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EX-32.1 - CERTIFICATION - GL Brands, Inc.freedomleaf_10qa1-ex3201.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - GL Brands, Inc.freedomleaf_10qa1-ex3102.htm
EX-31.1 - CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER - GL Brands, Inc.freedomleaf_10qa1-ex3101.htm
EX-32.2 - CERTIFICATION - GL Brands, Inc.freedomleaf_10qa1-ex3202.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1 to

FORM 10-Q/A

 

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

 

For the quarterly period ended March 31, 2015

 

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: 333-190067  

 

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

 

(702) 499-6022

(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, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

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

 

As of September 1, 2015 there were 174,211,200 shares of common stock, par value $0.001 per share outstanding.

 

 
 

 

Explanatory Note

 

The purpose of this Amendment No. 1 to Freedom Leaf, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015, filed with the Securities and Exchange Commission on May 15, 2015 (the “Form 10-Q”), is to amend the Form 10-Q to properly reflect the reverse merger with Freedom Leaf, Inc. and Arkadia International, Inc. and the effect on the financials and other applicable disclosures.

 

 

FREEDOM LEAF, INC.

FORM 10-Q/A

MARCH 31, 2015

INDEX

 

  Page No.
PART I – FINANCIAL INFORMATION 3
Item 1.   Financial Statements 3
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 14
Item 4.   Controls and Procedures 14
PART II – OTHER INFORMATION 16
Item 1.   Legal Proceedings 16
Item 1A.   Risk Factors 16
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3.   Defaults Upon Senior Securities 16
Item 4.   Mine Safety Disclosures 16
Item 5.   Other Information 16
Item 6.   Exhibits 16
       
SIGNATURES 17

 

2 

 

 

PART I – FINANCIAL INFORMATION

 

TABLE OF CONTENTS

 

Index to Financial Statements   Page
Balance Sheets as of March 31, 2015 (unaudited) and June 30, 2014   4
Statements of Operations for the Three and Nine Months ended March 31, 2015 and 2014 (unaudited)   5
Statements of Cash Flows for the Nine Months ended March 31, 2015 and 2014 (unaudited)   6
Notes to Financial Statements.   7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3 

 

 

Item 1. Financial Statements.

 

FREEDOM LEAF, INC.

(f/k/a Arkadia International, Inc.)

Balance Sheets

(Unaudited)

 

 

   March 31,   June 30, 
   2015   2014 
         
ASSETS        
         
Current assets          
Cash  $234   $ 
Accounts receivable   4,105     
Other receivable   1,412     
Prepaid expense   833     
Total current assets   6,584     
           
Intangible assets, net   3,998     
Other assets   3,819     
           
Total assets  $14,401   $ 
           
LIABILITIES AND STOCKHOLDERS' DEFICIT          
           
Current liabilities          
Accounts payable  $2,179   $ 
Accounts payable to related parties   6,955     
Accrued expenses   5,938     
Deferred revenue   2,300     
           
Total current liabilities   17,372     
           
Long-term liabilities          
Payable to related party   233,355     
           
Total long-term liabilities   233,355     
           
Total liabilities   250,727     
           
Commitments and contingencies (Note 3)          
           
Stockholders' deficit          
Common stock, $0.001 par value, 500,000,000 and 75,000,000 shares authorized, respectively, 174,181,200 and 0 shares issued, issuable, and outstanding at March 31, 2015 and June 30, 2014, respectively   174,181     
Additional paid-in capital   (152,767)    
Accumulated deficit   (258,040)    
Total stockholders' deficit   (236,326)    
           
Total liabilities and stockholders' equity (deficit)  $14,401   $ 
           

See accompanying notes to unaudited financial statements.

 

4 

 

 

FREEDOM LEAF, INC.

(f/k/a Arkadia International, Inc.)

Statements of Operations

(unaudited)

 

 

   For the three months ended   For the nine months ended 
   March 31,   March 31, 
   2015   2014   2015   2014 
                 
Revenue, net  $49,237   $   $579,041   $ 
                     
Operating expenses                    
Direct costs of revenue   141,027        233,936     
General and administrative   147,911        556,272     
Marketing expense   1,182        46,873     
                     
Net loss  $(240,883)  $   $(258,040)  $ 
                     
Net loss per share - basic and diluted  $(0.00)  $   $(0.00)  $ 
                     
Weighted average number of shares outstanding - basic and diluted   174,181,200        173,834,533     

 

See accompanying notes to unaudited financial statements.

