material properties or assets or (iii) result in the creation or imposition of any material lien, charge or encumbrance upon any material property or assets of FRLF or any of its subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of their property or any of them is subject except in the case of clauses (i)(B), (ii) or (iii) for any such conflicts, breaches, or defaults or any liens, charges, or encumbrances which would not have a Material Adverse Effect.

 

(e)             The delivery and issuance of the FRLF Equity in accordance with the terms of and in reliance on the accuracy of Caesars and Abramsrepresentations and warranties set forth in this Agreement will be exempt from the registration requirements of the Securities Act.

 

(f)             No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of FRLF is required in connection with the valid execution and delivery of this Agreement or the offer, sale or issuance of the FRLF Equity or the consummation of any other transaction contemplated by this Agreement.

 

(g)            FRLF has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and delivery of the FRLF Equity hereunder. Neither FRLF nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the FRLF Equity, or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has taken or will take any action so as to bring the issuance and sale of any of the FRLF Equity under the registration provisions of the Securities Act and applicable state securities laws. Neither FRLF nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the FRLF Equity.

 

(h)            FRLF represents that it has not paid, and shall not pay, any commissions or other remuneration, directly or indirectly, to any third party for the solicitation of the Exchange.

 

 

 

 3 

 

 

4.    Conditions Precedent to the Obligation of FRLF to Consummate the Exchange. The obligation hereunder of FRLF to issue and deliver the FRLF Equity to Caesar and Abrams and consummate the Exchange is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below. These conditions are for FRLF's sole benefit and may be waived by FRLF at any time in its sole discretion.

 

(a)             Caesar and Abrams shall have executed and delivered this Agreement.

 

(b)            Caesar and Abrams shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Caesar and Abrams at or prior to the Closing Date.

 

(c)             The representations and warranties of Caesar and Abrams shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.

 

5.    Conditions Precedent to the Obligation of Caesar and Abrams to Consummate the Exchange. The obligation hereunder of Caesar and Abrams to assign the Cicero Equity, accept the FRLF Equity, and consummate the Exchange is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below. These conditions are for Caesars and Abramsbenefit and may be waived by the Caesar and Abrams at any time in their sole discretion.

 

(a)             FRLF shall have executed and delivered this Agreement.

 

(b)            FRLF shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Agreement to be performed, satisfied or complied with by FRLF at or prior to the Closing Date.

 

(c)             Each of the representations and warranties of FRLF shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such d a t e .

 

(d)            No statute, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement at or prior to the Closing Date.

 

(e)             As of the Closing Date, no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting FRLF, or any of its properties, which questions the validity of the Agreement or the transactions contemplated thereby or any action taken or to be taken pursuant thereto. As of the Closing Date, no action, suit, claim or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting FRLF, or any of its properties, which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.

 

6.    Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. Each of the Parties consents to the exclusive jurisdiction of the Federal courts whose districts encompass any part of the State of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each Party waives its right to a trial by jury. Each Party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Party at its address set forth herein. Nothing herein shall affect the right of any Party to serve process in any other manner permitted by law.

 

 

 

 4 

 

 

7.    Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, express overnight courier, registered first class mail, or telecopier (provided that any notice sent by telecopier shall be confirmed by other means pursuant to this Section 7), initially to the address set forth below, and thereafter at such other address, notice of which is given in accordance with the provisions of this Section.

 

(a)if to the Company:
  Freedom Leaf Inc.
  3571 E. Sunset Road Suite 420
  Las Vegas, NV 89120
  Attention: Clifford J. Perry
  Chief Executive Officer

 

(b)if to Abrams:
  Joseph Abrams
  131 Laurel Grove Avenue
  Kentfield, CA 94904

 

(c)if to Caesar:
  Name: Michael Woloshin
  Caesar Capital Group, LLC
  15 Birch Court
  Ossining, NY 10562

 

All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied; or when actually received or refused if sent by other means.

 

8.    Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous oral or written proposals or agreements relating thereto all of which are merged herein. This Agreement may not be amended or any provision hereof waived in whole or in part, except by a written amendment signed by both of the Parties.

 

9.     Counterparts. This Agreement may be executed by facsimile signature and in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

 

 

 5 

 

 

IN WITNESS WHEREOF, this Agreement was duly executed on the date first written above.

 

   

 

Freedom Leaf Inc.

 

 

By: /s/ Clifford J. Perry        

Name: Clifford J. Perry

Title: Chief Executive Officer

 

 

 

Caesar Capital Group, LLC

 

 

By: Michael Woloshin        

Name: Michael Woloshin

Title: Managing Member

 

 

 

Joseph W and Patricia G Abrams Family Trust dtd 3/95

 

 

By: Joseph Abrams        

Name: Joseph Abrams

 

 

 

 

 

 

 

 

 

 

 6 

 

EX-31.1 4 freedom_10q-ex3101.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Clifford J. Perry, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Freedom Leaf Inc.;

 

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;

 

3. Based on my knowledge, the consolidated 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;

 

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:

 

  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, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) designed such internal control over financial reporting, or 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 consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. 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):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: June 29, 2018 By:   /s/ Clifford J. Perry  
    Chief Executive Officer  
    (Principal Executive Officer)  

 

EX-31.2 5 freedom_10q-ex3102.htm CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

REQUIRED BY RULE 13A-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Richard Groberg, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Freedom Leaf Inc.;

 

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;

 

3. Based on my knowledge, the consolidated 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;

 

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:

 

  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, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b) designed such internal control over financial reporting, or 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 consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. 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):

 

  a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: June 29, 2018 By:   /s/ Richard Groberg  
    Chief Financial Officer  
    (Principal Financial Officer)  

EX-32.1 6 freedom_10q-ex3201.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Clifford J. Perry, Chief Executive Officer of Freedom Leaf Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2018 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 29, 2018 By:   /s/ Clifford J. Perry  
    Chief Executive Officer  
    (Principal Executive Officer)  
           
           

 

 

EX-32.2 7 freedom_10q-ex3202.htm CERTIFICATION

Exhibit 32.2

CERTIFICATION OF

PRINCIPAL FINANCIALS OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Richard Groberg, Chief Financial Officer of Freedom Leaf Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2018 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 29, 2018 By:   /s/ Richard Groberg  
    Chief Financial Officer  
    (Principal Financial Officer)  
           
           

 

 

 

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accounts payable Issuance of common stock for services Loss on conversion of debt Change in fair value of embedded conversion features Loss on revaluation of derivative liabilities Bad debt expense Changes in operating assets and liabilities: Accounts receivable Inventory Prepaid expense Other receivable Other assets Accounts payable and accrued expenses Accounts payable and accrued expenses to related parties Net cash used in operating activities Cash flows from (used in) investing activities Cash acquired in acquisition of GME Intangible asset acquired Net cash from (used in) investing activities Cash flows from financing activities: Proceeds from capital contributed Proceeds from related party Proceeds from sale of common stock Repayments on notes payable Proceeds from notes payable Net cash provided by financing activities Effects of exchange rates on cash Net increase in cash Cash at beginning of period Cash at end of period Supplemental disclosure of cash flow information: Cash paid for interest Cash paid for taxes Non-cash investing and financing activities: Conversion of debt into common stock Issuance of common stock for accounts payable and accrued expenses Conversion of common stock into licensing agreement Issuance of common stock for inventory Financed purchases of property and equipment Common stock issued in business combination Exercise of warrants for the issuance of common stock Notes assigned between holders Initial debt discounts Common stock issued for settlement of debt Common stock issued for rights agreement Derivative liability Organization, Consolidation and Presentation of Financial Statements [Abstract] Nature of Operations and Summary of Significant Accounting Policies Business Combinations [Abstract] Definitive Agreements Business Combination Going Concern Going Concern Commitments and Contingencies Disclosure [Abstract] Commitments and Contingencies Related Party Transactions [Abstract] Related Parties Receivables [Abstract] Other Receivables Property, Plant and Equipment [Abstract] Fixed Assets Goodwill and Intangible Assets Disclosure [Abstract] Intangible Assets Derivative Instruments and Hedging Activities Disclosure [Abstract] Derivatives Debt Disclosure [Abstract] Convertible Notes Payable, Net of Premiums and Notes Payable Equity [Abstract] Stockholders' Equity Risks and Uncertainties [Abstract] Concentrations Subsequent Events [Abstract] Subsequent Events Notes to Financial Statements Restatement of Prior Period Financial Statements Organization Nature of Operations Basis of Presentation Principles of Consolidation Impairment of Long-Lived Assets Fair Value of Measurements Stock-based Compensation Use of Estimates Reclassifications Cash and Cash Equivalents Inventory Accounting for Derivatives Revenue Recognition Advertising and Marketing Income Taxes Net Earnings (Loss) Per Share Effect of Recent Accounting Pronouncements Allocation of assets acquired and liabilities assumed in business combination Future minimum lease payments Schedule of other receivables Schedule of fixed assets Schedule of intangible assets Amortization table Assumptions Schedule of derivative instruments Schedule of convertible notes Schedule of Assumptions Schedule of Error Corrections and Prior Period Adjustments Statement [Table] Statement [Line Items] Antidilutive shares Sales or commissions earned Consideration given: Common stock shares given Total consideration given Fair value of identifiable assets acquired, and liabilities assumed: Cash Accounts receivable Fixed assets, net Intangible assets, net Accounts payable Acquisition payable Payable to shareholders Total identifiable net liabilities Total consideration Green Market Europe Purchase Percentage Ownership Fair value of net assets acquired Net loss Net cash used in operating activities Working capital Stockholders' equity 2018 2019 Total Rent expense Due to related parties Stock issued for accrued compensation, value Stock issued for accrued 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Document and Entity Information - shares
9 Months Ended
Mar. 31, 2018
Jun. 27, 2018
Document And Entity Information    
Entity Registrant Name Freedom Leaf Inc.  
Entity Central Index Key 0001581545  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   187,048,252
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2018  
XML 15 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Mar. 31, 2018
Jun. 30, 2017
Current assets    
Cash $ 165,544 $ 2,498
Accounts receivable, net 28,881 0
Inventory, net 82,485 0
Prepaid expense and other current assets 119,615 1,600
Other receivable, net of reserves 1,123 637,817
Total current assets 397,648 641,915
Fix assets, net 196,631 0
Intangible assets, net 316,955 10,820
Goodwill 315,685 0
Other assets 44,185 338,084
Total assets 1,271,104 990,819
Current liabilities    
Convertible notes payable, net of discount 0 70,678
Notes payable 759 3,141
Accounts payable 323,924 15,789
Accrued expenses 97,806 31,891
Accrued expenses to related parties 109,500 0
Derivative liabilities 0 52,757
Total current liabilities 531,989 174,256
Non-current liabilities    
Other non-current liabilities 0 188,075
Payable to related party 313,713 290,670
Total non-current liabilities 313,713 478,745
Total liabilities 845,702 653,001
Commitments and contingencies 150,000
Stockholders' equity (deficit)    
Preferred stock, $0.001 par value, 10,000,000 shares authorized Series A preferred stock, 1,000,000 shares authorized, 948,022 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively 948 948
Common stock, $0.001 par value, 500,000,000 shares authorized, 161,740,712 and 111,101,795 shares issued, issuable, and outstanding at March 31, 2018 and June 30, 2017, respectively 161,741 111,102
Additional paid-in capital 8,516,596 4,996,756
Accumulated comprehensive income 22 0
Accumulated deficit (8,247,029) (4,920,988)
Total Freedom Leaf Inc. stockholders' equity 432,278 187,818
Non-controlling interest (6,876) 0
Total stockholders' equity 425,402 187,818
Total liabilities and stockholders' equity $ 1,271,104 $ 990,819
XML 16 R3.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2018
Jun. 30, 2017
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.001 $ .001
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 948,022 948,022
Preferred stock, shares outstanding 948,022 948,022
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 500,000,000 500,000,000
Common stock, shares issued 161,740,712 111,101,795
Common stock, shares outstanding 161,740,712 111,101,795
XML 17 R4.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]        
Revenue, net $ 56,254 $ 254,084 $ 63,913 $ 823,204
Operating expenses        
Direct costs of revenue 81,045 17,428 150,871 88,792
General and administrative 337,409 247,578 1,186,222 1,170,036
Depreciation and amortization expense 84,935 0 108,251 370
Bad debt expense 221,294 0 637,817 1,500
Marketing and selling 54,237 12,600 58,554 32,319
Total operating expenses 778,920 277,606 2,141,715 1,293,017
Operating loss (722,666) (23,522) (2,077,802) (469,813)
Other income (expense)        
Interest expense (1,659) (6,026) (14,439) (11,276)
Loss on settlement of debt (113,936) 0 (419,098) 0
Interest income 7 0 10,331 0
Loss on conversion of debt into common stock (781,523) 0 (781,523) 0
Gain on extinguishment of liabilities 54,157 0 54,157 0
Change in fair value of embedded conversion features (36,575) (2,905) (59,127) (2,905)
Beneficial conversion feature 34,178 5,253 (45,416) (55,014)
Total other income (expense) (845,351) (3,678) (1,255,115) (69,195)
Provision for income taxes 0 0 0 0
Net loss before non-controlling interest (1,568,017) (27,200) (3,332,917) (539,008)
Loss attributable to non-controlling interest 6,876 0 6,876 0
Net loss attributable to common stockholders $ (1,561,141) $ (27,200) $ (3,326,041) $ (539,008)
Net loss attributable to common stockholders per share - basic and diluted $ (0.01) $ (0.00) $ (0.02) $ (0.01)
Weighted average number of common shares outstanding - basic and diluted 158,509,748 102,022,698 137,114,271 98,283,870
Exchange differences arising on translating foreign operations $ 22 $ 0 $ 22 $ 0
Total comprehensive loss (1,561,039) 0 (3,326,019) 0
Total comprehensive loss - Non-controlling interest (6,978) 0 (6,898) 0
Total comprehensive loss - Controlling interest $ (1,568,017) $ (27,200) $ (3,332,917) $ (539,008)
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash flows from operating activities:    
Net loss $ (3,332,917) $ (539,008)
Adjustments to reconcile net loss to net cash used in operations:    
Depreciation and amortization 108,251 370
Beneficial conversion feature 187,902 55,014
Gain on settlement of contingent liabilities (150,000) 0
Loss on common stock issued for accounts payable 189,114 0
Issuance of common stock for services 571,858 616,942
Loss on conversion of debt 710,447 0
Change in fair value of embedded conversion features 0 2,905
Loss on revaluation of derivative liabilities 59,217 0
Bad debt expense 637,817 (1,500)
Changes in operating assets and liabilities:    
Accounts receivable (21,451) 500
Inventory (55,285) 2,465
Prepaid expense (119,138) 0
Other receivable 0 (399,286)
Other assets (40,600) (229,791)
Accounts payable and accrued expenses 607,198 165,085
Accounts payable and accrued expenses to related parties 127,499 103,405
Net cash used in operating activities (520,088) (222,899)
Cash flows from (used in) investing activities    
Cash acquired in acquisition of GME 3,546 0
Intangible asset acquired (27,938) (3,897)
Net cash from (used in) investing activities (24,392) (3,897)
Cash flows from financing activities:    
Proceeds from capital contributed 0 28,148
Proceeds from related party 0 76,940
Proceeds from sale of common stock 646,058 80,000
Repayments on notes payable (97,382) 0
Proceeds from notes payable 166,842 46,000
Net cash provided by financing activities 715,518 231,088
Effects of exchange rates on cash (7,992) 0
Net increase in cash 163,046 4,293
Cash at beginning of period 2,498 1,758
Cash at end of period 165,544 6,051
Supplemental disclosure of cash flow information:    
Cash paid for interest 0 0
Cash paid for taxes 0 0
Non-cash investing and financing activities:    
Conversion of debt into common stock 0 115,065
Issuance of common stock for accounts payable and accrued expenses 662,459 0
Conversion of common stock into licensing agreement 0 25,000
Issuance of common stock for inventory 27,200 0
Financed purchases of property and equipment 148,500 0
Common stock issued in business combination 396,728 0
Exercise of warrants for the issuance of common stock 215 0
Notes assigned between holders 118,602 0
Initial debt discounts 116,625 0
Common stock issued for settlement of debt 1,346,520 0
Common stock issued for rights agreement 22,000 0
Derivative liability $ 0 $ 23,918
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1. Nature of Operations and Summary of Significant Accounting Policies
9 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations and Summary of Significant Accounting Policies

 

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

Freedom Leaf Inc. (the “Company,” “we,” “us,” “our,” “Freedom Leaf” or “FRLF”) was incorporated in the State of Nevada on February 21, 2013, under the name of Arkadia International, Inc. The Company originally was engaged in the business of the acquisition of in demand equipment, cars and goods with the intent to resale these in the U.S. territory or export to overseas countries. On October 3, 2014, the Company experienced a change in control. Richard C. Cowan (“Cowan”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between Cowan and Vladimir and Galina Shekhtman (“Sellers”). On the closing date, October 3, 2014, Cowan purchased from the Sellers 6,950,100 shares of the Company’s outstanding restricted common stock for $100,000, representing 93% of the then-outstanding common stock of the Company.

