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DOCUMENTS INCORPORATED BY REFERENCE

The following documents (or portions thereof) are incorporated by reference into the Parts of this Form 10-Q noted:

NONE

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words "expects," "anticipates," "intends," "believes," "estimates" or similar language, and among other things:  (i) events that may occur in the future, (ii) implementation of our business model; development and marketing of our products and services and (iii) prospects for revenues and profitability.  All forward-looking statements included in this document are based on information available to us on the date hereof.  We caution investors that our business and financial performance and the matters described in these forward-looking statements are subject to substantial risks and uncertainties.  Because of these risks and uncertainties, some of which may not be currently ascertainable and many of which are beyond our control, actual results could differ materially from those projected in the forward-looking statements. Deviations between actual future events and our estimates and assumptions could lead to results that are materially different from those expressed in or implied by the forward looking statements. We do not intend to update these forward looking statements to reflect actual future events. 

 

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

"We", "us" and "our" refer to FutureWorld Corp., a Delaware corporation.

  

On June 11, 2014, 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. 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. We are invested in the following portfolio companies as subsidiaries;

NutraCann Labs, Inc, - CB Scientific, Inc, - URVape, Inc, - HempTech Corp. - FutureLand Corp. - Bioceudical Sciences

NutraCann Labs Inc.

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.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

 

The present usage for CBD oil in the United States is estimated to be approximately 1,000-2,000 Kilograms a year and growing and with a yearly value of around $200,000,000. Currently, the apparent current competitors are; CannaVest, Inc. and Medical Marijuana, Inc., which own portions of each other's companies, are the primary supplier of CBD oil in the United States. They supply the product in bulk to affiliate distributors and sell it retail in plastic tubes that are refined up to three levels. Real Scientific Hemp Oil™ is their trademark name.

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, 2014 UPDATE).   CBDESSENCE.com and URCBDOil.com will assist FutureWorld to generate positive cash flow for both URVape and our CBD oil and CBD infused products offered by NutraCann Labs.

CB Scientific, Inc.

CB Scientific, Inc. a wholly owned subsidiary based in Denver Colorado has developed new technologies specifically for cannabis analytics. CB Scientific introduced the first ever personal cannabinoid detection kits. These kits test all your products in-house and at your own convenience. These tests are quick, easy, and effective. CB Scientific's new PERSONALANALYTICS THC & CBD detection kit is the first simple, quick and accurate consumer THC & CBD test which will give you're an accurate reading of THC or CBD in any product you purchase, manufacture, or grow   While many medical and recreational products are sold with cannabinoid levels listed, these numbers are often not representative of what is being sold.

URVape, Inc.

URVape™ is our brand name vaporizer pen which is sold with a charger and refill bottles.  We market the product at URVape.com. It is our own trademarked vaporizer being marketed and sold online and in retail shops. The product is cutting edge design and requires puffing on the pen to facilitate battery use.  The URVape vaporizing pen is sleek and lightweight. URVape will initially have oil vaporizers available and dry herb versions available in the coming months.

URVape was started to contribute to the current revolution, which has become an international phenomenon, known as the "Vaping" industry. URVape began test marketing OEM branded, off-the-shelf oil vaporizers, whose design and utility was well received, and which promulgated our first vendor agreement in the state of Colorado.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

After studying the marketplace, with more than 466 vendors attempting to reach nicotine consumers, we recognized early on that there were unsupported claims and deficiencies in the products and e-liquids being sold. Product deficiencies were noted in the devices being used in combination with e-liquids, which, together could be producing harmful elements. Consequently, these elements are being inhaled as a result of heating the contents of the e-liquids, thereby producing potentially harmful changes to the initial ingredients. As a result, URVape has dedicated itself to providing products that are free of any substances which, when heated for vaping, could be harmful.

URVape has entered into an exclusive Non-disclosure/Non-compete contract with one of the foremost international vaping products manufacturers. Through our in-house Product Development personnel, and through the hiring of a consultant whose area of expertise is microbiology, specific to cannabis and vaping, we have developed two primary device changes that are being patented. These changes are designed to produce safe devices, built with safe materials, and to exact temperature specifications suited to a variety of e-liquids that we will bring to market.

We are also developing new methods of producing, packaging and flavoring a variety of e-liquids with the intention to provide consumers with happy, healthy and potentially curative products.

