The accompanying notes are an integral
part of these unaudited interim financial statements.
The accompanying
notes are an integral part of these unaudited interim financial statements.
HEMP
NATURALS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the
Nine Months
Ended
August 31, 2018
|
|
For the
Nine Months
Ended
August 31, 2017
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,020,981
|
)
|
|
$
|
(104,715)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Expenses contributed to capital
|
|
|
52,241
|
|
|
|
59,711
|
Stock based compensation
|
|
|
4,798,294
|
|
|
|
—
|
Loss on Change of Fair Value of Derivative Liability
|
|
|
352
|
|
|
|
—
|
Non-Cash Interest Expense
|
|
|
94,955
|
|
|
|
—
|
Changes in current assets and liabilities:
|
|
|
|
|
|
|
|
Inventory
|
|
|
—
|
|
|
|
999
|
Accrued expenses
|
|
|
(946
|
)
|
|
|
(2,000)
|
Net cash used in operating activities
|
|
|
(76,086
|
)
|
|
|
(46,005)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Proceeds from Convertible Note Payable
|
|
|
78,750
|
|
|
|
—
|
Contributed capital from shareholder
|
|
|
5,100
|
|
|
|
—
|
Net cash provided by financing activities
|
|
|
83,850
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
7,764
|
|
|
|
(46,005)
|
Cash and cash equivalents at beginning of period
|
|
|
11
|
|
|
|
46,017
|
Cash and cash equivalents at end of period
|
|
|
7,775
|
|
|
|
12
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Common stock issued recorded as prepaid expense
|
|
$
|
11,600,000
|
|
|
$
|
—
|
The accompanying notes are an integral
part of these unaudited interim financial statements.
Hemp Naturals, Inc.
Notes to the financial statements
(Unaudited)
Note 1 – Organization and Description
of Business
Hemp Naturals, Inc. (the Company) was
incorporated under the laws of the State of Delaware on November 13, 2015. The Company intends to offer consumer goods that are
made of industrial hemp and/or the non-psychoactive ingredients of the cannabis plant.
The Company has elected November 30th
as its year end.
Note 2 – Summary of Significant
Accounting Policies
Basis of Presentation
This summary of significant accounting policies is
presented to assist in understanding the Company's unaudited interim financial statements. These accounting policies conform to
accounting principles, generally accepted in the United States of America, and have been consistently applied in the preparation
of the unaudited interim financial statements. While the information presented in the accompanying interim financial statements
for the nine months ended August 31, 2018 is unaudited, it includes all adjustments which are, in the opinion of management, necessary
to present fairly the financial position, results of operations and cash flows for the interim period presented in accordance with
the accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments
are of a normal recurring nature. The accompanying unaudited interim financial statements should be read in conjunction with the
Company’s audited financial statements (and notes thereto) for the fiscal year ended November 30, 2017 included elsewhere
in the Company’s Form 10K filed with the SEC on August 8, 2018. Operating results for the nine months ended August 31, 2018
are not necessarily indicative of the results that can be expected for the year ending November 30, 2018. Notes to the financial
statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent
fiscal period, as reported in the Form 10-K for the most recent fiscal year, as filed with the Securities and Exchange Commission
on August 8, 2018, have been omitted.
Use of Estimates
The preparation of unaudited interim
financial statements in conformity with generally accepted accounting principles 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. In the opinion of management,
all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The Company’s balance sheet includes certain financial
instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively
short period of time between the origination of these instruments and their expected realization.
ASC 820,
Fair Value Measurements and Disclosures
,
defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels
of the fair value hierarchy are described below:
|
·
|
Level 1 - Unadjusted
quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
|
|
·
|
Level 2 - Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including
quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities
in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest
rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
·
|
Level 3 - Inputs that
are both significant to the fair value measurement and unobservable.
|
Fair value estimates discussed herein are based upon certain
market assumptions and pertinent information available to management as of August 31, 2018. The respective carrying value of certain
on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These
financial instruments include accrued expenses
Related Parties
The Company follows ASC 850,
Related Party Disclosures,
for
the identification of related parties and disclosure of related party transactions.
Note 3 – Going Concern
The Company’s unaudited interim financial statements
are prepared in accordance with generally accepted accounting principles applicable to a going concern that contemplates the realization
of assets and liquidation of liabilities in the normal course of business.
The Company demonstrates adverse conditions that raise substantial
doubt about the Company's ability to continue as a going concern for one year following the issuance of these unaudited interim
financial statements. These adverse conditions are negative financial trends, specifically operating loss, working capital deficiency,
and other adverse key financial ratios.
The Company has not established any source of revenue to
cover its operating costs. Management plans to fund operating expenses with related party contributions to capital until such time
as revenue is sufficient to cover expenses. There is no assurance that management's plan will be successful.
The unaudited interim financial statements do not include
any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities
that might be necessary in the event that the Company cannot continue as a going concern.
Note 4 – Commitments and Contingencies
The Company follows ASC 450-20,
Los
s
Contingencies,
to
report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines
and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated.
Office Space
The Company contracted the use of 3,000 square feet of space
owned by our Secretary, Maryna Bleier, who has been and will be contributing the space, valued at $5,000 per month, to the Company
as additional paid-in capital July 1, 2016 until July 1, 2028. Beginning July 1, 2028, the Company is obligated to pay $5,000 monthly
for the use of their office space per the terms of the rental contract.