 

On November 6, 2014, the Company merged with Freedom Leaf Inc., a private Nevada corporation. The Company changed its name from Arkadia International, Inc., to Freedom Leaf Inc. As a result of the merger, the private company was dissolved, the sole officer, director and shareholder of the private company, Clifford J. Perry, became an officer and director of the Company, and Mr. Perry received approximately 48.1% of the Company’s common stock post-merger. See Note 2 for related discussion.

 

For financial reporting purposes, the merger was accounted for as a "reverse merger" and recapitalization rather than a business combination, and the private company was deemed to be the accounting acquirer in the transaction, with the Company deemed to be the acquired company for financial reporting purposes. Consequently, the assets and liabilities and the operations that are reflected in the historical consolidated financial statements of the Company prior to the merger are those of the private company, and were recorded at the historical cost basis of the private company, and the consolidated financial statements after completion of the merger include the assets and liabilities of both the predecessor public company and private company, the historical operations of private company, and the operations of both companies from the date of the merger.

 

Cannabis Business Solutions Inc (“Cannabis Business Solutions”), a Nevada corporation, was formed on February 5, 2014, and is a subsidiary of the Company. This subsidiary had nominal activity until it purchased the LaMarihuana.com assets from Valencia Web Technology S.L., B-97183354, effective April 8, 2017 (see Note 2).

 

Leafceuticals Inc (“Leafceuticals”), formerly known as Cannabiz U, Inc., a Nevada corporation, was formed on February 13, 2014, and is a wholly-owned subsidiary of the Company. This subsidiary began active operations in January 2018.

 

Freedom Leaf International Inc. (“Freedom Leaf International”), a Nevada corporation, was formed on November 27, 2015, and is a wholly-owned subsidiary of the Company. This subsidiary has had no activity to date.

 

Freedom Leaf Cares Inc. (“Freedom Leaf Cares”), a Nevada corporation, was formed on October 1, 2014, and is a wholly-owned subsidiary of the Company. Freedom Leaf Cares was dissolved in 2016. Until dissolution, this subsidiary had no activity.

 

Nature of Operations

 

Freedom Leaf Inc. is a Company that is dedicated to health and wellness products derived from legal Hemp. It is comprised of a group of diversified, international, vertically-integrated hemp businesses and cannabis media companies. Freedom Leaf Inc. has been working since 2014 to build a diverse portfolio of related hemp businesses through strategic acquisitions across the industry.

 

FRLF’s portfolio of acquisitions includes our recently acquired hemp CBD product line Irie CBD; our wholly-owned hemp extraction division Leafceuticals, Inc.; our exclusive health and wellness CBD brand “Hempology;” our hemp greenhouse cultivation with recent acquisition of a facility in Valencia, Spain; our hemp-based rolling paper company Plants to Paper; two of the largest Spanish-speaking cannabis web portals in the world LaMarihuana.com and Marihuana-Medicinal.com; and, of course, our flagship publication, Freedom Leaf Magazine.

 

Through our targeted acquisitions and growth plan execution, the Company has built a solid foundation for our vertically-integrated hemp and cannabis media company to enhance both revenue growth and shareholder value. Our cultivation and extraction divisions allow FRLF to grow and source our own hemp CBD, which allows lower production costs for our wholly-owned CBD product lines, and better gross profit, for our CBD product sales. In addition, our domestic and international media companies permit us to direct organic traffic to our eCommerce sites and retail locations.

 

·Freedom Leaf does not handle, grow, sell, or dispense marijuana or related products in the United States.

 

·Freedom Leaf believes that its European activities are in compliance with relevant EU laws.

 

Basis of Presentation

 

The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America.

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Freedom Leaf and its subsidiaries, Cannabis Business Solutions, Leafceuticals, Freedom Leaf Cares, and Freedom Leaf International. All significant inter-company balances and transactions have been eliminated in consolidation.

 

Fair Value Measurements

 

We follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

We currently measure and report at fair value our intangible assets (due to our impairment analysis) and derivative liabilities. The fair value of intangible assets has been determined using the present value of estimated future cash flows method. The fair value of derivative liabilities is measured using the Black-Scholes option pricing method.

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates in the accompanying consolidated financial statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrants and beneficial conversion feature debt discounts, valuation of derivatives, valuation of share-based payments and the valuation allowance on deferred tax assets.

 

Reclassifications

 

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously reported.

 

Inventory

 

Inventory is recorded at the lower of cost or market and the cost of sales are recorded utilizing the first in first out (“FIFO”) method.

 

Accounting for Derivatives

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

 

Revenue Recognition

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. We have early adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

Net Earnings (Loss) Per Share

 

In accordance with ASC 260-10, “Earnings Per Share,” basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares, which may dilute future earnings per share, consist of warrants to purchase 4,618,167 shares of common stock at March 31, 2018. Equivalent shares are not utilized when the effect is anti-dilutive.

 

Effect of Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU No. 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. We have adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements (Topic 205) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance requires management to perform an evaluation each annual and interim reporting period of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within the one-year period after the date that the financial statements are issued. If such conditions are identified, the guidance requires an entity to provide certain disclosures about the principal conditions or events that gave rise to the substantial doubt about the entity’s ability to continue as a going concern, management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations and management’s plans to alleviate or mitigate substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for the first annual period ending after December 15, 2016 and interim periods thereafter.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU on lease accounting. The ASU requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating the ASU, the Company expects the adoption of the ASU to have a material effect on the Company’s financial condition due to the recognition of the lease rights and obligations as assets and liabilities. The Company does not expect the ASU to have a material effect on the Company’s results of operations, and the ASU will have no effect on cash flows.

 

The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a significant effect on the Company’s financial statement.

XML 20 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
2. Definitive Agreements
9 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Definitive Agreements

NOTE 2 –DEFINITIVE AGREEMENTS

 

On November 6, 2014, Freedom Leaf Inc., a Nevada corporation and the public company (the “Company,” “Public Company,” “we,” “us,” “our”) entered into a merger agreement with a private Nevada corporation, Freedom Leaf Inc. (the “Private Company”). Prior to the reverse merger, Cowan, the officer and director of the Public Company, had acquired the majority of its outstanding common stock. Clifford J. Perry, the Private Company’s sole officer and director pre-merger (“Perry”), was the owner of record of all of the outstanding common shares of the Private Company (the “Private Company Stock”) prior to the merger. Pursuant to the merger, the Private Company was merged into the Public Company, and Perry, the Private Company’s shareholder, received 83,401.2 shares of Public Company common stock for each share of Private Company stock pre-merger, or 83,401,200 total shares of the Company’s common stock.

 

The closing of the merger was conditioned upon certain, limited customary representations and warranties, as well as the satisfaction or waiver of specified conditions to closing. As the parties satisfied all of the closing conditions, we filed Articles of Merger in Nevada consummating the merger, and shareholders of the Private Company pre-merger (Perry) owned approximately 48.1% of our issued and outstanding common stock post-merger. Following the merger, the Company focused on pursuing Private Company’s historical businesses.

 

The foregoing description of the merger agreement and transaction does not purport to be complete and is qualified in its entirety by the merger agreement, a copy of which has been filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q/A for the period ended December 31, 2014, which is incorporated herein by reference.

 

Accounting Treatment of the Merger

 

For financial reporting purposes, the merger represents a “reverse merger” rather than a business combination, and Private Company is deemed to be the accounting acquirer in the transaction. The merger is being accounted for as a reverse-merger and recapitalization. Private Company is the acquirer for financial reporting purposes and the Public Company (Freedom Leaf Inc., f/k/a Arkadia International, Inc.) is the acquired company. Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the merger will be those of the Private Company and will be recorded at the historical cost basis of the Private Company, and the financial statements after completion of the merger will include the assets and liabilities of the Public Company and the Private Company, the historical operations of the Private Company and operations of both companies from the closing date of the Merger.

 

Licensing Rights

 

On February 8, 2016, the Company and Freedom Leaf Netherlands, B.V. (“FLNL”), a company located in the Netherlands, executed a Memorandum of Understanding (“MOU”), wherein the Company granted FLNL a right of first refusal to license certain rights from the Company described below in exchange for a payment of $25,000, and the parties agreed to negotiate a definite license agreement for such rights with the terms of the definitive agreement incorporating the material terms set forth in the MOU. Such rights include FLNL’s rights to use various trademarks of the Company, primarily “Freedom Leaf,” and other related rights, for use in the Netherlands by FLNL, including FLNL’s right to publish a Freedom Leaf magazine in the Netherlands, sell Freedom Leaf products and perform other activities related to the business of the Company. FLNL is a shareholder (common stock and warrants to purchase additional common stock) of the Company. On December 15, 2016, the Company and FLNL executed the license agreement. The agreement provided for a licensing fee of $250,000 with a payment schedule as follows: $70,869 which has been paid from the date of the MOU until the date of the agreement; $25,000 payment every two months, commencing on April 10, 2017 with the last payment on April 10, 2018, and a final payment of $4,131 on June 10, 2018. As of March 31, 2018, the Company has written the receivable off to bad debt. The Company also provided FLNL with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows:

 

·250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018; and 250,000 warrants between March 2018 and May 2018. See Notes 7 and 12.

 

On December 15, 2016, the Company and Freedom Leaf Iberia, B.V. (“FLI”), a company incorporated under the laws of the Netherlands, executed a license agreement. The licensing agreement provides FLI the distribution rights to the Company’s magazine and other “Freedom Leaf” branded merchandise. The territory of the agreement is Spain and Portugal. The agreement provided for a license fee of $250,000 payable to the Company. The payment schedule provides for a $25,000 payment every two months, beginning on April 20, 2017, concluding on April 20, 2018, with a final payment of $75,000 on June 20, 2018. As the Company is allowing for progress payments, the balance is shown net of imputed interest on the balance sheet. The Company also provided FLI with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows: 250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018; and 250,000 warrants between March 2018 and May 2018. See Notes 8 and 12. As of March 31, 2018, the Company has written the receivable off to bad debt.

 

On March 31, 2017, the Company entered into a license agreement with BBD Healthcare Strategies, LLC, a Florida limited liability company (“BBDHS”), pursuant to which BBDHS received distribution rights to the Company’s magazine and other “Freedom Leaf” branded merchandise for the State of Florida, in consideration of (1) a license fee of $250,000, paid $25,000 at execution, and $25,000 due August 2017, October 2017, December 2017, February 2018, March 2018, April 2018, May 2018 and concluding June 2018, with a final payment of $50,000, (2) ongoing royalties of 5% for sales of Company merchandise purchased from the Company, (3) ongoing royalties of 10% for sales of Company merchandise purchased from a third-party supplier, and (4) ongoing royalties of 33% for Company seminars and conferences. As the Company is allowing for progress payments, the balance is shown net of imputed interest on the balance sheet. The Company also provided BBDHS with warrants to purchase 1,200,000 shares of Company common stock at an exercise price of $0.05, exercisable as follows: 240,000 shares between September 1, 2017 and October 31, 2017, 240,000 shares between November 1, 2017 and December 31, 2017, 240,000 shares between January 1, 2018 and February 28, 2018, 240,000 shares between March 1, 2018 and May 30, 2018, and 240,000 shares between June 1, 2018 and July 30, 2018. See Notes 8 and 12. As of March 31, 2018, the Company has written the receivable off to bad debt.

 

Incubation Agreement

 

On January 18, 2016, the Company and Plants to Paper, LLC (“PTP”), a New Jersey limited liability company, executed an Incubation Agreement. PTP owned the patent pending application 62/245,153 (the “Patent”) with the title being “Rolling Papers and Blunt Wraps made from 100% Marijuana.” PTP agreed to transfer its ownership rights in the patent application to the Company, as well as PTP’s Medical Marijuana / Cannabis/Hemp Industry Incubator program. The Company agreed to supply management services and to fund the early stage development of PTP. The Incubation Agreement is for a period of twelve months. PTP will provide the Company with 20% of the outstanding membership shares of PTP in exchange for its services. The costs of patent registrations in the United States and other countries will be the liability of PTP. As of March 31, 2018, PTP had no activity. On February 1, 2017, the Agreement was modified for the following items: a) to provide 25% of the outstanding membership shares of PTP; b) require that the Patent be assigned to PTP; and c) acknowledge that the ownership rights have not been transferred to the Company as of that date. To-date, ownership rights have not been transferred.

 

Sales Representation Contract

 

On December 22, 2016, the Company and NuAxon BioScience, Inc. (“NuAxon”), a Delaware corporation, executed a Sales Representation Contract. NuAxon is a manufacturer and distributor for bulk extracts, Rebel Herbs brand products, and Intelligence Tree brand products. The contract appoints the Company as NuAxon’s sales representative worldwide. The contract is for a period of one year and shall automatically renew for successive terms of the same duration. The contract provides a commission for sales by the Company at rates as follows: a) bulk extracts is 9% with a 2% bonus on annual sales above $500,000; b) Rebel Herbs and Intelligence Tree brand products is 10% with a 3% bonus on annual sales above $1,000,000. As of March 31, 2018, there have been no sales or commissions earned.

 

Equipment Sales Representative Contract

 

On December 22, 2016, the Company and NuAxon executed an Equipment Sales Representative Contract. NuAxon is a manufacturer and distributor for extraction equipment. The contract appoints the Company as NuAxon’s equipment sales representative worldwide. The contract is for a period of one year and shall automatically renew for successive terms of the same duration. The contract provides a commission for sales by the Company at various rates ranging from 3% to 10%, dependent on the cumulative annual sales. On March 15, 2017, the Company entered into an Exclusive Distribution Agreement with NuAxon to sell NuAxon’s CO2 extraction equipment pursuant to which the Company would be paid increasing commissions depending on gross sales of the equipment. On March 16, 2017, the Company issued a purchase order (the “Purchase Order”) to NuAxon to purchase extraction equipment for one of the Company’s customers. As of March 31, 2018, there were no sales.

