FORWARD-LOOKING STATEMENTS
The information set forth in this section contains certain "forward-looking
statements," including, among other things, (i) expected changes in our revenues
and profitability, (ii) prospective business opportunities, and (iii) our
strategy for financing our business. Forward-looking statements are statements
other than historical information or statements of current condition. Some
forward-looking statements may be identified by use of terms such as "believes,"
"anticipates," "intends," or "expects." These forward-looking statements relate
to our plans, objectives and expectations for future operations. Although we
believe that our expectations with respect to the forward-looking statements are
based upon reasonable assumptions within the bounds of our knowledge of our
business and operations, in light of the risks and uncertainties inherent in all
future projections, the inclusion of forward-looking statements in this report
should not be regarded as a representation by us or any other person that our
objectives or plans will be achieved. Unless otherwise specified in this
quarterly report, all dollar amounts are expressed in
Corporate Overview
The Company is an innovative, full-scope, science-driven, premium hemp cultivation and branding enterprise focused on the cultivation and processing of industrial hemp for cannabidiol ("CBD"). The Hemp Farming Act of 2018 removed hemp from Schedule I controlled substances (defined as cannabis with less than 0.3% THC), making it an ordinary agricultural commodity.
The Company's business model includes generating revenues from the sale of hemp and premium-grade CBD products, creating trusted global consumer brands; developing valuable IP, and growing the Company rapidly through strategic acquisitions. With direct regard to acquisitions, the Company acts as a business accelerator and a vertical integrator focusing to support rapid growth and development of companies with extraordinary potential.
The independent auditors' report on our financial statements for the years ended
While our unaudited condensed consolidated financial statements are presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time, our auditors have raised a substantial doubt about our ability to continue as a going concern.
Results of Operations for the three and six months ended
Revenues
For the six months ended
In June and
The Company is currently in the process of drying and curing these harvested
crops and plans to market and sell these crops during this fiscal year at market
prices based on market demand. The Company seeks to sell at optimal market
pricing in order to maximize potential revenues. Some of these crops will be
sold as flower and finished smokable products, whereas some crops will be
processed into higher valued oils, isolate, and other processed products. We
intend to sell the crops, whether in raw form or as processed goods, through
wholesale channels as well as through the Company's upcoming e-commerce site
under the
Additionally, new greenhouse plantings are planned for calendar quarter ending
18 Table of Contents Operating Expenses
Operating expenses for the three and six months ended
Three Months Ended Six Months Ended January 31, January 31, 2022 2021 2022 2021
Operating Expenses:
Consulting and business development
- 384,000 - 2,288,050 Supplies - 79,681 - 166,974 Payroll and subcontractor expenses - (4,746 ) 23,023 - Depreciation 62,439 33,288 122,099 63,465 General and administrative, other 121,819 87,020 155,918 201,498 Contingent Loss 186,480 - 186,480 - Total Operating Expenses$ 721,942 $ 799,594 $ 1,213,925 $ 3,078,829
This decreases for the three and six months ended
Stock compensation expense for the three and six months ended
· OnSeptember 2, 2020 , the Company issued 500,000 common shares to SRAX, Inc. ("SRAX"), in exchange for the right to use the SRAX Sequire platform, pursuant to a Platform Account Contract datedAugust 4, 2020 . The shares were valued at$355,550 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 250,000 shares of common stock to the CEO of the Company in exchange for consulting services, pursuant to his agreement datedAugust 1, 2019 (see Note 9 (b)). The shares were valued at$370,000 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 100,000 shares of common stock to the Chief Project Manager of the Company in exchange for consulting services, pursuant to his consulting agreement datedAugust 1, 2019 (see Note 9 (c)). The shares were valued at$148,000 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 100,000 shares of common stock to the Chief Science Officer of the Company pursuant to his employment agreement datedAugust 1, 2020 (see Note 9 (l)). The shares were valued at$87,250 based on OTC's closing trade price on the date of the agreement. 19 Table of Contents · OnSeptember 21, 2020 , the Company issued 25,000 common shares to the Assistant Agricultural Operations Manager of the Company in exchange for consulting services, pursuant to her consulting agreement datedAugust 1, 2019 (see Note 9 (e)). The shares were valued at$37,000 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 and under the terms of the Placement Agreement datedSeptember 18, 2020 , withBoustead Securities LLC ("BSL")., the Company issued to BSL an advisory fee of two hundred fifty thousand (250,000) shares of common stock (see Note 9 (p)). The shares were valued at$187,500 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 50,000 shares to the Company's CFO, pursuant to his consulting agreement datedFebruary 13, 2020 (see Note 9 (i)). The shares were valued at$60,750 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 50,000 shares of common stock to a consultant for advice on real estate acquisitions, pursuant to his consulting agreement (see Note 9 (n)). The shares were valued at$58,500 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 125,000 shares of common stock to a consultant for advisory services to the Board of Directors of the Company, pursuant to his consulting agreement (see Note 9 (j)). The shares were valued at$113,750 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 125,000 shares of common stock to a consultant for advisory services to the Board of Directors of the Company, pursuant to his consulting agreement (see Note 9 (k)). The shares were valued at$113,750 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 100,000 shares of common stock to a consultant for services, pursuant to his agreement datedFebruary 1, 2020 (see Note 9 (h)). The shares were valued at$187,000 based on OTC's closing trade price on the date of the agreement. · OnSeptember 21, 2020 , the Company issued 125,000 shares of common stock to a shareholder for advisory services to the Company, pursuant to his consulting agreement datedAugust 1, 2019 (see Note 9 (d)). The shares were valued at$185,000 based on OTC's closing trade price on the date of the agreement. · OnNovember 15, 2020 , the Company issued 125,000 shares of common stock to a consultant for services to the Company, pursuant to his consulting agreement datedAugust 18, 2020 (see Note 9 (m)). The shares were valued at$75,000 based on OTC's closing trade price on the issuance date, pursuant to the agreement. · OnNovember 15, 2020 , the Company issued 100,000 shares of common stock to a pursuant to a consulting agreement datedNovember 15, 2019 , for services performed as COO of the Company (see Note 9 (g)). The shares were valued at$200,000 based on OTC's closing trade price on the effective date of the agreement. · OnDecember 1, 2020 , the Company issued 50,000 shares of common stock to a consultant for services, pursuant to her agreement datedDecember 1, 2020 (see note 9 (q)). The shares were valued at$34,000 based on OTC's closing trade price on the date of the agreement. · OnJanuary 15, 2021 , the Company issued 100,000 shares of common stock to a consultant for services, pursuant to her agreement datedJanuary 15, 2021 (see note 9 (r)). The shares were valued at$75,000 based on OTC's closing trade price on the date of the agreement.