URVape's plans include the installation of its own laboratory along with a "clean room" for production of its products. The goal is to become the market leader of safe vaping materials. To that end, URVape has Trademarked "SafeVape" for use in describing the technologies utilized in bringing both devices and e-liquids to the marketplace.

The E-cigarette, Cannabis and Herbal vaping industry is an ever growing and evolving industry. Business models need to be constantly adjusted and configured based on all moving parts. But we are fortunate to be part of this historical moment in time where consumers around the globe will finally have access to natural plant derivatives to enhance their health and enjoyment without the inherent side effects of synthetic medicines. URVape will be part of that historical moment creating technologies for the delivery of its specialized, researched products. With the decriminalization and legalization of cannabis for medicinal and recreational use in many states and countries throughout the world the adoption of electronic vaporizing by the world's 1.2 Billion smokers - eCig or vaporizer market is the fastest market within the tobacco (free) industry and estimated to be a multi-billion dollar industry within a few years.

HempTech Corp:

HempTech Corp has several products available specifically geared to helping cultivators of industrial hemp and medical cannabis maximum yields while helping to control costs. CaNNaLyTiX™ , SPIDer™, SmartSense™ ,Smart.NRG™ , and CaNNaTRAK™.

CaNNaLyTiX™ "A picture is worth a thousand words" and being able to visualize all the various aspects of a cultivation enterprise solves challenges before they become problems. CaNNaLyTiX™ is a dashboard controller system that allows the various computer systems to be integrated throughout a cultivator's infrastructures. Using state-of –the-art API connecting software packages, CaNNaLyTiX™ can allow all computer systems to be monitored with the ease of a smartphone app and the robust hardware of integrated servers or cloud-based application.

CaNNaTRAK™- the next generation of barcode & RFID tracking systems for keeping pace with the extensive demands of seed to sale tracking of Hemp/Cannabis for state compliance.  We are currently developing "game changer" modifications that will make it the ultimate software system in the industry.  CannaTRAK's Asset Tracking Management Software automates the major aspects of the Asset Life Cycle. The Product suite is made up of modules, which are able to operate independently of one another, are able to be configured to work together, or to be integrated with non-native applications. CaNNaTRAK™ software easily tracks assets using bar coding, radio frequency (RFID), imaging, and wireless technologies. CaNNaTRAK™ software is designed under the client/server architecture, is multi-user and menu-driven following industry-standard MS Windows protocols and graphical user interfaces. CaNNaTRAK™ applications are compatible with MS Windows XP, Vista, Windows 7 & 8.1 operating systems and with SQL Server 2008 through 2014.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

CaNNaTRAK's mobile information applications are compatible with Windows Mobile devices and are tightly integrated with; bar coding, RFID, GPS, imaging, biometrics and wireless technologies.  Due to the State law, legal governance, compliance and tax reasons, we believe CaNNaTRAK™ will be an invaluable tool for legal compliance and profitability from growers to dispensers of the legal medicinal marijuana. Over the past decade, 22 (any change since November elections?)states have approved the use of medicinal marijuana. Medicinal marijuana has become an alternative to traditional treatments for patients with clinical diseases such as cancer and HIV/AIDS. The medicinal marijuana market is estimated to be valued in the billions of dollars initially and may provide hundreds of millions of dollars tax revenue for the state's tax coffers.

We believe compliance and governance will be a big concern for the state offices overseeing the cannabis lifecycle and CaNNaTRAK™ will be an invaluable tool to comply and monitor for the medicinal marijuana industry.  Our competition presently consists of the MITS system being used in the state of Colorado, the BioTrackTHC system being used in the state of Washington, and MJ Freeway.  Certainly we will look to enter every burgeoning market throughout the United States.

SPIDer (Secure Perimeter Intrusion Detection Network) is a system to meet the needs of theft and malicious attacks. While the economy is seeing improvement, theft, site destruction, and malicious activity are still happening at an alarming rate and within the legal Cannabis/Hemp industry surging forward we can expect no change particularly because of its specific draw. The SPIDer systems consist of 3 levels of detection to identify intruders and threats in areas that are restricted.

The first level utilizes an electronically charged coaxial cable woven into your chain link fencing. Excessive fence movement will set off an alarm through your network notification system that someone is attempting to enter your facility. This is a very cost effective means to secure your site to meet security requirements for your company.  The second level consists of a visual intrusion monitoring system. It is a wireless, battery operated, and connected through the cellular network. It provides 24/7 monitoring and notification through the internet and email system. Once an intruder is identified an alarm is sent to the security team with a picture that allows you to identify if this is an authorized or unauthorized person.