 

LaMarihuana Purchase

 

On May 30, 2017, with an effective date of April 8, 2017 as per the Bill of Sale, Cannabis Business Solutions Inc. (the “Buyer”), a wholly-owned Nevada subsidiary of the registrant, Freedom Leaf Inc., entered into an Asset Purchase Agreement with Valencia Web Technology S.L., B-97183354, a Spanish limited liability company (Sociedad de Responsabilidad Limitada) (the “Seller,” or “Valencia”) to purchase the Seller’s assets, including its cash and cash equivalents, equipment, inventory, receivables, and two of its websites www.lamarihuana.com and www.marihuana-medicinal.com (but not including the Seller’s website cannabislandia.com), for a purchase price consisting of a 10% interest in the Buyer, and 3,000,000 shares of common stock of the registrant, valued at $300,000 (the “Initial FRLF Shares”), with additional shares of the registrant’s common stock due six months (October 8, 2017) following closing if, at such time, the average closing price of the registrant’s common stock during the previous five trading days is less than $0.10/share. Such additional shares shall be calculated as follows: $300,000 minus the product of (a) the Initial FRLF Shares multiplied by (b) the average closing price of the registrant’s common stock during the five trading days immediately preceding the True-Up Date (the “True-Up Price”), with such difference divided by the True-Up Price. On October 8, 2017, the Company removed the previously recorded contingent liability and recorded 4,142,857 shares of common stock as issuable, with a value of $126,000. On February 7, 2018, the Company and the Buyer agreed that because of the increase in the value of the Company’s common stock, the Buyer had waived its right to additional shares of common stock as stated herein. Therefore, on February 7, 2018, the Company reversed its recording of the 4,142,857 shares of common stock recorded as issuable. See Note 17.

 

The Company is in the process of meeting international requirements for the complete use of the web sites by the Company. This process is expected to be completed before the end of this fiscal year.

XML 21 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
3. Business Combination
9 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Business Combination

NOTE 3 –BUSINESS COMBINATION

 

Green Market Europe Purchase

 

On January 5, 2018 as amended on February 5, 2018, with an effective date of January 5, 2018, the Company consummated its previously-announced acquisition of 100% of the capital stock of Green Market Europe, S.L. (“GME”), a Spanish producer of hemp products. GME’s facilities include: a 21,000 square foot light deprivation greenhouse; a 43,000 square foot indoor growing research facility, and over 200 acres of outdoor production space. The light deprivation allows the increase of the number of yearly crops from 3 to 4 crops a year, and the 43,000 square foot indoor grow facility is used for genetic research and cultivating additional hemp crops. GME is strategically located in Elche, Alicante, an important Spanish business hub, with great year-round weather conditions for agricultural growing and a long tradition of growing hemp. From its inception to-date, GME has had negligible operations.

 

Purchase Consideration:

 

In consideration for the acquisition, the Company paid to GME’s seller $320,205 in cash and Company common stock as follows:

 

(i)$24,805 (which amount was paid by a third party, and to whom the Company owes that amount), and

 

(ii)4,220,000 shares of the Company’s common stock valued on the Company’s Balance Sheet at $295,400.

 

Additionally: (i) additional shares will be issuable if the volume weighted-average price of the Company’s stock between January 5, 2018 and July 3, 2018 is less than $0.10 per share, and (ii) the sellers of GME have the option to repurchase all of the assets of GME for €100 (and the assumption of GME’s liabilities) if the volume weighted-average price of the Company’s stock between January 5, 2018 and January 5, 2019 is less than $0.01 per share.

 

Assets acquired, and liabilities assumed, at fair value:

 

The provisional fair value of the purchase consideration issued to the sellers of GME was allocated to the net tangible assets acquired. We accounted for the acquisition of GME as the purchase of a business under GAAP under the acquisition method of accounting, the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair value of the net assets acquired, net of Liabilities assumed, was approximately $20,285. The excess of the aggregate fair value of the net tangible assets has been treated as Goodwill. The purchase price allocation was based, in part, on management’s knowledge of GME’s business and is preliminary. Once we complete our analysis to finalize the purchase price allocation, which includes finalizing the valuation report from a third-party appraiser and a review of potential intangible assets, it is reasonably possible that, there could be significant changes to the preliminary values below.

 

Consideration given:  

 

Common stock shares given  $295,400 
      
Total consideration given  $295,400 
      
Fair value of identifiable assets acquired, and liabilities assumed:     
      
Cash  $3,546 
Accounts receivable   7,430 
Fixed assets, net   64,891 
Intangible assets, net   5,176 
Accounts payable   (71,478)
Acquisition payable   (24,805)
Payable to shareholders   (5,045)
Total identifiable net liabilities   (20,285)
Goodwill   315,685 
Total consideration  $295,400 

 

During March, April and May of 2018, in connection with the Company’s preliminary audit of GME, the Company’s management discovered several irregularities regarding GME’s operations and its sellers’ activities before and after the consummation of the Company’s acquisition of that business. Based on investigation of these discoveries, the Company, effective June 4, 2018, consummated a termination agreement with GME’s seller. In connection with that agreement, GME’s sellers returned to the Company the 4,220,000 shares it had previously issued to the sellers. The Company will write off the approximately $33,000 it had invested cumulatively in GME in addition to the stock issuance.

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4. Going Concern
9 Months Ended
Mar. 31, 2018
Going Concern  
Going Concern

NOTE 4– GOING CONCERN

 

The Company has a net loss attributable to common stockholders for the nine months ended March 31, 2018 of $3,326,041 and working capital deficit as of March 31, 2018 of $134,341 and has used cash in operations of $520,088 for the nine months ended March 31, 2018. In addition, as of March 31, 2018, the Company had a stockholders’ equity and accumulated deficit of $425,402 and $8,247,029, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of the issuance of these financial statements.

 

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements.

 

There can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

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5. Commitments and Contingencies
9 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this report, there were no pending or threatened lawsuits.

 

Lease Commitment

 

We lease approximately 2,800 square feet of office space in Las Vegas, Nevada, pursuant to a lease that will expire on December 31, 2019. This facility serves as our corporate headquarters. After December 31, 2017, the Company has the option to opt out of the lease.

 

Future minimum lease payments under these leases are as follows:

 

2018  $5,982 
2019   18,943 
      
Total  $24,925 

 

Rent expense for the nine months ended March 31, 2018 and 2017 was $23,334 and $28,021, respectively.

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6. Related Parties
9 Months Ended
Mar. 31, 2018
Related Party Transactions [Abstract]  
Related Parties

NOTE 6 – RELATED PARTIES

 

Cowan, a former director and officer of the Company, has payables and accruals due to him of $313,713 and $269,226 as of March 31, 2018 and June 30, 2017, respectively. The payable, as agreed upon verbally, has a maturity date greater than one year, without any other set terms for repayment. Imputed interest is immaterial.

 

Clifford J. Perry (“Perry”), Chief Executive officer, Chief Financial Officer, and a director of the Company, has payables and accruals due to him of $0 and $21,444 as of March 31, 2018 and June 30, 2017, respectively. Imputed interest is immaterial. On July 31, 2017, the Company issued 5,784,061 shares of common stock to Cliff Perry for accrued compensation of $112,500. See Note 12

 

Raymond P. Medeiros (“Medeiros”), a director of the Company, has payables and accruals due to him of $0 and $0 as of March 31, 2018 and June 30, 2017, respectively. Imputed interest is immaterial. On July 31, 2017, the Company issued 2,699,228 shares of common stock to Raymond Medeiros for accrued compensation of $52,500. See Note 12.

 

On October 31, 2017, the Company issued 850,000 shares of common stock to Paul F. Pelosi, Jr. (“Pelosi”), in regard to his appointment as Chairman of the Board on November 1, 2017, for compensation for the period November 1, 2017 through January 31, 2018. The Company was obligated to issue on February 1, 2018, an additional 1,250,000 options for common stock with an exercise price of $0.04, with an expiration date eighteen months after the issuance. On February 12, 2018, the Company issued 1,250,000 warrants for common stock to Paul Pelosi in satisfaction of this obligation. The warrants have an exercise price of $0.04 and expire August 11, 2018 (see Note 12).

 

On November 10, 2017, the Company sold 967,000 shares of common stock to Pelosi for $14,500, based on a per share price of $0.01499.

 

On January 18, 2018, the Company appointed Richard Groberg, via his company, RSGroberg Consulting, LLC, as its Chief Financial Officer to serve for an initial, two-year term. In consideration of the services to be performed by Groberg, the Company: (i) issued 800,000 shares of common stock, and (ii) $5,000 per month compensation payable: (1) prior to the date that the Company is paying monthly compensation to its directors primarily in cash, in 600,000 shares of common stock (representing the first 12 months’ compensation), and (2) payable in cash thereafter. See Note 17. The 800,000 and 600,000 shares of common stock were issued on January 18, 2018 and valued at $81,200 and $60,900, respectively.

 

On January 18, 2018, Pelosi purchased 1,050,000 shares of common stock for $21,000.

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7. Other Receivables
9 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Other Receivables

NOTE 7 – OTHER RECEIVABLES

 

The Company has three licensing agreements with the following: FLNL, FLI and BBDHS (see Note 2). The receivable, per entity, as recorded in Other Receivables as of March 31, 2018, is as follows:

 

   March 31,
2018
   June 30,
2017
 
FLNL  $176,779   $173,551 
FLI   246,178    240,555 
BBDHS   225,186    223,711 
Subtotal   648,143    637,817 
Less: Allowance   (648,143)    
Net Balance  $   $637,817 

 

As of March 31, 2018, FLNL, FLI and BBDHS are behind on payments of $100,000, $100,000, and $75,000, respectively. The Company and FLI agreed to a legal right of offset in regards to a balance of $60,000 owed by the Company to FLI. The revenue streams as stated herein have been delayed due to unforeseen circumstances. Thus, the Company granted deferment on the payments with each entity. Both FLNL and FLI expected to begin making payment sometime in 2018. As of the date of this report, the Company has not received payment, therefore, the Company has recorded an allowance of $648,143.

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8. Fixed Assets
9 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Fixed Assets

NOTE 8– FIXED ASSETS

 

The Company has fixed assets related to equipment and capital improvements. The depreciation of the equipment and capital improvements is over a five-year and two-year period, respectively. As of March 31, 2018, and June 30, 2017, the Company had fixed assets, net of accumulated depreciation, of $196,631 and $0, respectively. The fixed assets are as follows:

 

   March 31,   June 30, 
   2018   2017 
Equipment  $221,200   $ 
Total fixed assets   221,200     
Less: Accumulated depreciation   (24,569)    
Fixed assets, net  $196,631   $ 

 

The depreciation expense for the nine months ended March 31, 2018 and 2017, was $24,569 and $0, respectively.

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9. Intangible Assets
9 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

NOTE 9 – INTANGIBLE ASSETS

 

The Company has intangible assets related to website development. The amortization of the intangible assets is over a five-year period. As of March 31, 2018, and June 30, 2017, the Company had intangible assets, net of accumulated amortization, of $316,955 and $10,820, respectively. The intangible assets are as follows:

 

   March 31,   June 30, 
   2018   2017 
Website development  $401,980   $12,245 
Total intangible assets   401,980    12,245 
Less: Accumulated amortization   (85,025)   (1,425)
Intangible assets, net  $316,955   $10,820 

 

The amortization expense for the nine months ended March 31, 2018 and 2017, was $83,722 and $370, respectively.

 

The following table presents the amortization for the next five years:

 

2018  $5,136 
2019   15,127 
2020   1,044 
2021   1,044 
2022 and thereafter   2,422 
Total  $24,773 
XML 28 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
10. Derivatives
9 Months Ended
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives

NOTE 10 – DERIVATIVES

 

Embedded Conversion Option Derivatives

 

Due to the conversion terms of certain promissory notes, the embedded conversion options met the criteria to be bifurcated and presented as derivative liabilities. The Company calculated the estimated fair values of the liabilities for embedded conversion option derivative instruments at the original note inception date and settlement dates and at June 30, 2017, using the Black-Scholes option pricing model using the share prices of the Company’s stock on the dates of valuation and using the following ranges for volatility, expected term and the risk-free interest rate at each respective valuation date, no dividend has been assumed for any of the periods:

 

   

March 31,

2018

   

June 30,

2017

   

Note

Inception

Date

 
Volatility     N/A       141%       170% - 232%  
Expected Term     N/A       0.33 - 0.96 years       0.75 - 1.0 years  
Risk-Free Interest Rate     N/A       0.84%       1.07% - 1.33%  

 

The following reflects the initial fair value on the note inception date and changes in fair value through March 31, 2018, which reflects that all promissory notes were converted and/or paid leaving no outstanding promissory notes as of March 31, 2018:

 

Embedded conversion option derivative liability fair value on June 30, 2017  $52,757 
Note modifications adjustment   43,866 
Adjustment for extinguishment of notes and conversion of notes   (91,653)
Change in fair value in fiscal year 2018   (4,970)
Embedded conversion option derivative liability fair value on March 31, 2018  $ 
XML 29 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
11. Convertible Notes Payable, Net of Premiums and Notes Payable
9 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Convertible Notes Payable, Net of Premiums and Notes Payable

NOTE 11 – CONVERTIBLE NOTES PAYABLE, NET OF PREMIUMS AND NOTES PAYABLE

 

Convertible notes, net of discounts and notes payable                        
   March 31, 2018   June 30, 2017 
           Principal,           Principal, 
       Debt   net of       Debt   net of 
   Principal   Discounts   Discounts   Principal   Discounts   Discounts 
PureEnergy  $   $   $   $15,475   $(7,489)  $7,986 
PureEnergy               13,480    (5,565)   7,915 
PowerUp               75,000    (39,330)   35,670 
PowerUp               38,000    (18,893)   19,107 
Total  $   $   $   $141,955   $(71,277)  $70,678 

 

On July 7, 2015, the Company executed a convertible promissory note for $5,000 with Bruce Perlowin. The note is for one year, 12% interest rate, and convertible at $0.10 per share. The current price at that date was $0.085, which is less than the conversion price. The stock price for our common stock as of September 30, 2015 was $0.40. Our common stock is thinly traded therefore our price, as management has determined, is not indicative of our valuation. In October 2015, the Company issued common stock for services to unrelated parties and the common stock was values at $0.20, therefore, the $0.20 was used for valuation purposes for this note. A beneficial conversion feature of $5,000 was recorded and subsequently amortized. The Company has recorded accrued interest of $467 as of March 31, 2018. On April 15, 2016, Mr. Perlowin converted the principal of this promissory note into 50,000 shares of common stock. The accrued interest was not converted.

 

On August 12, 2015, the Company executed a convertible promissory note for $5,000 with Bruce Perlowin. The note is for one year, 12% interest rate, and convertible at $0.10 per share. The current price at that date was $0.10, which is less than the conversion price. The stock price for our common stock as of September 30, 2015 was $0.40. Our common stock is thinly traded therefore our price, as management has determined, is not indicative of our valuation. In October 2015, the Company issued common stock for services to unrelated parties and the common stock was values at $0.20, therefore, the $0.20 was used for valuation purposes for this note. A beneficial conversion feature of $5,000 was recorded and subsequently amortized. The Company has recorded accrued interest of $408 as of March 31, 2018. On April 15, 2016, Mr. Perlowin converted the principal of this promissory note into 50,000 shares of common stock. The accrued interest was not converted.