For the three and six months ended
Other Income (Expenses)
Interest expense for the three and six months ended
Net loss
The net loss for the three and six months ended
20 Table of Contents
Liquidity and Capital Resources
In
Currently, we have limited operating capital. Our current capital and our other existing resources will not be sufficient to provide the working capital needed for our current business. Additional capital will be required to meet our debt obligations, and to further expand our business. We may be unable to obtain the additional capital required. Our inability to generate capital or raise additional funds when required will have a negative impact on our business development and financial results.
For the six months ended
Working Capital January 31, July 31, 2022 2021 Current Assets$ 269,235 $ 507,512 Current Liabilities 9,334,343 8,322,766 Working Capital (Deficit)$ (9,065,108 ) $ (7,815,254 )
Cash was
Cash Flows Six Months Six Months Ended EndedJanuary 31 ,January 31, 2022 2021
Net cash used in operating activities
49,975 (206,046 )
Net cash provided by financing activities 372,827 1,896,417 Net change in cash
$ (506,178 ) $ 141,670
With our current cash balance will be unable to sustain operations for the next
twelve months. We need to raise additional funds by issuing new debt or equity
securities or otherwise. Other than amounts received from the issuance of a note
payable and related parties, we have raised no funds for the six months ended
21 Table of Contents
We estimate that our expenses over the next 12 months will be approximately
We anticipate continuing to rely on equity sales and grants of our common stock in order to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
Except as described below, we presently do not have any arrangements for additional financing and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.
Since
The Company entered into an Equity Financing Agreement (the "Financing
Agreement") dated as of
We can sell shares of our common stock to GHS at a price equal to 100% of the
lowest closing price of our common stock during the ten (10) consecutive trading
day period ending on the date on which we deliver a put notice to GHS (the
"Market Price"), and we will be obligated to simultaneously deliver the number
of shares equal to120% of the put notice amount based on the Market Price. In
addition, the Financing Agreement (i) imposes an ownership limitation on GHS of
4.99% (i.e., GHS has no obligation to purchase shares if it beneficially owns
more than 4.99% of our common stock), (ii) requires a minimum of ten (10)
trading days between put notices, and (iii) prohibits any single Put Amount from
exceeding
Concurrently therewith, we entered into a registration rights agreement with
GHS, pursuant to which we agreed to file a registration statement with the
On
The initial term of this Agreement shall be exclusive for six (6) months from the Company's delivery of an offering memorandum to BSL (the "Initial Term"). After the Initial Term, the term of the Placement Agreement will automatically be extended for additional successive one (1) year periods unless either party provides written notice to the other party of its intent not to so extend the term at least thirty (30) days before the expiration of the then current term. Pursuant to the terms of the Placement Agreement, the Company issued to BSL an advisory fee of two hundred fifty thousand (250,000) common stock shares with an issuance date of the Effective Date.
On
22 Table of Contents
Critical Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance and trust funds to be cash equivalents.
Inventory
Inventory is carried at the lower of cost or net realizable value, with the cost being determined on a first-in, first-out (FIFO) basis. The Company periodically reviews physical inventory and will record a reserve for excess and/or obsolete inventory if necessary.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its fixed assets and other assets in accordance with ASC 360-10- 15, Impairment or Disposal of Long-Lived Assets. Impairment of long-lived assets is recognized when the net book value of such assets exceeds their expected cash flows, in which case the assets are written down to fair value, which is determined based on discounted future cash flows or appraised values.
Related Party Transactions
The Company follows ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, the Company's financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, "Income Taxes". The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Foreign Currency Translation
The Company's functional and reporting currency is the
Financial Instruments and Fair Value Measures
ASC 820, "Fair Value Measurements and Disclosures", requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
23 Table of Contents Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company's financial instruments consist principally of cash, accounts payable and accrued liabilities, loans payable, and amounts due to related parties. Pursuant to ASC 820, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, "Compensation - Stock Compensation" and ASC 505, "Equity Based Payments to Non-Employees", using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
Loss Per Share
The Company computes earnings (loss) per share in accordance with ASC 260,
"Earnings per Share". ASC 260 requires presentation of both basic and diluted
earnings per share ("EPS") on the face of the income statement. Basic EPS is
computed by dividing earnings (loss) available to common shareholders
(numerator) by the weighted average number of shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential common
shares outstanding during the period using the treasury stock method and
convertible preferred stock using the if-converted method. In computing diluted
EPS, the average stock price for the period is used in determining the number of
shares assumed to be purchased from the exercise of stock options or warrants.
Diluted EPS excludes all dilutive potential shares if their effect is
anti-dilutive. As of
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
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