Notes to Condensed Consolidated Financial
Statements
As of June 30, 2016
(Unaudited)
1. History of the Company and Nature of the Business
“We”, “us” and
“our” refer to FutureWorld Corp., a Delaware corporation.
On June 11, 2015, the Company changed its name to FutureWorld
Corp.
Nature of Business
The address of our executive offices is: 3637 4th Street
North, Saint Petersburg, FL 33704 and our telephone number at that address is 727-474-1816. The address of our web site is www.futureworldcorp.com.
The information at our web site is for general information and marketing purposes and is not part of this annual report for purposes
of liability for disclosures under the federal securities laws.
FutureWorld (FWDG), a Delaware corporation, is a leading
provider of advanced technologies and solutions to the global cannabis industry. FutureWorld, together with its subsidiaries, focuses
on the identification, acquisition, development, and commercialization of cannabis related products and services, such as industrial
Hemp. FutureWorld, through its subsidiaries, provides personal and professional THC and CBD test kits, pharmaceutical grade CBD
oil solutions, SafeVape vaporizers, smart sensor technology, communication network, surveillance security, data analysis for smart
cultivation and consultation for the industrial hemp and legal medicinal cannabis. Our wireless agricultural smart sensor networks
offer precision to the agriculture, irrigation systems, and greenhouses for the global cannabis and hemp industry. FutureWorld
and its subsidiaries do not grow, distribute or sell marijuana.
As the only Cannabis Technology Accelerator, FutureWorld
will incubate and fund leading technologies, products, and services for Cannabis industry (Industrial Hemp) for foreseeable future;
bringing value to its core and its shareholders.
FutureWorld Corp. is seeking to acquire minority or full
interest in currently operating companies and disruptive technologies in the Industrial Hemp/Medical and Recreational Cannabis
Industry globally; such as vaporizers, lab testing, tracking systems, security, CBD oil, testing kits, financial solutions, dispensaries
and other needed components. Our goal is to provide our acquired companies, current and future shareholders a clear strategy for
the growth of their companies and their investment in those companies.
We currently provide multiple products that supply the burgeoning
cannabis industry through our portfolio companies. The "picks and shovel" business model capitalizes of selling enterprises
associated with the Industrial Hemp and Medical Cannabis industries products that are essential in their success. Our products
solve long standing problems in cultivation, processing, and retail sales for industrial hemp and medical cannabis. The following
divisions will continue to delve even further into purchasing existing products or developing brand new products as the wholesale
and retail space continues to evolve. In addition, one primary focus is to manufacture, market, and sell products containing hemp
derived CBD oil.
Cannabis industry is the fastest-growing industry in the
United States and had its biggest year ever which could grow by another eight to 10 states in 2016. With the presidential election
looming, there is guaranteed to be a massive voter turnout and the initiatives that are poised to include legalization of cannabis
on the 2016 ballot stand a chance to make some big changes. The cannabis ballot initiatives could open the door to legalization
in more states including Arizona, California, Maine, Massachusetts, Michigan and Nevada in 2016. This rapid growth of the industry
is a boom for ancillary products providers such as HempTech, CB Scientific, Bioceutical Sciences, NutraCann Labs and incubators
such as FutureWorld Corp (FWDG). A majority of Americans continue to support full legalization, nationally, and by 2016, it's entirely
possible that marijuana could be a wedge issue in the presidential election.
On the industrial Hemp side, with the 2014 Agricultural Act
(known as the Farm Bill) making year 2014 notable and celebrated, 2015 proved to be a year of record-setting, transformative strides
within the industrial hemp industry. Laws governing industrial hemp continued to evolve in more and more states, making Industrial
Hemp one of most lucrative opportunities to unfold over the course of the year and beyond. In short, the Cannabis industry will
grow from $1.5 billion in 2014 to an estimated $35 billion in 2020.