The network system can quickly be deployed and moved to provide security coverage as needed.  The third level is a multi-level detection and verification system that uses both level one and level two to rapidly identify a potential intruder and provide you information for a rapid decision. The combination of the two systems provides the additional barriers for quick action. Sometimes seconds are critical in preventing serious damage or theft at your site.  The command center software provides intrusion notification to your network center and to individuals via email. For level two and three you receive a picture that enables you to make a more informed and quicker decision concerning your action.

The SPIDer solution addresses the potential threat facing the entire Cannabis/Hemp industry. With this system you are able to supply your security team with information that enables them to be proactive in addressing these costly activities.  Compliance with state rules and regulations for the Cannabis/ Hemp industry is going to be essential.  Though there are many security companies on the market, few are adapting themselves to the Cannabis industry.

SmartSense- offers wireless security and smart sensor mesh network for precision agriculture, irrigation systems, and greenhouses for the hemp industry. Our Smart Agriculture models allow monitoring multiple environmental parameters involving a wide range of applications with smart sensors such as Leaf Wetness, Atmospheric Pressure, Solar Radiation, Air Temperature / Humidity, Soil Temperature / Moisture, Ultraviolet Radiation etc. The smart sensor information will be collected and sent via the cloud to the central office for analysis and procedural modifications.  FutureWorld is not aware of any another competitor in the United States.  FutureWorld, through HempTech plans on marketing the product to large and medium sized grow facilities since they will have the greatest need.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

SmartNergy- offers tools to analyze every aspect of a cultivator's energy usage. Being fully integrated with CaNNaLyTiX™, one can visualize energy consumption in real-time and track historical usage. The software's predictive functionality also helps optimize energy use challenges proactively. We believe a cultivator's huge electric bills can be scaled back when the entire grow is looked at as a complete and fully integrated operation.

CaNNaBoX™- Much like a bank ATM, the CaNNaBoX™ machine operates with the swipe of a card, which will verify identity, age and prescription information of a medical marijuana patient before releasing measured packages of marijuana. The advantage is you will not have to be waited on by an assistant if you don't require consultation and the store location is busy.  The machine is capable of holding several hundred items in multiple forms of marijuana. CaNNaBoX™ is a secure robotic device specifically designed for dispensing cannabis products in secure prepackaged amounts, in complete accordance with state law requirements, in licensed dispensaries, and only to legal buyers.

FutureWorld has teamed up with American Green to brand the Zazzz Dispensary machine with the CaNNaBoX™ logo and distribute the product across the United States and possibly worldwide.  Presently the Zazzz machine presented by American Green, which is first to the market, MedBox Inc.'s machine, and a vending machine product by Endexx Corp also distribute the product. The model for FutureWorld is to bring 1500 units to market within a couple years in accordance with our JV goals alongside American Green and its Zazzz machine.

There will be a revenue sharing agreement with American Green and FutureWorld for every placed CaNNaBoX™ machine via monthly leasing and transaction costs.  We are currently putting together the details of the JV with American Green and beginning the marketing and design phase of our product.  Revenues are purely a function of quantity at this point. A monthly leasing fee of approximately $150 dollars a month and a transaction cost somewhere between $1.50 and $2.00 per.  Competing brands are to look for a large upfront expenditures from dispensaries for the machines which we believe will make their sales model harder to actual achieve sales nationwide.

CaNNaBoX™ will be marketed exclusively through our new dispensary division, DispenseTek.  DispenseTek was created to market and sell dispensary related products and services including but not limited to CaNNaBoX™.  It is important to understand, CaNNaBoX™ robotic dispensaries are secure delivery and control systems for use in licensed cannabis dispensaries and not "vending machines". Their specific design benefits public safety, governance, dispensaries, and consumers.

HempTech has also signed an agreement with Colorado Flower Company to provide turnkey state-of-the-art technology for their grow facility which is being built on our land in Colorado. The contract calls for $1.5M and the technology is leased at $190K per month for five years.

 

 

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 September 30, 2015 and 2014: (b) the financial position at September 30, 2015 and March 31, 2015 and (c) cash flows for the three and nine months ended September 30, 2015 and 2014, 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, 2015 filed with the Securities and Exchange Commission on August 12, 2015.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

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.