Note 5 – Prepaid Expenses
During the nine months ended August 31, 2018, the Company
issued 58,000,000 shares of common stock as compensation for consulting services. The fair value of the shares issued as compensation
was $0.20 per share.
Note 6 – Convertible Note Payable
On February 28, 2018, the Company entered into a share purchase
agreement with third party Adar Bays LLC (“Adar”) in which the Company sold a promissory note to Adar at 8% annual
interest and convertible to discounted shares at 55% discount. The one year promissory note was purchased March 6, 2018. As of
August 31, 2018, the convertible note payable, derivative liability and accumulated interest totaled $174,057.
Fair Value Measurements
The Company adopted the provisions of
ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements,
establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain
financial instruments, payables to related parties, and accounts payable and accrued expenses are carried at historical cost basis,
which approximates their fair values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes
a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active
markets for identical assets or liabilities
Level 2 — quoted prices for similar
assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable
(for example cash flow modeling inputs based on assumptions)
The Company used Level 3 inputs for
its valuation methodology for the conversion option liability in determining the fair value using a Black-Scholes option-pricing
model with the following assumption inputs:
|
|
March 6, 2018
|
|
August 31, 2018
|
Annual dividend yield
|
|
|
—
|
|
|
—
|
Expected life (years)
|
|
|
1
|
|
|
.5
|
Risk-free interest rate
|
|
|
2.00%
|
|
|
2.38%
|
Expected volatility
|
|
|
219.0%
|
|
|
255.0%
|
|
|
Fair Value Measurements at
|
|
|
August 31, 2018
|
|
|
Using Fair Value Hierarchy
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Embedded derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
131,531
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
131,531
|
Derivative Liabilities
The embedded conversion features of
the above convertible notes payable and warrants contain discounted conversion prices and should be recognized as derivative instruments.
Such embedded conversion features should be bifurcated and accounted for at fair value. As of November 30, 2017 and August 31,
2018, the Company had a derivative liability balance of $0 and $131,531, respectively. The Company uses the Black-Scholes option-pricing
model to calculate derivate liability.
Fair Value of Embedded Derivative Liabilities:
|
|
|
|
November 30, 2017
|
|
$
|
-
|
Addition
|
|
|
131,179
|
Converted
|
|
|
-
|
Change in Fair Market Value
|
|
|
-
|
Changes in fair value of derivative liabilities
|
|
|
352
|
As of August 31, 2018
|
|
$
|
131,531
|
Note 7 – Shareholder Equity
Preferred Stock
The authorized preferred stock of the Company consists of
20,000,000 shares with a par value of $0.0001. The Company has no shares of preferred stock issued and outstanding as of August
31, 2018 and November 30, 2017.
Common Stock
The authorized common stock of the Company consists of 1,200,000,000
shares with a par value of $0.0001. There were 324,125,983 and 266,125,983 shares of common stock issued and outstanding as of
August 31, 2018 and November 30, 2017, respectively.
On January 14, 2018 29,000,000 common shares were issued
to an entity controlled by our CEO as compensation for a two year agreement to provide consulting to the Company.
On January 10, 2018 29,000,000 common shares were issued
to a shareholder as compensation for a two year agreement to provide consulting to the Company.
Pertinent Rights and Privileges
Holders of shares of Common Stock are entitled to one vote
for each share held to be used at all stockholders’ meetings and for all purposes including the election of directors. Common
Stock does not have cumulative voting rights. Nor does it have preemptive or preferential rights to acquire or subscribe for any
unissued shares of any class of stock.
Holders of shares of Preferred Stock are entitled to voting
rights where every one share of Preferred Stock has voting rights equal to one hundred shares of Common Stock.
Additional Paid In Capital
During the nine months ended August 31, 2018, our CEO paid
a combined $5,841 in operating expenses which is recorded as additional paid in capital. Our secretary provided rental space to
the company totaling $45,000, which is recorded as additional paid in capital. A shareholder paid operating expenses of $1,500
and another shareholder advanced $5,000 to the Company. These contributions from the two shareholders are posted as additional
paid in capital as there is no expectation of repayment.
Note 8 – Related-Party Transactions
Contributed Capital
During the nine months ended August 31, 2018, our CEO paid
a combined $5,841 in operating expenses which is recorded as additional paid in capital. Our secretary provided rental space to
the company totaling $45,000, which is recorded as additional paid in capital. A shareholder paid operating expenses of $1,500
and another shareholder advanced $5,000 to the Company. These contributions from the two shareholders are posted as additional
paid in capital as there is no expectation of repayment.
Equity
On January 14, 2018 29,000,000 common shares were issued
to Blue Car Enterprise, an entity controlled by our CEO, as compensation for a two year agreement to provide consulting to the
Company.
On January 10, 2018 29,000,000 common shares were issued
to the Elad National Properties, a shareholder, as compensation for a two year agreement to provide consulting to the Company.
Office Space
At this time our office space is provided to us rent free
by our Secretary Maryna Bleier which is accounted for as contribution of $5,000 monthly. Our office space is located at 16950 North
Bay Road, Suite 1803 Sunny Isles Beach, Florida 33160. After July 1, 2028, the Company is obligated to pay $5,000 monthly.