 

On August 20, 2015, the Company executed a convertible promissory note for $12,500 with Svetlana Ogorodnikova. The note matures on February 19, 2016, 12% interest rate, and convertible at $0.10 per share. The current price at that date was $0.085, which is less than the conversion price. The stock price for our common stock as of December 31, 2015 was $0.40. Our common stock is thinly traded therefore our price, as management has determined, is not indicative of our valuation. In October 2015, the Company issued common stock for services to unrelated parties and the common stock was values at $0.20, therefore, the $0.20 was used for valuation purposes for this note. A beneficial conversion feature of $12,500 was recorded and subsequently amortized. The Company has recorded accrued interest of $986 as of March 31, 2018. On February 19, 2016, Ms. Ogorodnikova granted the Company an extension on the due date to June 30, 2016. On April 15, 2016, Ms. Ogorodnikova converted the principal of this promissory note into 125,000 shares of common stock. The accrued interest was not converted.

 

On November 1, 2016, the Company executed a collateralized secured promissory note with Eagle Equities, LLC (“Eagle”) for $25,000. The Company netted $23,000 due to legal fees of $2,000. The note has a conversion discount of 45% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $25,000 and as of December 31, 2017, had recorded $25,000 of amortization. The note matures on November 1, 2017 and bears interest at 8%. On April 26, 2017, Eagle sold its convertible note to PureEnergy 714 LLC (“PureEnergy”) with no change in terms. As of March 31, 2018, there is $0 of accrued interest. On June 29, 2017, the Company issued 791,140 shares of common stock to PureEnergy for the conversion of $12,501. On July 19, 2017, the Company issued 748,934 shares of common stock to PureEnergy related to the conversion of $13,481.

 

On May 23, 2017, the Company executed a convertible promissory note with PureEnergy for $15,475. The note has a conversion discount of 45% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $8,481. The note matures on February 23, 2018 and bears interest at 8%. On October 30, 2017, the balance of the note and the accrued interest was converted into 1,006,768 shares of common stock. See Note 12.

 

On May 10, 2017, the Company executed a convertible promissory note with Power Up for $75,000. The note has a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The note matures on February 23, 2018 and bears interest at 8%. On September 28, 2017, Pure Energy purchased the May 10, 2017 convertible promissory note between the Company and Power Up. The Power Up convertible promissory note was for $78,427. The Company and Pure Energy entered into a revised convertible promissory note to replace the Power Up convertible promissory note as stated below. On November 9, 2017, Pure Energy converted the entire note and accrued interest into 5,764,490 shares of common stock. See Note 12. On January 26, 2018, the Company issued to Pure Energy 1,933,848 shares of common stock in consideration of its conversion of a second convertible promissory note for $33,842 (see Note 11) that the Company issued to Pure Energy on September 27, 2017 in conjunction with Pure Energy’s payoff of the May 10, 2017 Power Up convertible note.

 

On June 20, 2017, the Company executed a convertible promissory note with Power Up for $38,000. The note has a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $19,611 and as of the date of pay off, had recorded $6,609 of amortization. The note matures on February 23, 2018 and bears interest at 8%. On December 15, 2017, the principal and accrued interest was paid in full.

 

On July 20, 2017, the Company executed a convertible promissory note with Power Up for $38,000. The note has a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The Company recorded a debt discount of $14,829 and as of March 31, 2018, had recorded $7,455 of amortization. The note matures on August 11, 2018 and bears interest at 8%. As of March 31, 2018, there is $0 of accrued interest. On January 19, 2018, Pure Energy converted into 2,008,740 shares of Company common stock: (i) the principal balance of the $38,000 convertible promissory note it previously acquired from Power Up and (ii) $2,175 of accrued interest in connection with that note ($40,175 in total). That note, executed by the Company on July 20, 2017, had a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. In conjunction with its conversion of that note, on January 19, 2018, Pure Energy also received 800,918 shares of common stock – (i) $19,826.19 in conjunction with the settlement amount owed by the Company to Power Up at the time Pure Energy acquired that note from Power Up in connection with that note, and (ii) $3,000 as a transaction fee ($22,826.19 in total).

 

On August 11, 2017, the Company executed a convertible promissory note with LG Capital (“LG”) for $42,000. The note has a conversion discount of 35% based on the lowest closing price of the 12 days prior to conversion. On February 1, 2018, the Company paid LG Capital $58,813 to retire the convertible promissory note it issued to LG Capital on August 11, 2017 for $42,000. The repayment amount included $1,565 of accrued interest and a payment premium of $15,248.

 

On September 26, 2017, the Company executed a convertible promissory note with Power Up for $53,000. The note has a conversion discount of 35% based on the lowest closing price of the 10 days prior to conversion. On February 8, 2018, the Company paid Power Up $71,913 to retire in full this convertible note.

 

On September 27, 2017, the Company executed a convertible promissory note with Pure Energy for $78,427 to replace the May 10, 2017 convertible note with Power Up, as reflected above. The note has a conversion discount of 35% based on the lowest closing price of the 12 days prior to conversion. On November 9, 2018, the principal and accrued interest was converted into 5,765,490 shares of common stock. (See Note 12.) In conjunction with the payoff of the May 10, 2017 Power Up convertible note, the Company incurred a prepayment penalty of $28,496, which Pure Energy paid to Power Up. The Company issued a second convertible promissory note to Pure Energy, in consideration of its payment to Power Up, for $33,842, which included the prepayment penalty and legal fees of $5,346. On January 26, 2018, the Company issued to Pure Energy 1,933,848 shares of common stock in consideration of its conversion of a second convertible promissory note for $33,842 (see Note 12).

 

On January 17, 2018, Pure Energy acquired from Power Up the $38,000 note executed by the Company on July 20, 2017. On January 19, 2018, Pure Energy converted into 2,008,740 shares of Company common stock: (i) the principal balance of the $38,000 convertible promissory note it acquired from Power Up on January 17, 2018 and (ii) $2,175 of accrued interest in connection with that note ($40,175 in total) (see Note 12).

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12. Stockholders' Equity
9 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Stockholders' Equity

NOTE 12 – STOCKHOLDERS’ EQUITY

 

Series A Preferred Stock

 

On May 24, 2016, the Board of Directors of the Company authorized amending the Company’s Articles of Incorporation to authorize 10,000,000 shares of “blank check” preferred stock and designate 1,000,000 of the shares as Series A preferred stock. Each share of the Series A preferred stock is entitled to 500 votes and is convertible into 100 shares of common stock.

  

Common Stock

 

The Company was authorized to issue up to 75,000,000 shares of common stock, par value $0.001 per share. On January 21, 2015, the Company increased its authorized capital to 500,000,000 shares of common stock. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

 

In the first quarter of fiscal year 2018, the Company issued 1,793,195 shares of common stock which were recorded as issuable as of June 30, 2017.

 

On July 19, 2017, the Company issued 748,934 shares of common stock to PureEnergy related to the conversion of $13,481 of a convertible promissory note.

 

On July 31, 2017, the Company issued 5,784,061 shares of common stock to Cliff Perry for accrued compensation of $112,500. See Note 6.

 

On July 31, 2017, the Company issued 2,699,228 shares of common stock to Raymond Medeiros for accrued compensation of $52,500. See Note 6.

 

On August 23, 2017, the Company issued 500,000 shares of common stock to Frank Dobrucki for services valued at $22,000.

 

On August 14, 2017, the Company issued 500,000 shares of common stock to Nuaxon Bioscience as part of the agreement for exclusive rights to market and sell their equipment. The shares were valued at $22,000.

 

On August 17, 2017, the Company issued 345,451 shares of common stock to Lakeport Business Services, Inc. for accounts payable $9,450.

 

On August 25, 2017, the Company issued 600,000 shares of common stock to Christopher Thompson as a bonus in August 2017. The shares were valued at $48,900.

 

On August 25, 2017, the Company issued 550,000 shares of common stock to Joshua Halford for services in August 2017. The shares were valued at $44,825.

 

On August 28, 2017, the Company issued 1,061,500 shares of common stock to Christopher Sloan for services in May 2017 (661,500 shares) and for accrued expenses of $23,075 (400,000 shares of common stock). The shares were valued at $52,175.

 

On August 28, 2017, the Company issued 500,303 shares of common stock to Neil Dutson for services valued at $37,173.

 

On August 29, 2017, the Company issued 100,000 shares of common stock to Marc Hatch for services valued at $7,430.

 

On October 6, 2017, the Company issued 400,000 shares of common stock to Jason Edwards for services in October 2017 valued at $16,280.

 

On October 6, 2017, the Company issued 600,000 shares of common stock to Michael Ostrander for services in October 2017 valued at $33,870.

 

On October 7, 2017, due to the agreement with Valencia (see Note 2), the Company owed Valencia an additional 4,142,857 shares of common stock, which were recorded as issuable. The Company recorded a contingent liability of $174,000 associated with this obligation. On January 29, 2018, because of the increase of the Company’s common stock, Valencia agreed to the accept the initially issued 3,000,000 shares of common stock as satisfaction of the obligation to pay to Valencia in connection with the Company’s May 30, 2017 Asset Purchase Agreement with Valencia to acquire certain of its assets without the need to issue additional true-up shares of the Company’s common stock. The January 29, 2018 agreement relieved the Company of the contingent liability of issuing additional shares. See Note 17.

 

On October 23, 2017, the Company issued 1,001,250 shares of common stock to Timothy Puetz for services in October 2017 valued at $20,025.

 

On October 23, 2017, the Company issued 1,000,000 shares of common stock to Breadfruit Tree, Inc. for inventory received in October 2017 valued at $27,200.

 

On October 26, 2017, the Company issued 255,000 shares of common stock to Ronald Voight for services in October 2017 valued at $7,727.

 

On October 28, 2017, the Company issued 273,333 shares of common stock to Lakeport Business Services, Inc. for services in October 2017 valued at $8,200.

 

On October 28, 2017, the Company issued 30,000 shares to Neil Dutson for leasehold improvement performed in October 2017 valued at $900.

 

On October 30, 2017, the Company issued 122,500 shares of common stock to legal counsel for services in October 2017 valued at $3,225. 

 

On October 31, 2017, the Company issued 850,000 shares of common stock to Paul F. Pelosi, Jr. (“Pelosi”), in regard to his appointment as Chairman of the Board on November 1, 2017, for compensation for the period November 1, 2017 through January 31, 2018. The Company is obligated to issue on February 1, 2018, an additional 1,250,000 options for common stock with an exercise price of $0.04, with an expiration date eighteen months after issuance. On February 12, 2018, the Company issued 1,250,000 warrants for common stock to Paul Pelosi in satisfaction of this obligation (see Note 13). The warrants have an exercise price of $0.04 and expire August 11, 2018.

 

On October 25, 2017, the Company issued 250,000 shares of common stock to Frank Dobrucki for services in October 2017 valued at $7,500.

 

On November 2, 2017, the Company issued 250,000 shares of common stock to Victor Park, a vendor, for services in October 2017 valued at $7,725.

 

On November 3, 2017, the Company issued 1,006,768 shares of common stock to PureEnergy for the conversion of $15,475 of a convertible promissory note (see Note 11).

 

On November 9, 2017, the Company issued 5,764,490 shares of common stock to Pure Energy for the conversion of $80,077 of principal and accrued interest of a convertible promissory note (see Note 11).

 

On November 9, 2017, the Company sold 4,785,459 shares of common Stock to Pure Energy for $83,745.53, based on a per share price of $0.0175.

 

On November 10, 2017, the Company sold 967,000 shares of common stock to Pelosi for $14,500, based on a per share price of $0.01499.

 

On November 28, 2017, the Company issued 730,769 shares of common Stock to Michael Ostrander for services in October 2017 and November 2017. The shares for October 2017, which were effective October 1, 2017, were 500,000, whereas the shares for November 2017, which were effective November 1, 2017, were 230,769. The shares were valued at $40,119.

 

On November 30, 2017, the Company recorded 600,000 shares of common stock as issuable to Alan Stone & Co. (“Stone”) in connection with various consulting services provided in 2017. The shares were valued at $36,750.

 

On January 5, 2018 as amended on February 5, 2018, with an effective date of January 5, 2018, the Company consummated its previously-announced acquisition of 100% of the capital stock of Green Market Europe, S.L. (“GME”), a Spanish producer of hemp products. In partial consideration for the acquisition, the Company paid to GME’s seller 4,220,000 shares of the Company’s common stock valued at $295,400.

 

On January 15, 2018, the Company issued to Stone 600,000 shares of common stock which were recorded as issuable as of December 31, 2017.

 

On January 17, 2018, Pure Energy acquired 526,315 shares of the Company’s common stock for $25,000.

 

On January 18, 2018, in connection with the Company’s appointment of Richard Groberg (“Groberg”) as its Chief Financial Officer to serve for an initial, two-year term, the Company (i) issued Groberg’s company, RSGroberg Consulting, LLC, 800,000 shares of common stock, and (ii) $5,000 per month compensation payable: (1) prior to the date that the Company is paying monthly compensation to its directors primarily in cash, in 600,000 shares of common stock (representing the first 12 months’ compensation), and (2) payable in cash thereafter. The common stock received was valued at $81,200 and $60,900, respectively.

 

On January 19, 2018, Pure Energy converted into 2,008,740 shares of Company common stock: (i) the principal balance of the $38,000 convertible promissory note it acquired from Power Up on January 17, 2018 and (ii) $2,175 of accrued interest in connection with that note ($40,175 in total). The Power Up note, executed by the Company on July 20, 2017, had a conversion discount of 35% based on the lowest closing price of the 20 days prior to conversion. The common stock received was valued at $190,027 and resulted in the Company recording a loss of $157,340.

 

On January 19, 2018, in conjunction with its conversion of that note, Pure Energy received 800,918 shares of common stock – (i) $19,826.19 in conjunction with the settlement amount owed by the Company to Power Up at the time Pure Energy acquired that note from Power Up in connection with that note, and (ii) $3,000 as a transaction fee ($22,826 in total). The common stock received was valued at $89,703 and resulted in the Company recording a loss of $66,877.

 

On January 22, 2018, the Company issued 60,616 shares of common stock to Joseph Gurreri, an employee, in consideration of $8,550 of accrued wages. The common stock received had a value of $8,850

 

On January 22, 2018, Pelosi purchased 1,050,000 shares of common stock for $21,000.

 

On January 22, 2018, the Company issued 82,192 shares of common stock to Steven Bloom in connection with consulting services provided in 2017 totaling $12,000.

 

On January 22, 2018, the Company issued 16,952 shares of common stock to the Company’s legal counsel, in connection with services rendered totaling $2,475.

 

On January 26, 2018, the Company issued to Pure Energy 1,933,848 shares of common stock in consideration of its conversion of a second convertible promissory note for $33,842 (see Note 11) that the Company issued to Pure Energy on September 27, 2017 in conjunction with Pure Energy’s payoff of the May 10, 2017 Power Up convertible note. The common stock received was valued at $580,154 and resulted in the Company recording a loss of $558,722.