3.  Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts and operations of FutureWorld Corp., and its wholly owned subsidiaries, URVape, Inc., HempTech Corp., 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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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

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

Inventory consists of finished product, URVape electronic vaporizing cigarettes valued at the lower of cost or market valuation under the first-in, first-out method of costing, PersonalAnalytics testing kits that are also valued at the lower of cost or market valuation under the first-in, first-out method of costing and CBD bulk oil that are also valued at the lower of cost or market valuation under the first-in, first-out method of costing.

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 September 30, 2015 and March 31, 2015.

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 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

 

 

Revenue Recognition

 

Revenue associated with software sales to distributors is recognized, net of discounts, when the Company has performed substantially all its obligations under the arrangement.  Until such time as substantially all obligations under the arrangement are met, software sales are recognized as deferred revenue.  Costs and expenses associated with deferred revenue are also deferred.  When a software sales arrangements include a commitment to provide training and/or other services or materials, the Company estimates and records the expected costs of these training and/or other services and/or materials.

Foreign currency translation

The Company's functional currency and its reporting currency is the United States Dollar.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

Cost of Goods Sold

The Company recognizes the direct cost of purchasing product for sale, including freight-in and packaging, as cost of goods sold in the accompanying income statement.

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 nine months ended September 30, 2015 and 2014 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, 2014 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.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

Impact of Recently Issued Accounting Pronouncements

 

In April 2014, the FASB issued ASU 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment. ASU No. 2014-08 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. 201408 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 2014-08 becomes effective for interim and annual periods beginning on or after December 15, 2014. Adoption of ASU 2014-08 is not expected to have a significant impact on the Company's consolidated financial statements.

In August 2014, the FASB issued ASU 2014-15, 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 2014, the FASB issued ASU 2014-16-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 September 30, 2015, the Company incurred a net loss of $203,918 and a cumulative net loss since inception of $7,964,665.  As of September 30, 2015, the Company had cash of $13,887 and working capital deficit of $332,317 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 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 September 30, 2015 and March 31, 2015 consists of the following:

 

 

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

5.   Intangibles

On May 2, 2014, the Company acquired the assets of MedTest, Inc., including Product Technology for 5,000,000 shares of Common Stock valued at $100,000.  FutureWorld also acquired certain Trademarks from HempTech Corp., URVape, Inc., and CB Scientific, Inc. for in April of 2014 valued at $825. The useful lives of the Product Technology and Trademarks have been evaluated to have a useful life of 15 years and are being amortized accordingly per the financial statements.  For the three months ended September 30, 2015, the amortization expense for intangible assets was $7,170 and $7,170, respectively.

6.     Stock Options and Awards

None

7.  Accrued Expenses

Accrued expenses at September 30, 2015 and March 31, 2015 were as follows:

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 September 30, 2015 and March 31, 2015, the balance due to Mr. Talari on this Promissory Note is $150,126 and $299,118 respectively, and the accrued interest thereon at September 30, 2015 and March 31, 2015 is $67,511 and $45,048 respectively.

 9.    Employment Agreements

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.

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FUTUREWORLD CORP.

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(Unaudited)

On April 21 2014, 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.

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.

On January 1, 2015, the Company entered into a three-year employment agreement with Terry Gardner as VP of Professional Services. 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. Gardner has been granted 5% option of HempTech common stock at par value.

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 2014 as the position required additional hours.

10.  Office Space

During the Company's initial stage, it has limited need for use of office space or equipment.  The Company operates out of office space shared by the principals at an allocated cost of $ 1,440 per month.

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 September 30, 2015.

Common Stock:   The Company has 4,900,000,000 shares of $0.0001 par value stock Authorized.  As of September 30, 2015, 1,363,628,371 shares were issued and outstanding.

12. Subsequent Events

None

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Item 2.   Management's discussion and analysis of financial condition and results of operations

You should read the following discussion and analysis in conjunction with the information set forth under Item 6, Selected Consolidated Financial Data, and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The statements in this discussion regarding our expectations of our future performance, liquidity and capital resources, and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements. Our significant accounting policies are more fully described in Note 1 to the financial statements. However, certain accounting policies are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management; as a result they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on knowledge of our industry, historical operations, terms of existing contracts, and our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate.

Overview

FutureWorld (Other OTC: 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.

Key Elements of Operating and Financial Performance

We monitor the key elements of our operating and financial performance to help us evaluate growth trends, determine investment priorities, establish budgets, measure the effectiveness of our sales efforts and assess operational efficiencies.