Who We Are
FutureWorld focuses on the identification, acquisition, development,
and commercialization of cannabis related products and services. As a Cannabis Technology Incubator and Accelerator, FutureWorld
will incubate and fund leading technologies, products, and services for Cannabis industry (including Industrial Hemp) combining
resources to strengthen the company and the industry.
FutureWorld follows a well-tested business incubation model;
the seed fund model. The seed fund model thesis is based on a combination of “high-quality filter” and “broad
portfolio” approaches. The high-quality filter attempts to ensure that the very best minds, teams and ideas get into FWDG.
The broad portfolio approach, statistically, discovers a few breakaway companies in order to provide the big returns to investors.
So far the Company has funded 6 companies in 2015 and expects to fund more in 2016.
How We Make Money
We make money by exiting our incubated companies through
a sale, reverse merger, merger or an IPO. In any case, some or all of the proceeds, whether in stock or cash, will be returned
to the shareholders as dividend. For FutureWorld, our main revenue is derived from cash and marketable securities through our exits.
In most cases we own from 19% to 100% of the companies being
incubated by FWDG. According GAAP, we would need to consolidate the financials of all the holdings until they are sold or spun
off. Products or services revenue generation by our companies is not our business model, as an incubator, but only a successful
exit will define our revenue stream.
Our Companies, Current and Future Results
Four areas within the cannabis industry sector with the most
accelerated growth for 2016 and beyond includes;
Medicine – Accessories – Testing – Grow
Delivery and Land Leasing. We have and will use this guide to incubate exciting companies for better ROI. All of our companies
fall within all of these important areas;
Medicine & Nutraceuticals
• NutraCann Labs - http://nutracann.com
We incubated a distribution company called “NutraCann
Labs” in 2015 to sell our designed and manufactured products online and offline. The distribution company provides sales
channels for CB Scientific, Bioceutical Sciences and any other businesses within FWDG universe and beyond. The company has had
limited sales so far since we are in the beta stage.
CBD Oil- CBD is one of at least 60 cannabinoids
found in hemp, and is non-psychoactive. The Cannabidiol “CBD” is a compound in cannabis that has significant medical
effects, but does not make people feel “high” and can actually counter the psychoactive effects of THC. The reduced
psychotropic of CBD-rich cannabis makes it an appealing treatment option for patients seeking anti-inflammatory, anti-pain, anti-anxiety,
anti-psychotic, and/or anti-spasm effects without disconcerting lethargy. Scientific and clinical studies underscore CBD’s
potential as a treatment for a wide range of conditions, including rheumatoid arthritis, diabetes, alcoholism, MS, chronic pain,
schizophrenia, PTSD, antibiotic-resistant infections, epilepsy, and other neurological disorders. CBD has demonstrated neuro-protective
and neurogenic effects, and its anti-cancer properties are currently being investigated at several academic research centers in
the United States and elsewhere.
NutraCann Labs has sourced its own CBD oil from Europe.
We are also developing plans to fund an overseas hemp cultivation project to provide a consistent and reliable supply to the United
States and beyond. Currently, industrial hemp cultivation is legal in twenty countries around the world. NutraCann’s products
are sold under the brand name “cbdessence” on CBDESSENCE.COM.
NutraCann Labs will process the CBD oils that
will be sold through our online presence for retailing industrial hemp oil-based Cannabidiol (CBD) nutritional supplements, wellness
and personal care products and vapable CBD oils. NutraCann Labs will market items such as CBD oil, CBD infused edibles & multiple
hemp related items and cross market our vaporizers from URVape.com. NutraCann Labs will be featuring scientific grade hemp oil
which is highly sought after around the world. We will sell already recognizable brands including our own brands and drive internet
sales through ads, videos, social media and Search Engine Optimization.
The global Nutraceutical market is projected to be
in excess of $200 billion by 2015 and the current US Nutraceutical and Dietary supplement market is valued at around $42 billion.
CBDESSENCE.com and URCBDOil.com will be at the forefront of this massive marketplace with significant opportunities. Cannabinoids
(non-psychoactive CBD) have been found to have antioxidant properties, unrelated to NMDA receptor antagonism. This new found property
makes cannabinoids useful in the treatment and prophylaxis of a wide variety of oxidation associated diseases, such as ischemic,
age-related, inflammatory and auto-immune diseases.