 

On January 22, 2018, the Company issued Reliable Steel 229,671 shares of common stock for a portion of its debt of $33,532.

 

On January 22, 2018, the Company issued 226,497 shares of common stock to Christopher Thompson, an employee, in connection with services provided in 2017 valued at $32,842.

 

On January 5, 2018 and February, respectively the Company issued to Michael Ostrander: (i) 150,000 shares of common stock for services performed in December 2017 valued at $12,350, and (ii) 56,930 shares of common stock for services performed in January 2018 valued at $16,737.

 

On January 31, 2018, the Company issued to Stone 600,000 shares of common stock which were recorded as issuable as of December 31, 2017.

 

On January 31, 2018, the Company issued 122,466 shares of common stock to Christopher Sloan, a former employee of the Company, in connection with services rendered by him to the Company in 2017 totaling $39,740.

 

On January 31, 2018, the Company issued 47,945 shares of common Stock to Lakeport Business Services, Inc. in connection with services rendered to the Company in 2018 valued at $7,000. The stock was valued at $15,558 based on the current stock price.

 

On January 31, 2018, Pure Energy purchased 838,126 shares of common stock for $83,813.

 

On February 7, 2018, Neil Dutson acquired 624,000 shares of common stock for $78,000.

 

On February 7, 2018, Weintraub Law Group, LLC (“Weintraub”) surrendered 52,779 warrants at a value of $0.3048 per share, $16,090 in total, to effect the cashless exercise of warrants to acquire 215,378 shares of common stock at $0.06 per share. The Company had issued to Weintraub 268,167 warrants to acquire common stock and 268,167 shares of common stock on October 17, 2016 for the settlement of payables of $15,065.

 

On February 9, 2018, Douglas Montgomery, Greg Montgomery and Lesley Montgomery acquired from the Company 160,000, 80,000 and 160,000, respectively, shares of the Company’s common stock, in each case for a purchase price of $0.125 per share, for total proceeds of $50,000. 

 

On February 21, 2018, the Company issued 83,760 shares of common Stock to Lakeport Business Services, Inc. in connection with services rendered to the Company in 2018 valued at 18,000 based on the current stock price.

 

On March 6, 2018 Vincent Moreno acquired 500,000 shares of common stock for $50,000.

 

On March 7, 2018, Neil Dutson acquired 909,090 shares of common stock for $100,000.

 

On March 7, 2018, Esteemed Consultants acquired 909,091 shares of common stock for $100,000.

 

On March 14, 2018, Rex Anthony Carrol acquired 272,727 shares of common stock for $30,000.

 

On March 15, 2018, Vision Concepts acquired 74,074 shares for $10,000.

 

During the quarter ended March 31, 2018, the Company issued 503,535 shares of common stock to NuAxon BioScience, Inc. on behalf of Jason Edwards for services in November 2017 through March 2018 valued at $48,117.

 

Warrants

 

On November 2, 2015, the Company issued 1,000,000 warrants for common stock to Freedom Leaf Iberia, B.V., in regard to a contemplated future transaction between the Company and Freedom Leaf Iberia, B.V. The warrants expire on May 2, 2016. The exercise price is $0.02; and the warrant has a cashless exercise option. The warrants were valued at $0.20 per share, as defined in the section. The Company recorded an expense of $200,000. On May 2, 2016, Freedom Leaf Iberia exercised a cashless conversion of its 1,000,000 warrants for common stock of the Company into 889,868 shares of common stock of the Company.

 

On November 2, 2015, the Company issued 1,000,000 warrants for common stock to Freedom Leaf Netherlands, B.V., in regard to a contemplated future transaction between the Company and Freedom Leaf Netherlands, B.V. The warrants expire on May 2, 2016. The exercise price is $0.02, and the warrant has a cashless exercise option. The warrants were valued at $0.20 per share, as defined in the section. The Company recorded an expense of $200,000. On May 2, 2016, Freedom Leaf Netherlands, B.V. exercised a cashless conversion of its 1,000,000 warrants for common stock of the Company into 889,868 shares of common stock of the Company.

 

On November 2, 2015, the Company issued 500,000 warrants for common stock to a subcontractor as an incentive to their services. The warrants mature on May 2, 2016. The exercise price is $0.02, and the warrant has a cashless exercise option. The warrants were valued at $0.20 per share, as defined in the section. The Company recorded an expense of $100,000. On February 2, 2016, Dobrucki exercised a warrant for 500,000 shares of common stock for $10,000, the exercise price of the warrants at $0.02 per share.

 

On December 14, 2015, the Company executed a convertible promissory note for $100,000 with Swiss Allied. The Company issued Swiss Allied four warrants as an incentive to the note, each for 20,000,000 shares of the Company’s common stock, for a total of 80,000,000 warrants. Each warrant has an exercise price of $0.005 per share. The four warrants, each for 20,000,000 shares of common stock, mature on March 31, 2016, June 30, 2016, October 31, 2016, and March 31, 2017, respectively. The warrants, as an incentive to the note, should have a beneficial conversion feature. As the note’s beneficial conversion feature is at the maximum, there is no beneficial conversion feature to record. If Swiss Allied exercises all warrants, the Company would receive an additional $400,000 for said shares of common stock. If Swiss Allied does not exercise all 80,000,000 warrants, by the maturation dates, as described herein, the exercise price shall be adjusted to $0.06, an increase of $0.055 per share as a penalty, which is payable to the Company at the time Swiss Allied requests to have the Rule 144 restriction removed. The interest rate for each loan tranche is 8% and is accrued with a payment date of December 15, 2016 for the first tranche and January 15, 2017 for the second tranche. The conversion price for the $100,000, which may happen any time prior to December 14, 2016, shall be the greater of $0.03 or 50% of the lowest closing price on the primary trading market on which the Company’s common stock is quoted for the five trading days immediately prior to, but not including, the conversion date, assuming that Swiss Allied has not exercised all 80,000,000 warrants for common stock. The conversion price for the $100,000, assuming that Swiss Allied has exercised all 80,000,000 warrants for common stock, shall be $0.005 per share. Swiss Allied has a right of first refusal on any future funding to the Company. Swiss Allied has the right to name a party to serve as a member of the Company’s board of directors if Swiss Allied owns at least 40,000,000 shares of the Company’s common stock. If Swiss Allied owns at least 80,000,000 shares of the Company’s common stock, they have the right to name two parties to the Company’s board of directors. The two directors will remain as long as Swiss Allied owns 55,000,000 shares of the Company’s common stock.

 

On October 17, 2016, the Company issued 268,167 shares of common stock and 268,167 warrants for common stock to Weintraub Law Group, LLC for the settlement of payables of $15,065.

 

On December 15, 2016, the Company and FLNL executed a license agreement (see Note 2). As part of the agreement, the Company provided FLNL with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows: 250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018, and; 250,000 warrants between March 2018 and May 2018. The warrants will be expensed according to their respective vesting schedule.

 

On December 15, 2016, the Company and FLI executed a license agreement (see Note 2). The Company provided FLI with warrants to purchase up to 1,000,000 shares of common stock. The warrants have an exercise price of $0.05. The warrants can be exercised as follows: 250,000 warrants between June 2017 and August 2017; 250,000 warrants between September 2017 and November 2017; 250,000 warrants between December 2017 and February 2018, and; 250,000 warrants between March 2018 and May 2018. The warrants will be expensed according to their respective vesting schedule.

 

On January 16, 2017, the Company issued 1,000,000 warrants for common stock to Vincent Moreno for future consulting services. The warrants have an exercise price of $0.05 and expire in five years.

 

On January 30, 2017, the Company entered into an agreement with CorporateAds.com, LLC for services. The compensation provides a minimal $500 payment, 150,000 shares of common stock, and 150,000 warrants for common stock. The warrants have an exercise price of $0.10 per share with an expiration date eighteen months after issuance. The agreement is for 15 days and has an auto renewal feature for an additional 75 days. During the 75-day period, the Company will pay $500 for each additional 15 days. On February 1, 2017, both parties agreed to an addendum to the agreement to change the exercise price of $0.10 for the warrants to the following: 50,000 of the warrants have an exercise price of $0.10 per share; 50,000 of the warrants have an exercise price of $0.125 per share; and 50,000 of the warrants have an exercise price of $0.15 per share.

 

On February 12, 2018, the Company issued 1,250,000 warrants for common stock to Paul Pelosi in lieu of a prior agreement for the Company to issue to Pelosi 1,250,000 options (see Note 12). The warrants have an exercise price of $0.04 and expire August 11, 2018.

 

   March 31, 2018   March 31, 2017   Warrants Inception Date 
Expected volatility   260%    231%    193% - 261% 
Expected dividends            
Expected term    2 - 9 months      21 months      0.25 - 1.76  
Risk-free interest rate   1.93%    1.15%    0.98% - 1.82% 

 

Stock Option Plan

 

On June 27, 2016, the Board of Directors approved the 2016 Stock Option Plan which has reserved 10,000,000 shares of common stock. There are no stock options outstanding as of March 31, 2018.

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13. Concentrations
9 Months Ended
Mar. 31, 2018
Risks and Uncertainties [Abstract]  
Concentrations

NOTE 13 – CONCENTRATIONS

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

 

The Company places its temporary cash investments with financial institutions insured by the FDIC. No amounts exceeded federally insured limits as of March 31, 2018. There have been no losses in these accounts through, March 31, 2018.

 

Concentration of Revenue

 

For the nine months ended March 31, 2018, the Company had no material customer.

 

Concentration of Supplier

 

The Company does not rely on any particular suppliers for its services.

 

Concentration of Intellectual Property

 

The Company owns or has filed for the trademarks “Freedom Leaf,” “Hemp Inspired,” “Cannabizu,” and “Cannabiz” as filed with the United States Patent and Trademark Office. The Company has filed for “Freedom Leaf” in Jamaica and Uruguay.

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14. Subsequent Events
9 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
Subsequent Events

NOTE 14 – SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.

 

On April 3, 2018, Esteemed Consultants, Inc. acquired from the Company 1,000,000 shares of the Company’s common stock for a purchase price of $0.075 per share, for total proceeds of $75,000.

 

On April 16, 2018, Leafceuticals consummated the acquisition, with an effective date of April 1, 2018, of substantially all of the assets of: Earth Born, Inc., a California corporation (“Earth Born California”), Earth Born, Inc., a Delaware corporation (“Earth Born Delaware”), Irie Living, a California nonprofit mutual benefit corporation (“Irie”), and Genesis Media Works, LLC, a Utah limited liability company doing business as “Terra’s Way,” “Irie Hemp Company,” “Earth Born Botanicals,” and “Santa Cruz Hemp Company” (“Genesis” and together with Earth Born California, Earth Born Delaware, and Irie, collectively referred to herein as the “Sellers” or IRIE). Irie CBD is a California-based product line owned by the Sellers that has been operating since 2015 that formulates, manufactures and distributes CBD tinctures, CBD edibles, CBD topicals and CBD concentrates to retail markets across the country. IRIE boasts an inventory of more than 25 different products and recorded approximately $1.5 million of revenue in 2017. IRIE also leases a full manufacturing and processing facility in Oakland, California. In addition to the IRIE CBD line and associated assets and trademarks, the acquisition also includes the product lines, websites and other assets of Earth Born California, Earth Born Delaware, Irie, and Genesis.

 

In connection with this acquisition, Leafceuticals assumed approximately $100,000 of liabilities associated with the Assets and paid the Sellers’ principals $2,200,000 (subject to adjustment), as follows: $356,080 in cash and $1,843,920 via the issuance of an aggregate of 8,118,886 shares of the Company’s common stock. The purchase price is to be reduced if: (i) the Sellers’ aggregate pre-closing revenues for the year ending December 31, 2017, were less than $1,500,000 or (ii) the Buyer’s average monthly revenues resulting from the Acquisition of the Assets for the three months following closing are less than $120,000 per month. Additionally, 1,250,000 of the Shares were to be escrowed for four months following Closing as the Buyer’s security for (i) any indemnification claims against the Sellers pursuant to the Agreement, or (ii) any pre-closing or post-closing revenue deficiency resulting in the purchase price reductions described above.

 

On April 2, 2018, JRKH Investments, LLC purchased 54,745 shares of common stock of the Company for a purchase price of $0.091 per share, for total proceeds of $5,000.

 

On April 2, 2018, the Company retained KSW Group, LLC as an independent contractor to serve render various services related to launching and managing various eCommerce initiatives for the Company. In connection with that appointment, the Company: (i) agreed to pay KSW monthly sales commissions based on net revenues generated by KSW, and (ii) issued to KSW 450,000 shares of the Company’s Rule 144 Common Stock. The closing price of the Company’s common stock on the issuance date of April 2, 2018 was $0.135 per share.

 

On April 11, 2018, Kahn Family Partnership purchased 4,444,444 shares of common stock of the Company for a purchase price of $0.09 per share, for total proceeds of $400,000. On that date, the Company also issued to Kahn Family Partnership a warrant to acquire 4,444,444 shares of common stock at an exercise price of $0.13 per share. The warrant expires on April 11, 2020.

 

On April 30, 2018, the Company appointed Nevada State Senator Richard Segerblom as a member of the Company’s Board of Directors and issued to Senator Segerblom (i) $50,000 in common stock to vest monthly for one year, with a value of $0.159 per share, for a total of 314,465 shares of common stock, and (ii) an eighteen-month warrant to acquire 500,000 shares of common stock at an exercise price of $0.10 per share.

 

On April 30, 2018, with an effective date of April 1, 2018, the Company entered into separate consulting agreements with Karen Lane and Ricky Potts, each of whom were owners of IRIE. Pursuant to these two agreements, each agreed to continue to provide senior management services relating to the operation of IRIE under the ownership of the Company for at least nine months. In connection with these two agreements, the Company (i) granted to each 500,000 shares of common stock of the Company, vesting monthly over a period of nine months, with the vesting beginning on the effective date. The shares were valued at $61,500 for each based on the closing price of the stock on the most recent trading day prior to April 1, 2018, and (ii) agreed to a monthly compensation to each of $4,000 per month, payable using the Company’s common stock. The determination of the number of shares of stock will be calculated monthly based on the average of the OTC closing price based on the last five trading days of each month, as applicable.

 

On May 10, 2018, the Company appointed its CFO, Richard Groberg, as a member of the Company’s Board of Directors. In consideration of his appointment, the Company agreed to issue to Mr. Groberg’s entity (1) $50,000 in common stock to vest monthly over a one-year period, at a value of $0.16 per share, for a total of 312,500 shares, and (2) an eighteen-month warrant to acquire 500,000 shares of common stock of the Company at an exercise price of $0.10 per share.

 

On May 14, 2018, the Company sold 1,250,000 shares to each Caesar Capital Group (“Cesar”) and Joseph W and Patricia G Abrams Family Trust dtd 3/95 (“Abrams”) for $200,000 in total, based on a per share price of $0.08.

 

In a related transaction, the Company is issuing to Caesar and Abrams 6,000,000 shares of the Company’s common stock (based on a value of $0.25 per share, or $1,500,000) in exchange for a 25% ownership interest in Cicero Transact Group, LLC (“Cicero”), a company that is launching an innovative, online business-to-business deal platform. The Company intends to work with Cicero in regard to opportunities in the cannabis industry. Additionally, Michael Woloshin (“Woloshin”), a principal of Caesar, and Abrams, intend to work with the Company in an advisory capacity.