Revenue

Currently, we derived all of our revenue from sales of URVape vaporizer pens, PersonalAnalytics test kits, and selling our CBD oil under "NutraCann". In 2015, lease and product revenue represented 100% of our total revenue.

Cost of Revenue and Gross Profit (Loss)

Product cost of revenue consists of third party product costs, including raw materials, component parts and associated freight, and normal yield loss in the period in which we recognize the related revenue. In addition, product cost of revenue may include compensation, benefits and stock-based compensation provided to our personnel, and overhead and other direct costs, which are recognized in the period in which we recognize the related revenue. Further, we recognize certain costs, including logistics costs, expenses for inventory obsolescence, warranty obligations, lower of cost or market adjustments to inventory, and amortization of intangibles, in the period in which they are incurred or can be reasonably estimated.

Service cost of revenue includes compensation and related costs for our yearly maintenance service delivery, customer operations and customer support personnel, facilities and infrastructure cost and depreciation. In accordance with our accounting policies, we recognize service cost of revenue in the period in which it is incurred even though the associated service revenue may be required to be deferred as described under "-Critical Accounting Policies and Estimates-Revenue Recognition."

Our gross profit (loss) varies from period to period based on the volume, average selling prices, and mix of products and services recognized as revenue, as well as product and service costs, expense for warranty obligations, and inventory write-downs. The timing of revenue recognition and related costs, which depends primarily on customer acceptance, can fluctuate significantly from period to period and have a material impact on our gross profit and gross margin results.

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Operating expenses consist of research and development, sales and marketing, and general and administrative expenses, as well as legal settlement expenses and amortization of acquired intangibles. Personnel-related expense represents a significant component of our operating expenses.

Sales and Marketing

Sales and marketing expense consists primarily of; compensation, benefits, sales commissions and stock-based compensation provided to our sales, marketing and business development personnel, as well as facility costs and other related overhead; marketing programs, including expenses associated with industry events and trade shows; and travel costs.

General and Administrative

General and administrative expense consists primarily of; compensation, benefits and stock-based compensation provided to our executive, finance, legal, human resource and administrative personnel, as well as facility costs and other related overhead; and

fees paid for professional services, including legal, tax and accounting services.

RESULTS OF OPERATIONS

Revenues

 

Total revenue for three months ended September 30, 2015 and 2014 was 8,052 and $77,463, respectively, representing a decrease . Substantially all revenue from 2015 was derived from few customers. The increase in total revenue is attributable to our successful ongoing product development efforts and inventions such as URVape and PersonalAnalytics test kits. We expect to substantially increase our total revenue by marketing HempTech related products and services for the next several quarters.

Total revenue for six months ended September 30, 2015 and 2014 was $9,773 and $77,772, respectively, representing an increase of 100%. Substantially all revenue from 2014 was derived from few customers. The increase in total revenue is attributable to our successful ongoing product development efforts and inventions such as URVape and PersonalAnalytics test kits. We expect to substantially increase our total revenue by marketing HempTech related products and services for the next several quarters.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the three months ended September 30, 2015 and 2014 were approximately $152,049 and $336,588 respectively. The increase in selling, general and administrative expenses in 2015 as compared 2014 was due primarily to the cost of additional human resources, higher professional fees related to fees associated with additional debt financings. General and administrative expenses increased due to additional expenses incurred as the result of the Company's start of operating activities.

Selling, general and administrative expenses for the six months ended September 30, 2015 and 2014 were approximately $306,442 and $503,499, respectively. The increase in selling, general and administrative expenses in 2014 as compared 2013 was due primarily to the cost of additional human resources, higher professional fees related to fees associated with additional debt financings. General and administrative expenses increased due to additional expenses incurred as the result of the Company's start of operating activities.

Net Loss from Operations. For the quarter ended September 30, 2015 and 2014, we incurred net losses of $203,918 and $447,670, respectively. Losses also include depreciation and amortization, non-cash expenses, in the amount of $33,672 and $125,957 for the quarter ended September 30, 2015 and 2014, respectively. There were no write downs in 2015.

Net Loss from Operations. For the six months ended September 30, 2014 and 2013, we incurred net losses of $286,703 and $640,487, respectively. Losses also include depreciation and amortization, non-cash expenses, in the amount of $41,769 and $145,840, respectively. There were no write downs in 2015.

 

Compensation and consulting expenses were $130,607 and $117,897 for the three months ended September 30, 2015 and 2014 respectively, Compensation and consulting expenses were $212,054 and $212,054 for the six months ended September 30, 2015 and 2014 respectively. The increases are due to the increase in operations and officer compensation.