Cannabinoids are found
to have particular application as neuroprotectants, for example in limiting neurological damage following ischemic events, such
as stroke and trauma, or in the treatment of neurodegenerative diseases, such as Alzheimer's, Parkinson's and HIV dementia. URCBDOil.com
should be live by July 1, 2015 UPDATE).
We have been experimenting on labeling and branding
for new products. We will be introducing the brands
shortly. We have high hopes for this company. NutraCann became part of CB Scientific with its IPO in April 2016. These are the
stats on this company;
Founded – April 2015
Investment - $150K
Revenue for 2015 – Less than $50K
Achievements – Successfully tested CBD Vape blends,
Tinctures and Pills sold on EBay, Amazon and its website. Signed up multiple resellers around the country and in Europe.
Estimated 2016 revenue – Pro Forma Financials only
available
Estimated Exit – Became part of CB Scientific with
its IPO in March 2016
Estimated Exit Type – Merged with CB Scientific (CBSC)
Comparable company – Cannavest (CANV), Medical Marijuana
(MJNA)
Facebook page: https://www.facebook.com/nutracannlabs
• Bioceutical Sciences
Founded in 2015, this company has the most exciting potentials.
We founded this company to get into the pharmaceutical aspect of the cannabis industry in which should be the biggest driver. The
company develops, designs and manufactures Pharma grade Nutraceuticals for cancer, Alzheimer and life threatening illnesses for
patients by proprietary formulations using cannabinoids derived from Cannabis. The company will also provide formulations and designs
for NutraCann and CB Scientific. There are major funding requirement for this company which will come from PPM, grants and sales.
Bioceutical Sciences became part of CB Scientific with its IPO in March 2016. This is one of most promising of our companies within
the FWDG and cannabis universe. These are the stats on this company;
Founded – May 2015
Investment - $45K
Revenue since inception – Less than $30K
Achievements – Formulated pre-pharmaceutical and Nutraceutical
grade CBD blends, pills and tinctures for NutraCann labs. The company also completed the development of next generations of CB
Scientific’s test kits. Estimated 2016 revenue – Pro Forma Financials only available
Estimated Exit – Became part of CB Scientific with
its IPO in March 2016
Estimated Exit Type – Merged with CB Scientific (CBSC)
Comparable company – Cannabis Sciences (CBIS), Cannabis
Sativa (CBDS)
Facebook page: https://www.facebook.com/bioceuticalsciences
• Magic Dragon Brands
Started in September 2015, Magic Dragon Brands is testing
formulations for the Hempseed infused energy and chill drinks for the consumers under the brand "Magic Dragon High".
Magic Dragon High Brands will initially produce Hempseed and Hemp based CBD infused beverages. According to new market data from
Packaged Facts; the energy drinks sector comprises an increasing portion of the non-alcoholic beverage market, and as the sector,
has grown 60% from 2008-2012 with a total U.S. sales of more than $12.5 billion in 2012. According to "Energy Drinks &
Shots Market Trends in the U.S.", sales of energy drinks will grow to a value of $21.5 billion by 2017, driven by expansion
in retail distribution, and strong potential in new product development. Packaged Facts also estimates that convenience stores
hold the largest share of market sales (59%), followed by mass merchandisers (13%), supermarkets (10%), club stores/warehouse (5%),
and drug stores (2%). In aggregate, all other retailers contribute a significant 11% to market sales. We are expecting to introduce
the line shortly with the finalization of the logistics.