 

On May 15, 2018, the Company issued to Cowan a License Agreement that grants him exclusive licensee distribution rights to the Freedom Leaf Inc magazine, as well as other “Freedom Leaf” branded merchandise and services. In consideration of such license, Cowan cancelled $240,000 of payables owed to him by the Company. Also, in connection with this transaction, the Company issued to Cowan a warrant exercisable between July 1, 2018 and November 15, 2019.

 

During March through May 2018, in connection with the Company’s audit of GME, Company’s management discovered several irregularities regarding GME’s operations and its seller’s activities before and after the consummation of the Company’s acquisition of that business. Based on investigation of these discoveries, the Company, effective on June 4, 2018, consummated a termination agreement with GME’s seller. In connection with that agreement, GME’s sellers committed to return to the Company the 4,220,000 shares it previously issued. The Company will write off approximately $33,000 it had invested cumulatively in GME in addition to the stock issuance. 

 

The Company, on May 17, 2018, entered into a binding letter of intent to acquire an existing, approximately 430,000 square foot facility, that it intends to convert from a Poinsettia production facility into a light deprivation hemp production greenhouse. The total purchase price, including approximately €350,000 of rare, botanical plants that the Company acquired for €100,000 and intends to sell, is: €4,100,000 (approximately US$4.8million). The purchase consideration will be paid as follows: (i) €20,000 down, which amount already has been paid by the Company; (ii) €20,000 a month for 25 months, and (iii) €100,000 per month thereafter until paid in full. The Company intends to consummate this acquisition on or about July 2, 2018. Located in Valencia, the third largest city in Spain with an average of 300 days of sun per year and agricultural setting, the facility previously was one of the biggest Poinsettia producers in Europe. At its peak, it produced millions of Poinsettia clones and had more than 80 greenhouse workers working 24/7. The Company chose this facility due to the similarities in growing Poinsettias and Hemp and because of its light cycles and heavy machinery specific to industrial plant production. This turn-key facility includes: approximately 430,000 square feet of light deprivation greenhouse; growing supplies; polished concrete, and triple galvanized steel framework. It its fully equipped with: an automated irrigation system; a mist system; a refrigerated storage area; a light deprivation system to maximize number of crops per year; a Dutch, hydroponic set up and heating system; its own gas pipe, and five sources of irrigation water with reservoir. The facility also has office space that the Company intends to utilize to house: (i) our Spanish Media department (lamarihuana.com) and (ii) a warehouse. The purchase also includes outdoor space and the necessary structural steel sufficient to erect a new 64,000 sq. ft galvanized steel frame facility the Company intends to build to use as a GMP extraction, formulation and bottling facility. The Company intends to retain the predecessor operation’s key employees to maintain the growing facilities. Management’s goal is for this facility to become a leading greenhouse producer of cannabinoids in Europe. The Company’s goal is to grow up to two million grams of EU-certified Industrial Hemp in its first year of operations and then to expand significantly in subsequent years. The company also expects to utilize this facility to increase its Hemp research, tissue culture and extraction capabilities in the following years.

 

On June 7, 2018, the Company retained Joseph Abrams, an individual acting as an independent contractor, to serve as a member of the Company’s Advisory Board and, in connection with that appointment, issued to Abrams: 312,500 of the Company’s Rule 144 common stock per year. The first year’s stock will be issued immediately and shall vest monthly over one year and will be valued at $0.16 per share, valuing the grant at $50,000. For the second year, the stock will be issued on June 9, 2019, and will be based on the closing price of the Company’s common stock on the OTC Markets listing on June 8, 2019.

 

On June 21, 2018, the Company consummated the acquisition of intellectual property relating to a proprietary formula for the compounding of a nutraceutical non-liquid to inhibit the accumulation of LDL cholesterol (and an underlying patent-pending application regarding the formula) developed by Healthy Discovery Associates Corp., a Florida corporation. The patent-pending application is for a formula for a dietary supplement, which should not require a United States Food and Drug Administration (“FDA”) approval. The Company acquired the intellectual property regarding the formula and patent-pending application for 1,600,000 shares of common stock at a value of $0.25 per share, subject to a leak-out agreement and a price adjustment if the average trading price of the Company’s common stock for the five days subsequent to the six-month anniversary of the consummation of this transaction does not exceed $0.25 per share.

XML 33 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
15. Restatement of Prior Period Financial Statements
9 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Restatement of Prior Period Financial Statements

NOTE 15 – RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

 

Balance Sheet and Statement of Operations

 

The Company restated its previously issued consolidated financial statements included in the original Quarterly Report on Form 10-Q for the six months ended December 31, 2017 and the three months ended September 30, 2017 to reflect the effects of accounting and reporting errors resulting from a deficiency in its accounting and financial statement preparation process. This error and the related adjustments resulted in an understatement of net loss of $314,903 for the six months ended December 31, 2017 and the overstatement of $29,707 in derivative liabilities, the understatement of $344,610 in additional paid-in capital and the overstatement of $314,903 in accumulated deficits as of December 31, 2017.  This error and the related adjustments resulted in an understatement of net loss of $143,789 for the three months ended September 30, 2017 and the overstatement of $115,975 in derivative liabilities, the understatement of $31 in common stock, the overstatement of $259,764 in additional paid-in capital and the overstatement of $143,789 in accumulated deficits as of September 30, 2017. 

 

The following tables present the impact of the financial statement error for the consolidated financials of Freedom Leaf Inc.:

 

Balance Sheet                                    
    December 31, 2017     September 30, 2017  
    As previously                 As previously              
    reported     Adjustments     As restated     reported     Adjustments     As restated  
Liabilities and Stockholders'                                                
Equity (Deficit)                                                
                                                 
Derivative liabilities   $ 47,289     $ (29,707 )   $ 17,582     $ 157,743     $ (115,975 )   $ 41,768  
                                                 
Common stock                           $ 124,591     $ 31     $ 124,622  
Additional paid-in capital   $ 6,110,832     $ 344,610     $ 6,455,442     $ 5,444,594     $ 259,764     $ 5,704,327  
Accumulated deficit   $ (6,370,985 )   $ (314,903 )   $ (6,685,888 )   $ (5,628,572 )   $ (143,789 )   $ (5,772,361 )

 

Statement of Operations                          
    For the Six Months Ended December 31, 2017     For the Three Months Ended September 30, 2017
Net loss attributable to common shareholders   $ (1,449,997 )   $ (314,903 )   $ (1,764,900 )   $ (707,584 )   $(143,789)   $(851,373)
                                         

 

 

On May 10, 2018, the Company appointed its CFO, Richard Groberg, as a member of the Company’s Board of Directors. In consideration of his appointment, the Company agreed to issue to Mr. Groberg’s entity (1) $50,000 in common stock to vest monthly over a one-year period, at a value of $0.16 per share, for a total of 312,500 shares, and (2) an eighteen-month warrant to acquire 500,000 shares of common stock of the Company at an exercise price of $0.10 per share.

On May 14, 2018, the Company sold 1,250,000 shares to each Caesar Capital Group (“Cesar”) and Joseph W and Patricia G Abrams Family Trust dtd 3/95 (“Abrams”) for $200,000 in total, based on a per share price of $0.08.

 

In a related transaction, the Company is issuing to Caesar and Abrams 6,000,000 shares of the Company’s common stock (based on a value of $0.25 per share, or $1,500,000) in exchange for a 25% ownership interest in Cicero Transact Group, LLC (“Cicero”), a company that is launching an innovative, online business-to-business deal platform. The Company intends to work with Cicero in regard to opportunities in the cannabis industry. Additionally, Michael Woloshin (“Woloshin”), a principal of Caesar, and Abrams, intend to work with the Company in an advisory capacity.

 

On May 15, 2018, the Company issued to Cowan a License Agreement that grants him exclusive licensee distribution rights to the Freedom Leaf Inc magazine, as well as other “Freedom Leaf” branded merchandise and services. In consideration of such license, Cowan cancelled $240,000 of payables owed to him by the Company. Also, in connection with this transaction, the Company issued to Cowan a warrant exercisable between July 1, 2018 and November 15, 2019.

 

During March through May 2018, in connection with the Company’s audit of GME, Company’s management discovered several irregularities regarding GME’s operations and its sellers’ activities before and after the consummation of the Company’s acquisition of that business. Based on investigation of these discoveries, the Company, effective on June 4, 2018, consummated a termination agreement with GME’s sellers. In connection with that agreement, GME’s sellers committed to return to the Company the 4,220,000 shares it previously issued to the sellers. The Company will write off approximately $33,000 it had invested cumulatively in GME in addition to the stock issuance. 

 

The Company, on May 17, 2018, entered into a binding letter of intent to acquire an existing, approximately 430,000 square foot facility, that it intends to convert from a Poinsettia production facility into a light deprivation hemp production greenhouse. The total purchase price, including approximately €350,000 of rare, botanical plants and other greenhouse supplies that the Company acquired for €100,000 and intends to sell, is: €4,100,000 (approximately US$4.8 million). The purchase consideration will be paid as follows: (i) €20,000 down, which amount already has been paid by the Company; (ii) €20,000 a month for 25 months, and (iii) €100,000 per month thereafter until paid in full. The Company intends to consummate this acquisition on or about July 2, 2018. Located in Valencia, the third largest city in Spain with an average of 300 days of sun per year and agricultural setting, the facility previously was one of the biggest Poinsettia producers in Europe. At its peak, it produced millions of Poinsettia clones and had more than 80 greenhouse workers working 24/7. The Company chose this facility due to the similarities in growing Poinsettias and Hemp and because of its light cycles and heavy machinery specific to industrial plant production. This turn-key facility includes: approximately 430,000 square feet of light deprivation greenhouse, growing supplies, polished concrete, and triple galvanized steel framework. It its fully equipped with an automated irrigation system, a mist system, a refrigerated storage area, a light deprivation system to maximize number of crops per year, a Dutch, hydroponic set up and heating system, its own gas pipe, and five sources of irrigation water with reservoir. The facility also has office space that the Company intends to utilize to house: (i) our Spanish Media department (lamarihuana.com) and (ii) a warehouse. The purchase also includes outdoor space and the necessary structural steel sufficient to erect a new 64,000 sq. ft galvanized steel frame facility the Company intends to build to use as a GMP extraction, formulation and bottling facility. The Company intends to retain the predecessor operation’s key employees to maintain the growing facilities. Management’s goal is for this facility to become a leading greenhouse producer of cannabinoids in Europe. The Company’s goal is to grow up to two million grams of EU-certified Industrial Hemp in its first year of operations and then to expand significantly in subsequent years. The Company also expects to utilize this facility to increase its Hemp research, tissue culture and extraction capabilities in the following years.

 

On June 7, 2018, the Company retained Joseph Abrams, an individual acting as an independent contractor, to serve as a member of the Company’s Advisory Board and, in connection with that appointment, issued to Abrams: 312,500 of the Company’s common stock per year. The first year’s stock will be issued immediately and shall vest monthly over one year and will be valued at $0.16 per share, valuing the grant at $50,000. For the second year, the stock will be issued on June 9, 2019, and will be based on the closing price of the Company’s common stock on OTC Markets on June 8, 2019.

 

On June 21, 2018, the Company consummated the acquisition of intellectual property relating a proprietary formula for the compounding of a nutraceutical non-liquid to inhibit the accumulation of LDL cholesterol (and an underlying patent-pending application regarding the formula) developed by Healthy Discovery Associates Corp., a Florida corporation. Clinical trials for the nutraceutical product based on the formula indicate significant improvements in patient cholesterol levels. The patent-pending application is for a dietary supplement, which should not require a United States Food and Drug Administration (“FDA”) approval. The Company acquired the intellectual property regarding the formula and patent-pending application for 1,600,000 shares of common stock at a value of $0.25 per share, subject to a leak-out agreement and a price adjustment if the average trading price of the Company’s common stock for the five days subsequent to the six-month anniversary of the consummation of this transaction does not exceed $0.25 per share.

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1. Nature of Operations and Summary of Significant Accounting Policies (Policies)
9 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization

Organization

 

Freedom Leaf Inc. (the “Company,” “we,” “us,” “our,” “Freedom Leaf” or “FRLF”) was incorporated in the State of Nevada on February 21, 2013, under the name of Arkadia International, Inc. The Company originally was engaged in the business of the acquisition of in demand equipment, cars and goods with the intent to resale these in the U.S. territory or export to overseas countries. On October 3, 2014, the Company experienced a change in control. Richard C. Cowan (“Cowan”) acquired a majority of the issued and outstanding common stock of the Company in accordance with stock purchase agreements by and between Cowan and Vladimir and Galina Shekhtman (“Sellers”). On the closing date, October 3, 2014, Cowan purchased from the Sellers 6,950,100 shares of the Company’s outstanding restricted common stock for $100,000, representing 93% of the then-outstanding common stock of the Company.

 

On November 6, 2014, the Company merged with Freedom Leaf Inc., a private Nevada corporation. The Company changed its name from Arkadia International, Inc., to Freedom Leaf Inc. As a result of the merger, the private company was dissolved, the sole officer, director and shareholder of the private company, Clifford J. Perry, became an officer and director of the Company, and Mr. Perry received approximately 48.1% of the Company’s common stock post-merger. See Note 2 for related discussion.

 

For financial reporting purposes, the merger was accounted for as a "reverse merger" and recapitalization rather than a business combination, and the private company was deemed to be the accounting acquirer in the transaction, with the Company deemed to be the acquired company for financial reporting purposes. Consequently, the assets and liabilities and the operations that are reflected in the historical consolidated financial statements of the Company prior to the merger are those of the private company, and were recorded at the historical cost basis of the private company, and the consolidated financial statements after completion of the merger include the assets and liabilities of both the predecessor public company and private company, the historical operations of private company, and the operations of both companies from the date of the merger.

 

Cannabis Business Solutions Inc (“Cannabis Business Solutions”), a Nevada corporation, was formed on February 5, 2014, and is a subsidiary of the Company. This subsidiary had nominal activity until it purchased the LaMarihuana.com assets from Valencia Web Technology S.L., B-97183354, effective April 8, 2017 (see Note 2).

 

Leafceuticals Inc (“Leafceuticals”), formerly known as Cannabiz U, Inc., a Nevada corporation, was formed on February 13, 2014, and is a wholly-owned subsidiary of the Company. This subsidiary began active operations in January 2018.

 

Freedom Leaf International Inc. (“Freedom Leaf International”), a Nevada corporation, was formed on November 27, 2015, and is a wholly-owned subsidiary of the Company. This subsidiary has had no activity to date.

 

Freedom Leaf Cares Inc. (“Freedom Leaf Cares”), a Nevada corporation, was formed on October 1, 2014, and is a wholly-owned subsidiary of the Company. Freedom Leaf Cares was dissolved in 2016. Until dissolution, this subsidiary had no activity.

Nature of Operations

Nature of Operations

 

Freedom Leaf Inc., “The Marijuana Legalization Company®,” is a group of diversified, international, vertically-integrated hemp businesses and cannabis media companies. Freedom Leaf Inc. has been working since 2014 to build a diverse portfolio of related cannabis and hemp businesses through strategic acquisitions across the industry.