 

5 

 

 

FREEDOM LEAF, INC.

(f/k/a Arkadia International, Inc.)

Statements of Cash Flows

For the Nine Months Ended March 31,

(unaudited)

 

   2015   2014 
Cash flows from operating activities:          
Net loss  $(258,040)  $ 
Adjustments to reconcile net loss to net cash used in operations:          
Issuance of common stock for services   12,500     
Changes in operating assets and liabilities:          
Accounts receivable   (4,105)    
Other receivable   (1,412)     
Prepaid expense   (833)    
Other assets   (3,819)    
Accounts payable   2,179     
Accounts payable to related parties   6,955     
Accrued expenses   5,938     
Deferred revenue   2,300     
Net cash used in operating activities   (238,337)    
           
Cash flows provided by investing activities          
Intangible asset acquired   (3,998)    
Net cash provided by investing activities   (3,998)    
           
Cash flows from financing activities:          
Proceeds from related party   233,355     
Net cash provided by financing activities   233,355     
           
Net decrease in cash   (8,980)    
           
Cash at beginning of period   9,214     
           
Cash at end of period  $234   $ 

 

See accompanying notes to unaudited financial statements.

 

6 

 

 

FREEDOM LEAF, INC.

(f/k/a Arkadia International, Inc.)

Notes to Financial Statements

March 31, 2015

(unaudited)

 

Note 1 – Nature of Business, Presentation and Going Concern

 

Organization

 

Freedom Leaf, Inc. (the “Company”) was incorporated in the State of Nevada on February 21, 2013, under the name of Arkadia International, Inc. The Company was originally engaged in the business of the acquisition of in demand equipment, cars, and goods with the intent to resale these in the U.S. or export to overseas countries.

 

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, Vladimir and Galina Shekhtman (“Sellers”).  On the closing date, October 3, 2014, pursuant to the terms of the Stock Purchase Agreement, Cowan purchased from the Sellers 6,950,100 shares of the Company’s outstanding restricted common stock for $100,000, representing 93%.

 

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. See Note 3 for related discussion.

 

On November 6, 2014, the Company changed its name, via merger in the state of Nevada, to Freedom Leaf, Inc. As of November 6, 2014, the Company has changed its course of business to the news, multi-media arts and entertainment industry, with both in print and online publications.

 

For financial reporting purposes, the Share Exchange represents a "reverse merger" rather than a business combination and Private Company is deemed to be the accounting acquirer in the transaction. The Share Exchange 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 Share Exchange 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 Share Exchange will include the assets and liabilities of the Public Company and the Private Company, and the historical operations of Private Company and operations of both companies from the closing date of the Share Exchange.

 

Basis of Presentation

 

The accompanying unaudited financial statements of Freedom Leaf, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. The results of operations for the interim period ended March 31, 2015 shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending June 30, 2015. In the opinion of the Company’s management, the information contained herein reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Company’s results of operations, financial position and cash flows. The unaudited interim financial statements should be read in conjunction with the audited financial statements in the Company’s Form 10-K for the year ended June 30, 2014 filed on August 8, 2014 and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Going Concern

 

The accompanying unaudited financial statements 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. The Company sustained net losses of $258,040 and used cash in operating activities of $238,337 for the nine months ended March 31, 2015. The Company had working capital deficit, stockholders’ deficiency and accumulated deficit of $10,788, $236,326 and $258,040, respectively, at March 31, 2015. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. 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.

 

Use of Estimates

 

The preparation of 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 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 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 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.

 

7 

 

FREEDOM LEAF, INC.

(f/k/a Arkadia International, Inc.)

Notes to Financial Statements

March 31, 2015

(unaudited)

 

Note 1 – Nature of Business, Presentation and Going Concern (continued)

 

Development Stage Company

 

Since inception, the Company became a “development stage company” as defined in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 915 “Development Stage Entities.” On June 10, 2014 the FASB issued authoritative guidance which eliminates the concept of a development stage entity. The incremental reporting requirements for presenting the development stage operations and cash flows since inception will no longer apply to development stage entities. The amendments of Topic 915 are to be applied retrospectively and are effective for fiscal years beginning after December 15, 2014. The Company has elected early adoption of this guidance effective with the filing of its previous quarterly report.