Founded – September 2015
Investment – Minimal
Revenue since inception – None
Estimated 2016 revenue - Pro Forma Financials only available
Estimated Exit – Became part of CB Scientific with
its IPO in March 2016
Estimated Exit Type – Merged with CB Scientific (CBSC)
Comparable company – Rocky Mountain High (RMHB)
Facebook page: https://www.facebook.com/magicdragonhigh
Testing & Analytics
• CB Scientific - http://www.test4cbd.com/shop/ -
http://corp.cbscientific.com/
We started this company in March 2014 to design, develop
and manufacture LST (Life Science Tools) for Cannabis and agricultural industry. Our first products were THC and CBD cannabis testing
personal kits which won product of the year in 2014. The sales are ramping up and we expect 1000% or more growth in 2016. The company
is also in development of other major products for non-
cannabis market to be unveiled in 2016. We are in the process
of seeking investment for manufacturing, sales and marketing to propel the revenue. The company also has had a major setback with
previous employees stealing major contracts causing financial and product roadmap delays. The company has since recouped and expecting
profitable 2016. These are the stats on this company;
Founded – April 2014
Investment - $350K
Revenue since inception – around $200K
Achievements – developed the only personal test kits
in the industry for THC and CBD, won best product award in only three month of development, increased sales from 0 test kits to
thousands through multiple sales channels in 2015. Brought to market the only ubiquitous, easy to use, all in one, ISO certified
laboratory test kits to the world.
Estimated 2016 revenue - $1M to $2M with 100% Q to Q growth
Estimated Exit – Went public in March 2016
Ticker Symbol - CBSC
Market Cap - $102M
Close Comparable – No direct competitors
Estimated FWDG Holding Value - $20,000,000
Estimated ROI - 5000%, expected to reach 10,000% by the end
of 2017
Facebook page: https://www.facebook.com/cbscientificinc
Grow Systems
• HempTech Corp - https://hemptechcorp.com/main/
We started this company in June 2014 to design and develop
state-of-the-art automation for grow facilities all across the agricultural industry, including the Cannabis market. In late 2015,
the company finished development of its first major product called grow-droid which is plug n play and comes fully automated for
growers to grow their cannabis for more yield and profitability. HempTech has been successful in signing its largest contract post
development with a company representing Indian tribes in Canada and the States to sell more than 1000 grow pods called grow.droid
II, for the next six years. Contract potential is more than $160M for the next six years. The company has also signed its first
exclusive reseller agreements in Colorado, California, Washington and Oregon and expects sales to start in September 2016. The
company is in the process of signing up distributors in the State of Arizona, Nevada and Massachusetts. This company will be our
biggest driver on revenue and market capitalization in the FWDG universe. The company is in development of non-cannabis farm pods
for local urban agriculture. These are the stats on this company;
Founded – April 2014
Investment - $400K in direct investment (and $2.5M in indirect
investment by a third party)
Revenue since inception – None
Achievements – Developed agricultural industry’s
only analytical automation with environmental controls. Cannabis industries only plug n play growing kit with complete environmental
automations and analytics scalable from 16 plants to thousands, cutting the time to grow from 28 weeks to only 3 weeks. Only company
to offer “Profiling” for grow consistency and profitability.
Estimated 2016 revenue – Pro Forma of $2M to $10M with
100% Q to Q growth
Estimated Exit – Went public in March 2016
Ticker Symbol - HTCO
Market Cap - $278M
Close Comparable – Surna (SRNA), Terra Tech (TRTC)
Estimated FWDG Holding Value - $32,500,000
Estimated ROI – 9000%, expected to reach 15000% by
the end of 2017
Facebook page: https://www.facebook.com/hemptechcorp
Land Leasing
• FutureLand Corp - http://futurelandcorp.com/
Founded in September 2014, FutureLand Corp., a Colorado company,
is a cannabis and hemp specialty zoned land leasing company formed to capitalize upon the emerging global cannabis market. FutureLand,
focuses on target acquisition, zoning, license fulfillment, site plan preparation and financing of cannabis or hemp grow facilities
throughout the United States. We give growers the opportunity to grow. Company monetizes through leasing the land, leasing the
structures on the land, financing interest revenue and management fees associated with cultivation centers. FutureLand retains
ownership of all the land and the structures. FutureLand leases to both medical marijuana, retail marijuana as well as industrial
hemp growers. FutureLand does not currently grow, distribute or sell marijuana. Company has multiple projects across the USA and
possible project in Jamaica.