 

FRLF’s portfolio of acquisitions includes our recently acquired hemp CBD product line Irie CBD; our wholly-owned hemp extraction division Leafceuticals, Inc.; our exclusive health and wellness CBD brand “Hempology;” our hemp greenhouse cultivation with recent acquisition of a facility in Valencia, Spain; our hemp-based rolling paper company Plants to Paper; two of the largest Spanish-speaking cannabis web portals in the world LaMarihuana.com and Marihuana-Medicinal.com; and, of course, our flagship publication, Freedom Leaf Magazine.

 

Through our targeted acquisitions and growth plan execution, the Company has built a solid foundation for our vertically-integrated cannabis/hemp company to enhance both revenue growth and shareholder value. Our cultivation and extraction divisions allow FRLF to grow and source our own hemp CBD, which allows lower production costs for our wholly-owned CBD product lines, and better gross profit, for our CBD product sales. In addition, our domestic and international media companies permit us to direct organic traffic to our eCommerce sites and retail locations.

 

·Freedom Leaf does not handle, grow, sell, or dispense marijuana or related products in the United States.

 

·Freedom Leaf believes that its European activities are in compliance with relevant EU laws.

Basis of Presentation

Basis of Presentation

 

The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America.

Principles of Consolidation

Principles of Consolidation

 

The consolidated financial statements include the accounts of Freedom Leaf and its subsidiaries, Cannabis Business Solutions, Leafceuticals, Freedom Leaf Cares, and Freedom Leaf International. All significant inter-company balances and transactions have been eliminated in consolidation.

Fair Value of Measurements

Fair Value Measurements

 

We follow accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

We currently measure and report at fair value our intangible assets (due to our impairment analysis) and derivative liabilities. The fair value of intangible assets has been determined using the present value of estimated future cash flows method. The fair value of derivative liabilities is measured using the Black-Scholes option pricing method.

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

Use of Estimates

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates in the accompanying consolidated financial statements include the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the web site and property and equipment, valuation of warrants and beneficial conversion feature debt discounts, valuation of derivatives, valuation of share-based payments and the valuation allowance on deferred tax assets.

Reclassifications

Reclassifications

 

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses, total assets, or stockholders’ equity as previously reported.

Inventory

Inventory

 

Inventory is recorded at the lower of cost or market and the cost of sales are recorded utilizing the first in first out (“FIFO”) method.

Accounting for Derivatives

Accounting for Derivatives

 

The Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on the reclassification date.

Revenue Recognition

Revenue Recognition

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. We have early adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Net Earnings (Loss) Per Share

Net Earnings (Loss) Per Share

 

In accordance with ASC 260-10, “Earnings Per Share,” basic net earnings (loss) per common share is computed by dividing the net earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares, which may dilute future earnings per share, consist of warrants to purchase 4,618,167 shares of common stock at March 31, 2018. Equivalent shares are not utilized when the effect is anti-dilutive.

Effect of Recent Accounting Pronouncements

Effect of Recent Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU No. 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for annual reporting periods beginning after December 15, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method, nor has it determined the effect of the standard on its ongoing financial reporting.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. We have adopted this update. We do not believe this guidance will impact the recognition of our primary source of revenue. The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements (Topic 205) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The guidance requires management to perform an evaluation each annual and interim reporting period of whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within the one-year period after the date that the financial statements are issued. If such conditions are identified, the guidance requires an entity to provide certain disclosures about the principal conditions or events that gave rise to the substantial doubt about the entity’s ability to continue as a going concern, management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations and management’s plans to alleviate or mitigate substantial doubt about the entity’s ability to continue as a going concern. The guidance is effective for the first annual period ending after December 15, 2016 and interim periods thereafter.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an ASU on lease accounting. The ASU requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The ASU is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating the ASU, the Company expects the adoption of the ASU to have a material effect on the Company’s financial condition due to the recognition of the lease rights and obligations as assets and liabilities. The Company does not expect the ASU to have a material effect on the Company’s results of operations, and the ASU will have no effect on cash flows.

 

The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a significant effect on the Company’s financial statement.

XML 35 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
3. Business Combination (Tables)
9 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Allocation of assets acquired and liabilities assumed in business combination

Consideration given:  

 

Common stock shares given  $295,400 
      
Total consideration given  $295,400 
      
Fair value of identifiable assets acquired, and liabilities assumed:     
      
Cash  $3,546 
Accounts receivable   7,430 
Fixed assets, net   64,891 
Intangible assets, net   5,176 
Accounts payable   (71,478)
Acquisition payable   (24,805)
Payable to shareholders   (5,045)
Total identifiable net liabilities   (20,285)
Goodwill   315,685 
Total consideration  $295,400 

 

XML 36 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
5. Commitments and Contingencies (Tables)
9 Months Ended
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]  
Future minimum lease payments
2018  $5,982 
2019   18,943 
      
Total  $24,925 
XML 37 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
7. Other Receivables (Tables)
9 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Schedule of other receivables
   March 31,
2018
   June 30,
2017
 
FLNL  $176,779   $173,551 
FLI   246,178    240,555 
BBDHS   225,186    223,711 
Subtotal   648,143    637,817 
Less: Allowance   (648,143)    
Net Balance  $   $637,817 
XML 38 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
8. Fixed Assets (Tables)
9 Months Ended
Mar. 31, 2018
Property, Plant and Equipment [Abstract]  
Schedule of fixed assets
   March 31,   June 30, 
   2018   2017 
Equipment  $221,200   $ 
Total fixed assets   221,200     
Less: Accumulated depreciation   (24,569)    
Fixed assets, net  $196,631   $ 
XML 39 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
9. Intangible Assets (Tables)
9 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of intangible assets
   March 31,   June 30, 
   2018   2017 
Website development  $401,980   $12,245 
Total intangible assets   401,980    12,245 
Less: Accumulated amortization   (85,025)   (1,425)
Intangible assets, net  $316,955   $10,820 
Amortization table
2018  $5,136 
2019   15,127 
2020   1,044 
2021   1,044 
2022 and thereafter   2,422 
Total  $24,773 
XML 40 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
10. Derivatives (Tables)
9 Months Ended
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Assumptions
   

March 31,

2018

   

June 30,

2017

   

Note

Inception

Date

 
Volatility     N/A       141%       170% - 232%  
Expected Term     N/A       0.33 - 0.96 years       0.75 - 1.0 years  
Risk-Free Interest Rate     N/A       0.84%       1.07% - 1.33%  
Schedule of derivative instruments
Embedded conversion option derivative liability fair value on June 30, 2017  $52,757 
Note modifications adjustment   43,866 
Adjustment for extinguishment of notes and conversion of notes   (91,653)
Change in fair value in fiscal year 2018   (4,970)
Embedded conversion option derivative liability fair value on March 31, 2018  $ 
XML 41 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
11. Convertible Notes Payable, Net of Premiums and Notes Payable (Tables)
9 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Schedule of convertible notes
Convertible notes, net of discounts and notes payable                        
   March 31, 2018   June 30, 2017 
           Principal,           Principal, 
       Debt   net of       Debt   net of 
   Principal   Discounts   Discounts   Principal   Discounts   Discounts 
PureEnergy  $   $   $   $15,475   $(7,489)  $7,986 
PureEnergy               13,480    (5,565)   7,915 
PowerUp               75,000    (39,330)   35,670 
PowerUp               38,000    (18,893)   19,107 
Total  $   $   $   $141,955   $(71,277)  $70,678 
XML 42 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
12. Stockholders' Equity (Tables)
9 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Schedule of Assumptions
   March 31, 2018   March 31, 2017   Warrants Inception Date 
Expected volatility   260%    231%    193% - 261% 
Expected dividends            
Expected term    2 - 9 months      21 months      0.25 - 1.76  
Risk-free interest rate   1.93%    1.15%    0.98% - 1.82% 
XML 43 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
15. Restatement of Prior Period Financial Statements (Tables)
9 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Schedule of Error Corrections and Prior Period Adjustments
Balance Sheet                                    
    December 31, 2017     September 30, 2017  
    As previously                 As previously              
    reported     Adjustments     As restated     reported     Adjustments     As restated  
Liabilities and Stockholders'                                                
Equity (Deficit)                                                
                                                 
Derivative liabilities   $ 47,289     $ (29,707 )   $ 17,582     $ 157,743     $ (115,975 )   $ 41,768  
                                                 
Common stock                           $ 124,591     $ 31     $ 124,622  
Additional paid-in capital   $ 6,110,832     $ 344,610     $ 6,455,442     $ 5,444,594     $ 259,764     $ 5,704,327  
Accumulated deficit   $ (6,370,985 )   $ (314,903 )   $ (6,685,888 )   $ (5,628,572 )   $ (143,789 )   $ (5,772,361 )

 