LIQUIDITY AND CAPITAL RESOURCES

We had $13,887 in cash at September 30, 2015, and 285,787 respectively remaining on the lines of credit from Mr. Talari with which to satisfy our future cash requirements. Our management believes that the credit lines will support only limited activities for the next twelve months. The Company depends upon capital derived from 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. We had no other contractual obligation or material commercial commitments for capital expenditures.

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Revenue Recognition.  We recognize revenue from licensing our software upon the installation and acceptance of the software by customers in accordance with Statement of Position 97-2, Software Revenue Recognition.  When a software sales arrangement includes rights to customer support, the portion of the license fee allocated to such support is recognized ratably over the term of the arrangement, normally one year.  Revenue from professional services arrangements will be recognized in the month in which services are rendered over the term of the arrangement. We also recognize revenue from selling URVape vape pens and our THC and CBD testing kits calls, PersonalAnalytics when purchase orders received.

Long-Lived Assets - We depreciate property and equipment and amortize intangible assets, including software development costs over the respective assets' estimated useful life and periodically review the remaining useful lives of our assets to ascertain that our estimate is still valid. If we determine a useful life has materially changed, we either change the useful life or write the asset down or if we determine the asset has exhausted its useful life, we write the asset off completely.

Stock Based Compensation -   We account for stock based compensation under the provisions of Statement of Financial Accounting Standards No. 123, (revised 2004) Share-Based Payments.  Under the fair value recognition provisions of SFAS 123R, we recognize stock-based compensation expense net of an estimated forfeiture rate and therefore only recognize compensation cost for those shares expected to vest over the service period of the award.  Calculating stock-based compensation expense requires the input of subjective assumptions, including the expected term of the option grant, stock price volatility, and the pre-vesting option forfeiture rate.  We estimate the expected life of options granted based on historical exercise patterns.  We estimate stock price volatility based on historical implied volatility in our stock.  In addition, we are required to estimate the expected volatility rate and only recognize expense for those shares expected to vest.  We estimate the forfeiture rate based on historical experience of our stock-based awards that are granted, exercised or cancelled.

Income Taxes - We record federal and state income tax liability in accordance with Statement of Financial Accounting Standards No. 109 – Accounting for Income Taxes.  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 our opinion, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Recent Accounting Pronouncements

 

The Company reviews new accounting standards as issued. No new standards had any material effect on these financial statements. The accounting pronouncements issued subsequent to the date of these financial statements that were considered significant by management were evaluated for the potential effect on these consolidated financial statements. Management does not believe any of the subsequent pronouncements will have a material effect on these consolidated financial statements as presented and does not anticipate the need for any future restatement of these consolidated financial statements because of the retro-active application of any accounting pronouncements issued subsequent to September 30, 2015 through the date these financial statements were issued.

Off-Balance Sheet Arrangements

 

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as special purpose entities or variable interest entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other limited purposes.

Management Consideration of Alternative Business Strategies

In order to continue to protect and increase shareholder value management believes that it may, from time to time, consider alternative management strategies to create value for the company or additional revenues. Strategies to be reviewed may include acquisitions; roll-ups; strategic alliances; joint ventures on large projects; and/or mergers.

The Company is currently in the final stages of selling all the assets of HempTech Corp to a publicly traded company. Management believes that acquisitions will be a catalyst for advancing the Company's existing technology and products to attain greater market share. Additionally, we are seeking capital financing for the purposes of furthering our plan of operations.

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As of September 30, 2015 we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. This evaluation was done under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation of our disclosure controls and procedures (as defined in the Exchange Act Rule 13a-15e), our Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2015 such disclosure controls and procedures were not effective.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; provide reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and provide reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Pursuant to Rule 13a-15d of the Exchange Act, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (1992) and Internal Control Over Financial Reporting Guidance for Smaller Public Companies (2006), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of September 30, 2015. 

This quarterly report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this quarterly report.

Changes in Controls and Procedures

There were no significant changes made in our internal controls over financial reporting during the first quarter September 30, 2015 that have materially affected or are reasonably likely to materially affect these controls. Thus, no corrective actions with regard to significant deficiencies or material weaknesses were necessary.

 

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Our management, including the President, does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, 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. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of internal control is also based in part upon 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. Over time, controls may become inadequate because of changes in circumstances, and/or the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.

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