Founded – September 2014
Investment - Less than $110K
Achievements – Purchased 240+ acres of land in southern
Colorado that has increased in value by a factor of 10. Purchased 50% interest in a recreational property in Oregon going live
in the third quarter 2016.
Estimated 2016 revenue – Pro Forma of $1M to $2M
Exited – April 2015
Exit Type – Merger
Ticker Symbol - FUTL
Market Cap - $1.2M
Close Comparable – Zoned Properties (ZDPY)
Estimated FWDG Holding Value - $600,000
Estimated ROI - 600%, expected to reach 6000% by the end
of 2016
Facebook page: https://www.facebook.com/futurelandcorp
2. Basis of Presentation, Business and
Summary of Significant Accounting Policies
Basis of Presentation
In the opinion of management, all adjustments consisting
of normal recurring adjustments necessary for a fair presentation of (a) the results of operations for the three and six months
ended June 30, 2016 and 2015: (b) the financial position at June 30, 2016 and March 31, 2016 and (c) cash flows for the three and
three months ended June 30, 2016 and 2015, have been made. Management believes that these estimates are reasonable and have been
discussed with the Board of Directors; however, actual results could differ from those estimates.
The accompanying unaudited financial statements of the Company
have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial
information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not included
all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. For further information regarding the Company’s significant accounting policies,
refer to the audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on from
10-K for the year ended March 31, 2016 filed with the Securities and Exchange Commission on August 12, 2015.
Our financial statements may not be comparable to companies
that comply with public company effective dates. Due to our election not to opt out of the extended transition period that allows
us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies
until those standards apply to private companies. All amounts referenced in these Financial Statements and this Report are in US
Dollars unless otherwise stated.
Nature of the Business, and History of the Company and
its Subsidiaries
The nature of the business and the history of the Company
and its subsidiaries are as follows:
Nature of the Business
FutureWorld Corp., a Delaware corporation, is a U.S. diversified
Hemp/Cannabis Company, listed on the Over the Counter exchange, which was originally formed to capitalize on the burgeoning markets
in renewable and alternative energy technologies, but has since changed direction and moved into the Hemp/Cannabis space. FutureWorld,
together with its subsidiaries, focuses on the identification, acquisition, development, and commercialization of Hemp/Cannabis
products, services and technologies globally.
FutureWorld is seeking to acquire minority or full interest
in currently operating companies and disruptive technologies in the Industrial Hemp/Medical and Recreational Cannabis Industry
globally; such as vaporizers, lab testing, tracking systems, security, CBD oil, testing kits, financial solutions, dispensaries
and other needed components. Our goal is to provide our acquired companies, current and future shareholders a clear strategy for
the growth of their companies and their investment in those companies.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements
include the accounts and operations of FutureWorld Corp., and its portfolio companies, HempTech Corp., FutureLand, and CB Scientific.
Basis of Accounting
The Company maintains its financial records and financial
statements on the accrual basis of accounting, in conformity with generally accepted accounting principles in the United States
of America. The accrual basis of accounting provides for matching of revenues and expenses in the period they were earned and incurred.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers
all cash accounts that are not subject to withdrawal restrictions or designated for assets acquisitions, and certificates of deposit
that have an original maturity of three months or less when purchased, to be cash equivalents. The Company believes it is not exposed
to any significant credit risk on cash and cash equivalents.
Fair Value of Financial Instruments
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial instruments:
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•
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Cash and Cash Equivalents, Accounts Receivable, Prepaid Expenses, Accounts Payable, and Accrued Expenses
:
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The carrying amount reported in the balance sheets
for these items approximates fair value because of the short maturity of these instruments.
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Loans and Notes Payable to Related Parties:
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The carrying value of loans and notes payable to
related parties approximates fair value as each of the notes payable carries an interest rate commensurate with commercial borrowing
rates available to the Company.