Statement of Operations                          
    For the Six Months Ended December 31, 2017     For the Three Months Ended September 30, 2017
Net loss attributable to common shareholders   $ (1,449,997 )   $ (314,903 )   $ (1,764,900 )   $ (707,584 )   $(143,789)   $(851,373)
XML 44 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
1. Nature of Operations (Details Narrative)
9 Months Ended
Mar. 31, 2018
shares
Warrants [Member]  
Antidilutive shares 4,618,167
XML 45 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
2. Definitive Agreements (Details Narrative)
9 Months Ended
Mar. 31, 2018
USD ($)
Business Combinations [Abstract]  
Sales or commissions earned $ 0
XML 46 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
3. Business Combination (Details) - USD ($)
7 Months Ended
Feb. 05, 2018
Mar. 31, 2018
Jun. 30, 2017
Fair value of identifiable assets acquired, and liabilities assumed:      
Goodwill   $ 315,685 $ 0
Green Market Europe [Member]      
Consideration given:      
Common stock shares given $ 295,400    
Total consideration given 295,400    
Fair value of identifiable assets acquired, and liabilities assumed:      
Cash 3,546    
Accounts receivable 7,430    
Fixed assets, net 64,891    
Intangible assets, net 5,176    
Accounts payable (71,478)    
Acquisition payable (24,805)    
Payable to shareholders (5,045)    
Total identifiable net liabilities (20,285)    
Goodwill 315,685    
Total consideration $ 295,400    
XML 47 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
3. Business Combination (Details Narrative)
Mar. 31, 2018
USD ($)
Business Combinations [Abstract]  
Green Market Europe Purchase Percentage Ownership 100.00%
Fair value of net assets acquired $ 20,285
XML 48 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
4. Going Concern (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended 9 Months Ended
Mar. 31, 2018
Sep. 30, 2017
Mar. 31, 2017
Dec. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Jun. 30, 2017
Going Concern              
Net loss $ (1,561,141) $ (851,373) $ (27,200) $ (1,764,900) $ (3,326,041) $ (539,008)  
Net cash used in operating activities         (520,088) $ (222,899)  
Working capital (134,341)       (134,341)    
Stockholders' equity 432,278       432,278   $ 187,818
Accumulated deficit $ (8,247,029) $ (5,772,361)   $ (6,685,888) $ (8,247,029)   $ (4,920,988)
XML 49 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
5. Commitments and Contingencies (Details)
Jun. 30, 2017
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2018 $ 5,982
2019 18,943
Total $ 24,925
XML 50 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
5. Commitments and Contingencies (Details Narrative) - USD ($)
9 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]    
Rent expense $ 23,334 $ 28,021
XML 51 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
6. Related Parties (Details Narrative) - USD ($)
9 Months Ended
Mar. 31, 2018
Feb. 12, 2018
Jun. 30, 2017
Cowan      
Due to related parties $ 313,713   $ 269,226
Perry      
Due to related parties 21,444   21,444
Stock issued for accrued compensation, value $ 112,500    
Stock issued for accrued compensation, shares issued 5,784,061    
Medeiros [Member]      
Due to related parties $ 0   $ 0
Stock issued for accrued compensation, value $ 52,500    
Stock issued for accrued compensation, shares issued 2,699,228    
Pelosi [Member]      
Stock issued for compensation, shares 850,000    
Stock issued for cash, shares 967,000    
Proceeds from sale of stock $ 14,500    
Warrant exercise price $ 0.04    
Pelosi [Member] | Pelosi [Member]      
Stock issued for cash, shares 967,000    
Proceeds from sale of stock $ 14,500    
Stock date of sale Nov. 09, 2017    
Pelosi [Member] | Pelosi [Member]      
Stock issued for cash, shares 1,050,000    
Proceeds from sale of stock $ 21,000    
Stock date of sale Jan. 22, 2018    
Pelosi [Member] | February 12, 2018 [Member]      
Warrants issued 1,250,000    
Warrant exercise price   $ .04  
Warrant expiration date   Aug. 11, 2018  
Groberg [Member]      
Stock issued for compensation, shares 1,400,000    
Stock issued for compensation, value $ 142,100    
XML 52 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
7. Other Receivables (Details) - USD ($)
Mar. 31, 2018
Jun. 30, 2017
Mar. 31, 2017
Other receivables, gross $ 648,143 $ 637,817  
Allowance for other receivables 648,143 0  
Other receivables, net 1,123 $ 637,817  
FLNL [Member]      
Other receivables, gross 176,779   $ 173,551
FLI [Member]      
Other receivables, gross 246,178   240,555
BBDHS [Member]      
Other receivables, gross $ 225,186   $ 223,711
XML 53 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
8. Fixed Assets (Details) - USD ($)
Mar. 31, 2018
Jun. 30, 2017
Property, Plant and Equipment [Abstract]    
Property and equipment, gross $ 221,200 $ 0
Less: Accumulated depreciation 24,569 0
Property and equipment, net $ 196,631 $ 0
XML 54 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
8. Fixed Assets (Details Narrative) - USD ($)
9 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Jun. 30, 2017
Property, Plant and Equipment [Abstract]      
Property and equipment, net $ 196,631   $ 0
Depreciation expense $ 24,569 $ 0  
XML 55 R42.htm IDEA: XBRL DOCUMENT v3.8.0.1
9. Intangible Assets (Details - Intangible assets) - USD ($)
Mar. 31, 2018
Jun. 30, 2017
Intangible assets, gross $ 396,682 $ 12,245
Less: Accumulated amortization 85,025 1,425
Intangible assets, net 316,955 10,820
Website Development [Member]    
Intangible assets, gross $ 396,682 $ 12,245
XML 56 R43.htm IDEA: XBRL DOCUMENT v3.8.0.1
9. Intangible Assets (Details-amortization)
Mar. 31, 2018
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
2018 $ 5,136
2019 15,127
2020 1,044
2021 1,044
2022 and thereafter 2,422
Total $ 24,773
XML 57 R44.htm IDEA: XBRL DOCUMENT v3.8.0.1
9. Intangible Assets (Details Narrative) - USD ($)
9 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization expense $ 83,722 $ 370
XML 58 R45.htm IDEA: XBRL DOCUMENT v3.8.0.1
10. Derivatives (Details-assumptions) - Embedded Derivative Financial Instruments [Member]
9 Months Ended
Mar. 31, 2018
Measurement Input, Option Volatility [Member] | June 2017 [Member]  
Assumptions 141%
Measurement Input, Option Volatility [Member] | Note Inception Date [Member]  
Assumptions 170% - 232%
Measurement Input, Expected Term [Member] | June 2017 [Member]  
Assumptions 0.33 - 0.96 years
Measurement Input, Expected Term [Member] | Note Inception Date [Member]  
Assumptions 0.75 - 1.0 years
Measurement Input Risk Free Interest Rate [Member] | June 2017 [Member]  
Assumptions 0.84%
Measurement Input Risk Free Interest Rate [Member] | Note Inception Date [Member]  
Assumptions 1.07% - 1.33%
XML 59 R46.htm IDEA: XBRL DOCUMENT v3.8.0.1
10. Derivatives (Details - Embedded conversion option) - USD ($)
3 Months Ended 9 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Derivative liabilities, beginning balance     $ 52,757  
Adjustment for extinguishment of notes and conversion of notes $ 34,178 $ 5,253 (45,416) $ (55,014)
Embedded Conversion Option [Member        
Derivative liabilities, beginning balance     52,757  
Note modifications adjustment     43,866  
Adjustment for extinguishment of notes and conversion of notes     (91,653)  
Change in fair value     (4,970)  
Derivative liabilities, ending balance $ 0   $ 0  
XML 60 R47.htm IDEA: XBRL DOCUMENT v3.8.0.1
11. Convertible Notes Payable, Net of Premiums and Notes Payable (Details) - USD ($)
Mar. 31, 2018
Jun. 30, 2017
Principal $ 0 $ 141,955
Debt discounts 0 (71,277)
Convertible notes payable, net 0 70,678
Current portion 0 70,678
Non-current portion   0
Pure Energy 1 [Member]    
Principal 0 15,475
Debt discounts 0 (7,489)
Convertible notes payable, net 0 7,986
Pure Energy 2 [Member]    
Principal 0 13,480
Debt discounts 0 (5,565)
Convertible notes payable, net 0 7,915
Power Up 1 [Member]    
Principal 0 75,000
Debt discounts 0 (39,330)
Convertible notes payable, net 0 35,670
Power Up 2 [Member]    
Principal 0 38,000
Debt discounts 0 (18,893)
Convertible notes payable, net $ 0 $ 19,107
XML 61 R48.htm IDEA: XBRL DOCUMENT v3.8.0.1
11. Convertible Notes Payable, Net of Premiums and Notes Payable (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 4 Months Ended 5 Months Ended 7 Months Ended 9 Months Ended 12 Months Ended
Jul. 19, 2017
Mar. 31, 2018
Mar. 31, 2017
Nov. 09, 2017
Oct. 30, 2017
Dec. 15, 2017
Jan. 26, 2018
Jan. 19, 2018
Mar. 31, 2018
Mar. 31, 2017
Jun. 30, 2017
Jun. 30, 2016
Beneficial conversion feature   $ 34,178 $ 5,253           $ (45,416) $ (55,014)    
Perlowin [Member] | Convertible Debt [Member]                        
Debt interest rate   12.00%             12.00%      
Accrued interest   $ 467             $ 467      
Conversion of debt, stock issued                       50,000
Conversion of debt, debt converted                       $ 5,000
Perlowin [Member] | Convertible Debt 2 [Member]                        
Debt interest rate   12.00%             12.00%      
Accrued interest   $ 408             $ 408      
Conversion of debt, stock issued                       50,000
Conversion of debt, debt converted                       $ 5,000
Ogorodnikova [Member] | Convertible Debt [Member]                        
Debt interest rate   12.00%             12.00%      
Accrued interest   $ 986             $ 986      
Conversion of debt, stock issued                       125,000
Conversion of debt, debt converted                       $ 12,500
Pure Energy [Member]                        
Conversion of debt, stock issued                 7,520,192      
Conversion of debt, debt converted                 $ 109,033      
Pure Energy [Member] | Convertible Debt [Member]                        
Debt interest rate         8.00%              
Amortization of beneficial conversion feature         $ 8,481              
Stock issued on conversion of debt, shares issued               800,918        
Conversion of debt, stock issued 748,934     5,764,490 1,006,768   1,933,848 2,008,740     791,140  
Conversion of debt, debt converted $ 13,481     $ 78,427 $ 15,475   $ 33,842 $ 40,175     $ 12,501  
Power Up [Member] | Convertible Debt [Member]                        
Debt face value   $ 75,000       $ 38,000     $ 75,000      
Debt interest rate   8.00%       8.00%     8.00%      
Amortization of debt discount                 $ 7,455      
Amortization of beneficial conversion feature           $ 6,609            
Accrued interest   $ 0             $ 0      
Repayment of convertible note           $ 38,000            
LG Capital [Member] | Convertible Debt [Member]                        
Debt issuance date                 Aug. 11, 2017      
Debt face value   42,000             $ 42,000      
Convertible rate                 35.00%      
Accrued interest   1,565             $ 1,565      
Repayment of convertible note                 58,813      
Prepayment penaly and legal fees   15,248             $ 15,248      
Pure Energy 3 [Member] | Convertible Debt [Member]                        
Debt issuance date                 Sep. 26, 2017      
Debt face value   53,000             $ 53,000      
Repayment of convertible note                 $ 71,913      
Pure Energy 4 [Member] | Convertible Debt [Member]                        
Debt issuance date                 Sep. 27, 2017      
Debt face value   $ 78,427             $ 78,427      
Debt interest rate   8.00%             8.00%      
Conversion of debt, stock issued                 5,765,490      
Prepayment penaly and legal fees   $ 28,496             $ 28,496      
Debt outstanding   $ 0             $ 0      
Pure Energy 5 [Member] | Convertible Debt [Member]                        
Conversion of debt, stock issued             1,933,848          
Conversion of debt, debt converted             $ 33,842          
Pure Energy 6 [Member] | Convertible Debt [Member]                        
Conversion of debt, stock issued               2,008,740        
Conversion of debt, debt converted               $ 40,175        
XML 62 R49.htm IDEA: XBRL DOCUMENT v3.8.0.1
12. Stockholders' Equity (Details Narrative) - USD ($)
6 Months Ended 9 Months Ended
Dec. 31, 2017
Mar. 31, 2018
Jun. 30, 2017
Stock issued for acquisition, Value   $ 50,000  
Pelosi [Member]      
Common stock issued for warrants   1,250,000  
Warrants exercise price   $ 0.04  
custom:WarrantsExpireDate   Aug. 11, 2018  
Stock issued for compensation, shares issued   850,000  
Stock issued for compensation, value   $ 26,285  
Sale of common stock, shares   967,000  
Sale of common stock, value   $ 14,500  
Common stock issued for option   $ 1,250,000  
Stock issued for acquisition, Shares   1,050,000  
Stock issued for acquisition, Value   $ 21,000  
2016 Stock Option Plan [Member]      
Shares reserved under plan   10,000,000  
Cliff Perry [Member]      
Stock issued for compensation, shares issued   5,784,061  
Stock issued for compensation, value   $ 112,500  
Raymond Medeiros [Member]      
Stock issued for compensation, shares issued   2,699,228  
Stock issued for compensation, value   $ 52,500  
Frank Dobrucki [Member]      
Stock issued for services, shares issued   750,000  
Stock issued for services, value   $ 48,475  
NuAxon BioScience, Inc [Member]      
Stock issued for services, shares issued   503,535  
Stock issued for services, value   $ 48,117  
Nuaxon Bioscience [Member]      
Stock issued for licensing rights, shares   500,000  
Stock issued for licensing rights, value   $ 22,000  
Lakeport Business Services [Member]      
Stock issued for services, shares issued   273,333  
Stock issued for services, value   $ 8,200  
Stock issued for accounts payable, shares issued   345,451  
Stock issued for accounts payable, value   $ 24,182  
Stock issued for accounts payable, amount   $ 9,450  
Christopher Thompson [Member]      
Stock issued for services, shares issued   600,000  
Stock issued for services, value   $ 48,900  
Christopher Thompson 1 [Member]      
Stock issued for services, shares issued   226,497  
Stock issued for services, value   $ 33,069  
Joshua Halford [Member]      
Stock issued for services, shares issued   550,000  
Stock issued for services, value   $ 44,825  
Christopher Sloan [Member]      
Stock issued for services, shares issued   661,500  
Stock issued for services, value   $ 137,535  
Stock issued for accounts payable, shares issued   400,000  
Stock issued for accounts payable, amount   $ 23,075  
Neil Dutson [Member]      
Stock issued for services, shares issued   500,303  
Stock issued for services, value   $ 37,203  
Stock issued for leasehold improvement, shares issued   30,000  
Stock issued for leasehold improvement, value   $ 900  
Stock issued for acquisition, Shares   909,090  
Stock issued for acquisition, Value   $ 100,000  
Neil Dutson 1 [Member]      
Stock issued for acquisition, Shares   624,000  
Stock issued for acquisition, Value   $ 78,000  
Marc Hatch [Member]      
Stock issued for services, shares issued   100,000  
Stock issued for services, value   $ 7,430  
Jason Edwards [Member]      
Stock issued for services, shares issued   400,000  
Stock issued for services, value   $ 16,280  
Michael Ostrander [Member]      
Stock issued for services, shares issued   600,000  
Stock issued for services, value   $ 24,420  
Valencia [Member]      
Common stock issuable   4,142,857  
Contingent liability   $ 174,000  
Timothy Puetz [Member]      
Stock issued for services, shares issued   1,001,250  
Stock issued for services, value   $ 30,038  
Breadfruit Tree Inc [Member]      
Stock issued for inventory received, shares issued   1,000,000  
Stock issued for inventory received value   $ 27,200  
Ronald Voight [Member]      
Stock issued for services, shares issued   255,000  
Stock issued for services, value   $ 7,650  
Legal counsel [Member]      
Stock issued for services, shares issued   122,500  
Stock issued for services, value   $ 8,575  
Victor Park [Member]      
Stock issued for services, shares issued   250,000  
Stock issued for services, value   $ 6,800  
Pure Energy [Member]      
Debt converted, shares issued   7,520,192  
Debt converted, debt amount   $ 109,033  
Sale of common stock, shares   4,785,459  
Sale of common stock, value   $ 83,746  
Stock issued for acquisition, Shares   526,315  
Stock issued for acquisition, Value   $ 25,000  
Stock isued for convertible promissory note, Shares   1,933,848  
Stock isued for convertible promissory note, Value   $ 33,842  
Common stock received   580,154  
Loss on issue of convertible note   $ (558,722)  
Pure Energy 1 [Member]      
Stock issued for acquisition, Shares   838,126  
Stock issued for acquisition, Value   $ 83,813  
Stock isued for convertible promissory note, Shares   800,918  
Stock isued for convertible promissory note, Value   $ 22,826  
Common stock received   89,703  
Loss on issue of convertible note   $ (66,877)  
Pure Energy 2 [Member]      
Stock isued for convertible promissory note, Shares   2,008,740  
Stock isued for convertible promissory note, Value   $ 40,175  
Common stock received   190,027  
Loss on issue of convertible note   $ (157,340)  
Stone [Member]      
Common stock issuable   600,000  
Stock issued for services, shares issued 600,000 600,000  
Stock issued for services, value   $ 36,750  
GME’s seller [Member]      
Stock issued for acquisition, Shares   4,220,000  
Stock issued for acquisition, Value   $ 295,400  
Stone 1 [Member]      
Stock issued for services, shares issued 600,000    
Groberg [Member]      
Stockholders' Equity Description  

On January 18, 2018, in connection with the Company’s appointment of Richard Groberg (“Groberg”) as its Chief Financial Officer to serve for an initial, two-year term, the Company (i) issued Groberg’s company, RSGroberg Consulting, LLC, 800,000 shares of common stock, and (ii) $5,000 per month compensation payable: (1) prior to the date that the Company is paying monthly compensation to its directors primarily in cash, in 600,000 shares of common stock (representing the first 12 months’ compensation), and (2) payable in cash thereafter. The common stock received was valued at $81,200 and $60,900, respectively.

 
Vision Concepts [Member]      
Stock issued for acquisition, Shares   74,074  
Stock issued for acquisition, Value   $ 10,000  
Rex Anthony Carrol [Member]      
Stock issued for acquisition, Shares   272,727  
Stock issued for acquisition, Value   $ 30,000  
Esteemed Consultants [Member]      
Stock issued for acquisition, Shares   909,091  
Stock issued for acquisition, Value   $ 100,000  
Moreno [Member]      
Stock issued for acquisition, Shares   500,000  
Stock issued for acquisition, Value   $ 50,000  
Lakeport Business Service [Member]      
Stock issued for services, shares issued   83,760  
Stock issued for services, value   $ 18,000  
Douglas Montgomery [Member]      
Stock issued for acquisition, Shares   160,000  
Greg Montgomery [Member]      
Stock issued for acquisition, Shares   80,000  
Lesley Montgomery [Member]      
Stock issued for acquisition, Shares   160,000  
Weintraub [Member]      
Common stock issued for warrants   268,167  
Number of warrants surrendered   52,779  
Proceeds from warrants surrendered   $ 16,090  
Acquisition of cashless exercise of warrants, Shares   215,378  
Stock issued for settlement of payables, value   $ 15,065  
Lakeport Business Services 1 [Member]      
Stock issued for services, shares issued   47,945  
Stock issued for services, value   $ 15,558  
Christopher Sloan [Member]      
Stock issued for services, shares issued   122,466  
Stock issued for services, value   $ 39,740  
Michael Ostrander 1 [Member]      
Stock issued for services, shares issued   150,000  
Stock issued for services, value   $ 12,350  
Michael Ostrander 2 [Member]      
Stock issued for services, shares issued   56,930  
Stock issued for services, value   $ 16,737  
Reliable Steel [Member]      
Debt converted, shares issued   229,671  
Debt converted, debt amount   $ 33,532  
Legal counsel 1 [Member]      
Stock issued for services, shares issued   16,952  
Stock issued for services, value   $ 2,475  
Steven Bloom [Member]      
Stock issued for services, shares issued   82,192  
Stock issued for services, value   $ 12,000  
Joseph Gurreri [Member]      
Common stock issued in consideration of accrued wages, Shares   60,616  
Common stock issued in consideration of accrued wages, value   $ 8,550  
The Company [Member]      
Common stock issuable     1,793,195
XML 63 R50.htm IDEA: XBRL DOCUMENT v3.8.0.1
15. Restatement of Prior Period Financial Statements (Details - Balance Sheet) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Derivative liabilities $ 0 $ 17,582 $ 41,768 $ 52,757
Common stock 161,741   124,622 111,102
Additional paid-in capital 8,516,596 6,455,442 5,704,327 4,996,756
Accumulated deficit $ (8,247,029) (6,685,888) (5,772,361) $ (4,920,988)
Scenario, Previously Reported [Member]        
Derivative liabilities   47,289 157,743  
Common stock     124,591  
Additional paid-in capital   6,110,832 5,444,594  
Accumulated deficit   (6,370,985) (5,628,572)  
Adjustment [Member]        
Derivative liabilities   (29,707) (115,975)  
Common stock     31  
Additional paid-in capital   344,610 259,764  
Accumulated deficit   $ (314,903) $ (143,789)  
XML 64 R51.htm IDEA: XBRL DOCUMENT v3.8.0.1
15. Restatement of Prior Period Financial Statements (Details - Statement of Operations) - USD ($)
3 Months Ended 6 Months Ended 9 Months Ended
Mar. 31, 2018
Sep. 30, 2017
Mar. 31, 2017
Dec. 31, 2017
Mar. 31, 2018
Mar. 31, 2017
Net loss attributable to common stockholders $ (1,561,141) $ (851,373) $ (27,200) $ (1,764,900) $ (3,326,041) $ (539,008)
Scenario, Previously Reported [Member]            
Net loss attributable to common stockholders   (707,584)   (1,449,997)    
Adjustment [Member]            
Net loss attributable to common stockholders   $ (143,789)   $ (314,903)    
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