 

On November 6, 2015, 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. See Note 3 for related discussion.

 

Revenue Recognition

 

The Company recognizes revenue for our services in accordance with ASC 605-10, “Revenue Recognition in Financial Statements.” Under these guidelines, revenue is recognized on transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of service has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has two primary revenue streams as follows:

 

  ·  Consulting services.
  ·  Advertising services.
  ·  Branding, marketing and selling products for companies.
  ·  Educational seminars.
  ·  Selling branded products.

 

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.

 

Segment Information

 

In accordance with the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information,” the Company is required to report financial and descriptive information about its reportable operating segments. The Company does not have any operating segments as of March 31, 2015 and 2014.

 

Effect of Recent Accounting Pronouncements

 

The Company reviews new accounting pronouncements as issued. No new pronouncements had any material effect on these unaudited financial statements. The accounting pronouncements issued subsequent to the date of these unaudited financial statements that were considered significant by management were evaluated for the potential effect on these unaudited financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these unaudited financial statements as presented and does not anticipate the need for any future restatement of these unaudited financial statements because of the retro-active application of any accounting pronouncements issued subsequent to September 30, 2014 through the date these unaudited financial statements were issued.

 

Note 2 – Stockholders’ Equity (Deficit)

 

The Company was authorized to issue up to 75,000,000 shares of common stock, par value $0.001 per share. On November 3, 2014, the Company increased it’s authorized 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.

 

On November 3, 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.

 

On November 6, 2014, the Company merged with Freedom Leaf, Inc., a private Nevada corporation (see Note 1). After the completion of the merger, there were 173,401,200 shares of common stock outstanding.

 

8 

 

 

FREEDOM LEAF, INC.

(f/k/a Arkadia International, Inc.)

Notes to Financial Statements

March 31, 2015

(unaudited)

 

Note 2 – Stockholders’ Equity (Deficit) (continued)

 

On November 10, 2014, the Company issued 780,000 shares of common stock to Vincent Moreno for consulting services from November 10, 2014 through April 10, 2015. The Company’s stock is thinly traded therefore the valuation of the issuance was based on the value of the services, which was $12,500. The Company is amortizing the related expense over the term of the services. As of December 31, 2014, the stock has not been issued therefore is classified as issuable.

 

Note 3 – Intangible Assets

 

The Company has $3,998 recorded for various trademarks (Hemp Inspired®, Cannabizu®, and Cannabiz®) as of March 31, 2015.

 

Note 4 – Commitments and Contingencies

 

From time to time, the Company may become subject to legal proceedings, claims and litigation arising in the ordinary course of its business. The Company is not currently a party to any material legal proceedings, nor is the Company aware of any other pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.

 

Note 5 – Restatement of Prior Period Financial Statements

 

Balance Sheet, Statement of Operations and Statement of Cash Flows

 

The Company restated its previously issued financial statements included in the original Quarterly Report on Form 10-Q for the nine months ended March 31, 2015 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 $226,257 for the nine months ended March 31, 2015 and the understatement and overstatement of $14,401 and $138,475 of total assets and accumulated deficits, respectively, as of March 31, 2015. The revisions applied to the affected individual line items in the consolidated financial statements are as follows:

 

In connection with the subsequent review of the Company’s financial statements for the period ended March 31, 2015, certain errors associated with the Company’s recognition of the merger of Arkadia International, Inc. with Freedom Leaf, Inc., effective November 6, 2014, resulted in the Company’s financial statements to be restated. The error related to the exclusion of the financials of Freedom Leaf, Inc., the private company, into the presented financial statements as filed.

 

The following tables present the impact of the financial statement omission for the financials of Freedom Leaf, Inc., the private company, on the Company’s previously reported financial statements for the period ended March 31, 2015.