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As of June 30, 2016 and March 31, 2016, the fair values of the Company’s financial instruments approximate their historical carrying amount.
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Accounts Receivable
Accounts receivable consist of
amounts due for the delivery of Product sales to customers. An allowance for doubtful accounts is considered to be established
for any amounts that may not be recoverable, which is based on an analysis of the Company’s customer credit worthiness, and
current economic trends. Based on management’s review of accounts receivable, no allowance for doubtful accounts was considered
necessary as of period end. Receivables are determined to be past due, based on payment terms of original invoices. The Company
does not typically charge interest on past due receivables. Balances on Current sales are due in 60 days from the date of
sale.
Inventory
N/A
Property and Equipment
Property and equipment are recorded at historical cost. Depreciation
is computed on the straight-line method over estimated useful lives of the respective assets, ranging from three to seven years. The
carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation periods or the
unamortized balance is warranted. Based upon the Company's most recent analysis, management believes that no impairment
of property and equipment exists at June 30, 2016 and March 31, 2016.
Intangible assets
Intangible assets are recorded at cost
and amortized over their useful lives. The Company's goodwill associated with its acquisitions is not amortized. Management reviews
goodwill and provisional marketable securities for impairment at least on an annual basis and at other times when existing conditions
raise substantial questions about their recoverability.
Impairment of Long-Lived Assets
Periodically,
the Company assesses the recoverability of the Company’s intangible assets, consisting of the
Intellectual
Property & licensing
and its trademark, and record an impairment loss to
the extent that the carrying amounts of the assets exceed its fair value. Based upon management's most recent analysis,
the Company believes that no impairment of the Company’s tangible or intangible assets exist at June 30, 2016 and March 31,
2016.
Revenue Recognition
Our revenue is arrived by exiting our
incubated companies through a sale, reverse merger, merger or an IPO. In any case, some or all of the proceeds, whether in stock
or cash, will be returned to the shareholders as dividend. For FutureWorld, our main revenue is derived from cash and marketable
securities through our exits.
In most cases we own from 19% to 100%
of the companies being incubated by FWDG. According GAAP, we would need to consolidate the financials of all the holdings until
they are sold or spun off. Products or services revenue generation by our companies is not our business model, as an incubator,
but only a successful exit will define our revenue stream.
Foreign currency translation
The Company’s functional currency
and its reporting currency is the United States Dollar.
Cost of Goods Sold
N/A
Stock Based Compensation
The Companies estimate the fair value of share-based payment
awards to employees and directors on the date of grant using an option-pricing model. For stock-based awards issued to employees
and directors, stock-based compensation is attributed to expense using the straight-line single option method, which is consistent
with how the prior-period pro-forma were provided. Stock-based compensation expense recognized in the Statements of Operations
for the three and three months ended June 30, 2016 and 2015 included compensation expense for share-based payment awards granted
prior to, but not yet vested based on the grant date fair value estimated and compensation expense for the share-based payment
awards granted subsequent to January 1, 2015 based on the grant date fair value estimated.
The Company’s determination of fair value of share-based
payment awards to employees and directors on the date of grant using the Black-Scholes model, which is affected by the Company’s
stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but
are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option
exercise behaviors.
Income Taxes
The Company records federal and state income tax liability
at the federal and state rates after allowances. Deferred income taxes are provided on the liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards, and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Tax benefit from an uncertain tax position may be recognized
in the financial statements when it is more likely than not that the position will be sustained upon examination, including resolutions
of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized and in subsequent periods.
The Company adopted a policy under which, if required to
be recognized in the future, they will classify interest related to the underpayment of income taxes as a component of interest
expense and will classify any related penalties in selling, engineering, general and administrating expenses in the statement of
operations.
Advertising Costs
Advertising costs are charged to operations as incurred.
Earnings (Loss) Per Share
Basic EPS is calculated by dividing earnings (loss) available
to common shareholders by the weighted average number of common shares outstanding during each period. Diluted EPS is
similarly calculated, except that the denominator includes common shares that may be issued subject to existing rights with dilutive
potential, except when their inclusion would be anti-dilutive.
Based on an estimated current value of the Company’s
stock being equal to or less than the exercise price of the warrants, none of the shares assumed issued upon conversion of the
warrants, nor any of the stock assumed issued under the Company's Incentive Stock Plan are included in the computation of fully
diluted loss per share, since their inclusion would be anti-dilutive.
Impact of Recently Issued Accounting Pronouncements
In April 2015, the FASB issued ASU 2015-08, Presentation
of Financial Statements and Property, Plant, and Equipment. ASU No. 2015-08 defines a discontinued operation as disposal of components
of an entity that represents a strategic shift that has or will have a major effect on an entity’s operations. ASU No. 201508
also requires a reporting entity to present the assets and liabilities of a disposal group that includes a discontinued operation
separately in the asset and liability sections, respectively, of the statement of financial position for each comparative period.
ASU 2015-08 becomes effective for interim and annual periods beginning on or after December 15, 2015. Adoption of ASU 2015-08 is
not expected to have a significant impact on the Company’s consolidated financial statements.
In August 2015, the FASB issued ASU 2015-15, Presentation
of Financial Statements-Going Concern. This statement provides US GAAP guidance on management’s responsibility in evaluation
whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures.
For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial
doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are
issued. The ASU is effective for annual periods ending after December 15, 2016 and interim periods thereafter.
In November 2015, the FASB issued ASU 2015-16-Derivatives
and Hedging: Determining Whether the Host contract in a Hybrid Financial Instrument issued in the Form of a Share is More Akin
to Debt or to Equity. Certain classes of shares include features that entitle the holders to preferences and rights (such as conversion
rights, redemption rights, voting powers and liquidation and dividend payment preferences) over the other shareholders. Shares
that include embedded derivative features are referred to as hybrid financial instruments, which must be separated from the host
contract and accounted for as a derivative if certain criteria are met. This ASU is effective for fiscal years and interim periods
within those fiscal years beginning after December 15, 2015
Other recent accounting pronouncements issued by the FASB,
the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed
by management to have a material impact on the Company's present or future financial statements.
3. Going Concern
For the quarter ended June 30, 2016, the Company incurred
a net loss of $106,306 and a cumulative net loss since inception of $8,157,078. As of June 30, 2016, the Company had
cash of $53,247 and working capital deficit of $33,698 with which to satisfy any future cash requirements. These conditions
raise substantial doubt about the Company's ability to continue as a going concern. The Company depends upon capital
derived from selling our marketable securities and future financing activities such as loans from its officers and directors, subsequent
offerings of its common stock or debt financing in order to operate and grow the business either directly or through its subsidiary. There
can be no assurance that the Company will be successful in raising such capital. The key factors that are not in the
Company's control and that may have a direct bearing on operating results. These factors include, but are not limited
to, acceptance of the Company’s business plan, the ability to raise capital in the future, the ability to expand its customer
base, and the ability to hire key employees to grow the business. There may be other risks and circumstances that management
may be unable to predict.
4. Property and Equipment
Property and equipment as of June 30, 2016 and March 31,
2016 consists of the following:
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June,
2016
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March,
2016
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Computer equipment
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$
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4,961
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$
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1,810
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Furniture and fixtures
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Accumulated depreciation
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(1,650)
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(1,3118)
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Net
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$
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3,311
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$
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449
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5. Intangibles
For the three months ended June 30, 2016, the amortization
expense for intangible assets was $0 and $7,170, respectively.