 

9 

 

 

Balance Sheet

 

   March 31, 2015 
   As previously reported   Adjustments   As restated 
             
             
ASSETS            
             
Current assets               
Cash  $   $234   $234 
Accounts receivable       4,105    4,105 
Other receivable       1,412    1,412 
Prepaid expense       833    833 
Total current assets       6,584    6,584 
                
Intangible assets, net       3,998    3,998 
Other assets       3,819    3,819 
                
Total assets  $   $14,401   $14,401 
                
LIABILITIES AND STOCKHOLDERS' DEFICIT               
                
Current liabilities               
Accounts payable  $   $2,179   $2,179 
Accounts payable to related parties   22,569    (15,614)   6,955 
Accrued expenses       5,938    5,938 
Deferred revenue       2,300    2,300 
                
Total current liabilities   22,569    (5,197)   17,372 
                
Long-term liabilities               
Payable to related party       233,355    233,355 
Total long-term liabilities       233,355    233,355 
                
Total liabilities   22,569    228,158    250,727 
                
Commitments and contingencies               
                
Stockholders' deficit               
Common stock   7,500    166,681    174,,181 
Additional paid-in capital   89,496    (242,263)   (152,767)
Accumulated deficit   (119,565)   (138,475)   (258,040)
Total stockholders' deficit   (22,569)   (213,757)   (236,326)
                
Total liabilities and stockholders' deficit  $   $14,401   $14,401 

 

10 

 

 

Statements of Operations

 

   For the three months ended   For the nine months ended 
   March 31, 2015   March 31, 2015 
   As previously reported   Adjustments   As restated   As previously reported   Adjustments   As restated 
                         
Revenue, net  $   $49,237   $49,237   $   $579,041   $579,041 
                               
Operating expenses                              
Direct costs of revenue       141,027    141,027        233,936    233,936 
General and administrative   22,569    125,342    147,911    31,783    524,489    556,272 
Marketing expense       1,182    1,182        46,873    46,873 
                               
Net loss  $(22,569)  $(218,314)  $(240,883)  $(31,783)  $(226,257)  $(258,040)

 

 

Statements of Cash Flows

 

   For the Nine Months Ended March 31, 2015 
   As previously reported   Adjustments   As restated 
Cash flows from operating activities:               
Net loss  $(31,783)  $(226,257)  $(258,040)
Adjustments to reconcile net loss to net cash used in operations:               
Issuance of common stock for services       12,500    12,500 
Changes in operating assets and liabilities:               
Accounts receivable       (4,105)   (4,105)
Other receivable        (1,412)   (1,412)
Prepaid expense       (833)   (833)
Other assets       (3,819)   (3,819)
Accounts payable       2,179    2,179 
Accounts payable to related parties   22,569    (15,614)   6,955 
Accrued expenses       5,938    5,938 
Deferred revenue       2,300    2,300 
Net cash used in operating activities   (9,214)   3,998    (5,216)
                
Cash flows provided by investing activities               
Intangible asset acquired       (3,998)   (3,998)
Net cash provided by investing activities       (3,998)   (3,998)
                
Cash flows from financing activities:               
Proceeds from related party       233,355    233,355 
Net cash provided by financing activities       233,355    233,355 
                
Net increase (decrease) in cash   (9,214)   234    (8,980)
                
Cash at beginning of period   9,214        9,214 
                
Cash at end of period  $   $234   $234 

 

  

Note 6 – 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 15, 2015, the Company granted Jared Baker 30,000 shares of common stock for consulting services. The Company’s stock is thinly traded therefore the valuation was based on the value of the services, which was $2,500.  

 

11 

 

 

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, 2014 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

 

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 Stock Purchase Agreement, Cowan purchased from the Sellers 6,950,100 shares of the Company’s outstanding restricted common stock for $100,000, representing 93%.

 

Prior to October 3, 2014, the Company was originally engaged in the business of the acquisition of in demand equipment, cars, and goods with the intent to resale these in the U.S. or export to overseas countries. On November 6, 2014, the Company changed its name, via merger in the State of Nevada, to Freedom Leaf, Inc.

 

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.

 

On November 6, 2014, Freedom Leaf, Inc., a private company, completed a reverse merger with Freedom Leaf, Inc. (f/k/a Arkadia International, Inc.).

 

Plan of Operation

 

We are currently devoting substantially all of our efforts in migrating to the news, multi-media arts and entertainment industry, with both in print and online publications. Principal business activities are still in the development stage and have not yet commenced. The Company will generate revenue through paid advertising in publications, both print and online, in the cannabis/hemp marketplace. The Company will also earn revenue from consulting companies who are in our industry, contracting with companies to brand, market, and sell their products and/or services, provide seminars in this space, and sell branded products for the Company and others the Company represents.