|
|
June 30,
2016
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
HempTech Product Technology
|
|
$
|
0
|
|
|
$
|
95,486
|
|
Trademarks
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
-
|
|
Accumulated Amortization
|
|
|
|
|
|
|
|
|
Intangibles, Net
|
|
$
|
0
|
|
|
$
|
95,486
|
|
6. Stock Options and Awards
None
7. Accrued Expenses
Accrued expenses at June 30, 2016 and March 31, 2016 were
as follows:
|
|
June 30,
2016
|
|
|
March 31, 2016
|
|
Accrued salaries and payroll taxes
|
|
$
|
1,019,943
|
|
|
$
|
925,649
|
|
|
|
|
|
|
|
|
|
|
Accrued interest
|
|
|
222,130
|
|
|
|
216,255
|
|
Accrued penalties
|
|
|
|
|
|
|
-
|
|
|
|
$
|
1,242,073
|
|
|
$
|
916,366
|
|
8. Related Parties Disclosures
Loan from Saeed (Sam) Talari
Mr. Talari has advanced funds to the Company at various times.
On April 1, 2010 the Company issued a promissory note with an initial balance of $306,319 bearing interest at 5%. This note allows
Mr. Talari to advance additional funds to the Company as needed. At June 30, 2016 and March 31, 2016, the balance due to Mr. Talari
on this Promissory Note is $185,884 and $299,118 respectively, and the accrued interest thereon at June 30, 2016 and March 31,
2016 is $67,511 and $45,048 respectively.
9.
Employment Agreements
Sam Talari
On January 1, 2012, the Company entered into a three-year
Employment Agreement with Mr. Talari, the Company's Acting Chief Executive Officer, and one of the Company's directors. The Agreement
is automatically extended for additional one-year periods without further action from the Company or the executive, unless notice
of termination is given by either party within 90 days of the end of any periods. The Agreement provides for (a) a base salary
of $8,500 per month, with a 5% increase per annum and (b) all group
insurance plans and other benefit plans and programs made
available to the Company's management employees. On January 1, 2015, the Company increased Mr. Talari's base salary to $25,000
per month based on a new three years employment agreement.
Kevin Defant
On April 21 2015, the Company entered into a three-year
Employment Agreement with Mr. Defant, the Company’s Acting Tech Director. The Agreement is automatically extended for additional
one-year periods without further action from the Company or the executive, unless notice of termination is given by either party
within 90 days of the end of any periods. The Agreement provides for (a) a base salary of $2,000 per month, with a 5% increase
per annum, and (b) all group insurance plans and other benefit plans and programs made available to the Company’s management
employees.
John Verghese
On January 1, 2015, the Company entered into a three-year
employment agreement with John Verghese as the CEO of HempTech Corp. The Agreement provides for (a) a base salary of $10,000 per
month, (b) two weeks' vacation within one year of the starting date, and (c) all group insurance plans and other benefit plans
and programs made available to the Company's management employees. Additionally Mr. Verghese has been granted 10% option of HempTech
common stock at par value.
Karin Rohret
On January 2nd, 2010, the Company entered into an employment
agreement with Karin Rohret as part-time Controller. The Agreement provides for (a) a base salary of $1,101.67 per month, (b) a
signing bonus of $20,000 by the way of Company's common stock within 30 days of signing the agreement. Additionally Ms. Rohret
will be eligible to receive a grant of 600,000 shares of common stock at founder level with a par value of 0.001. Vesting of the
grant shall be at the rate of 200,000 shares on each anniversary from the signing of the agreement. The salary was adjusted to
$2,950 on October 1 2015 as the position required additional hours.
10. Office Space
The address of our executive offices is: 10901 Roosevelt
Blvd, Suite 1000c, Saint Petersburg, FL 33716 and our telephone number at that address is 727-474-1816. We maintain our executive's
offices in a 13K square feet office and warehouse space. We believe the facilities are adequate for our operational needs. We
may require additional offices in the event of further expansions.
11. Stockholders’ Equity
Preferred Stock: The Company has 100,000,000 shares
of $0.0001 par value stock Authorized. 10,000,000 shares have been issued or are outstanding as of June 30, 2016.
Common Stock: The Company has 14,900,000,000 shares
of $0.0001 par value stock Authorized. As of June 30, 2016, 3,795,364,697 shares were issued and outstanding.
11. Subsequent Events
None