 

Results of Operations

 

For the Three Months Ended March 31, 2015 and 2014

 

Revenues

 

Our revenue was $49,237 for the three months ended March 31, 2015, compared to $0 for the three months ended March 31, 2014. Direct costs of revenues were $141,027 and $0 for the three months ended March 31, 2015 and 2014, respectively. The increases in revenues and cost of revenues are attributable to the change in control of the Company and the related change in business direction.

 

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Operating Expenses

 

For the three months ended March 31, 2015 our total operating expenses were $147,911 compared to $0 for the three months ended March 31, 2014 resulting in an increase of $147,911. As a result, net loss was $240,883 for the three months ended March 31, 2015 compared to net loss of $0 for the three months ended March 31, 2014. The increases in operating expenses and net loss were attributable to the change in control of the Company and the related change in business direction.

   

For the Nine Months Ended March 31, 2015 and 2014

 

Revenues

 

Our revenue was $579,041 for the nine months ended March 31, 2015, compared to $0 for the nine months ended March 31, 2014. Costs of revenues were $233,936 and $0 for the nine months ended March 31, 2015 and 2014, respectively. The increases in revenues and decreases in direct costs of revenues are attributable to the change in control of the Company and the related change in business direction.

 

Operating Expenses

 

For the nine months ended March 31, 2015 our total operating expenses were $556,272 compared to $0 for the nine months ended March 31, 2014 resulting in an increase of $556,272. As a result, net loss was $258,040 for the nine months ended March 31, 2015 compared to net income of $0 for the nine months ended March 31, 2014. The increases in operating expenses and net loss were attributable to the change in control of the Company and the related change in business direction.

 

Liquidity and Capital Resources

 

Overview

 

As of March 31, 2015, the Company had $234 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, 2015 compared to the Nine Months Ended March 31, 2014

 

We used cash in operations of $238,337 for the nine months ended March 31, 2015 compared to cash used in operations of $0 for the nine months ended March 31, 2014. The negative cash flow from operating activities for the nine months ended March 31, 2015 is attributable to the Company's net loss from operations of $258,040. Cash used in operations for the nine months ended March 31, 2014 is attributable to the Company's net loss of $0.

 

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 unaudited financial statements 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. The Company had revenue of $579,041 and net losses of $258,040 for the nine months ended March 31, 2015 compared to revenue of $0 and net losses of $0 for the nine months ended March 31, 2014. The Company had working capital deficiency, stockholders’ deficit, and accumulated deficit of $10,788, $236,326 and $258,040, respectively, at March 31, 2015, and used cash in operations of $238,337 in the nine months ended March 31, 2015. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company is highly dependent on its ability to continue to obtain investment capital from future funding opportunities to fund the current and planned operating levels. The unaudited 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. The Company’s continuation as a going concern is dependent upon its ability to bring in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts.

 

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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 2, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended June 30, 2014, included in our Annual Report on Form 10-K as filed on August 8, 2014, for a discussion of our critical accounting policies and estimates.

 

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.

 

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.

 

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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

 

Except as set forth above, due to the new business plan, we are in the process of finalizing our controls over the new business process.

 

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 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On November 10, 2014, the Company granted 780,000 shares of common stock to Vincent Moreno in exchange for consulting services to be performed from November 10, 2014 through April 10, 2015.

 

On April 15, 2015, the Company granted 30,000 shares of common stock to Jared Baker in exchange for consulting services.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit No.   Description
4.1   Articles of Incorporation (Incorporated by reference to Registration Statement on Form S-1, filed on July 22, 2013)
4.2   Bylaws (Incorporated by reference to Registration Statement on Form S-1, filed on July 22, 2013)
10.1   Share Exchange Agreement dated November 6, 2014 (Incorporated by reference to Form 10-Q/A for the period ended December 31, 204, filed on September 10, 2015)
10.2   Audit for the Period Ended November 6, 2014 of Freedom Leaf, Inc., the private company (Incorporated by reference to Form 10-Q/A for the period ended December 31, 2104, filed on September 10, 2015)
31.1   Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
31.2   Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a)).
32.1   Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2   Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS   XBRL 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

 

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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: September __, 2015 By: /s/ Clifford J. Perry
  Clifford J. Perry
  Chief Executive Officer and Chief Financial Officer
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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