Right On Brands, Inc. - Quarter Report: 2018 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

Indicated 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 x Yes    ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

If an emerging growth company, indicate by check mark if the registrant has elected transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 66,583,869 common shares as of February 8, 2019.

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 (§ 229.405 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 ¨

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

Our financial statements included in this Form 10-Q are as follows:

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended December 31, 2018 are not necessarily indicative of the results that can be expected for the full year.

RIGHT ON BRANDS, INC.

formerly known as HEALTHTALK LIVE, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

See accompanying notes to the financial statements.

RIGHT ON BRANDS, INC.

formerly known as HEALTHTALK LIVE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

See accompanying notes to the financial statements.

RIGHT ON BRANDS, INC.

formerly known as HEALTHTALK LIVE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

See accompanying notes to the financial statements.

RIGHT ON BRANDS, INC.

Formerly known as HEALTHTALK LIVE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim unaudited condensed financial statements as of December 31, 2018 and 2017 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these condensed financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended March 31, 2018 filed with the SEC on form 10-K on August 13, 2018.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of six months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided by the straight-line method over the useful lives of the related assets, from five to seven years.

The cost of building the Company’s website has been capitalized and amortized over a period of six years. Expenditures for minor enhancements and maintenance are expensed as incurred.

Inventory

Inventories are stated at the lower of cost (average cost) or market (net realizable value). As of December 31, 2018, and March 31, 2018, inventory consisted of finished goods inventory of $48,893 and $14,044, respectively, and raw materials inventory of $56,500 ad $-0-, respectively.

Use of Estimates

The preparation of 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. Actual results could differ from those estimates.

Income Taxes

The Company is subject to income taxes in the U.S.  Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. In accordance with FASB ASC Topic 740, “Income Taxes,” the Company provides for the recognition of deferred tax assets if realization of such assets is more likely than not. The Company accounts for income tax under the provisions of FASB ASC Topic 740, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities.  Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Fair Value of Financial Instruments

The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.  As of December 31, 2018 and March 31, 2018 the fair value of cash and accounts payable, approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

Convertible Instruments

The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

NOTE 2. GOING CONCERN

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.  As of December 31, 2018, the Company had an accumulated deficit of approximately $6,907,339, had net losses of approximately $2,806,395 for the nine months ended December 31, 2018, with net cash used in operating activities of $447,395, with little revenue earned since inception and a lack of operational history.  These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

While the Company is attempting to generate greater revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations.  The Company has completed an acquisition in hopes to increase revenue and profitability. Management intends to raise additional funds by way of additional public and/or private offerings of its stock.  Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate revenues.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3. PROPERTY AND EQUIPMENT

Depreciation expense for the nine months ended December 31, 2018 and 2017 was $2,821 and $5,000, respectively.

The Company also has capitalized intangible assets consisting trademarks valued at a cost of $1,024 as of December 31, 2018 and March 31, 2018. Accumulated amortization as of December 31, 2018 and March 31, 2018 was $256 and $154, respectively.

NOTE 4. NONCONTROLLING INTEREST

Investments in partnerships, joint ventures and less-than-majority-owned subsidiaries in which we have significant influence are accounted for under the equity method.

As of June 30, 2018, the Company’s consolidated financial statements includes a venture for the development of a commercial bottled water operation near Browning, Montana. The new venture will be operated through Spring Hill Water Company, LLC, a Nevada limited liability company (“Spring Hill”). Spring Hill is 49% owned by our newly-formed subsidiary corporation, Humble Water Company, and 51% owned by Doore, LLC. Doore, LLC, which will serve as the Manager of Spring Hill, has contributed the land and water source to be used in the new operation through a Land & Water Lease Agreement under which Spring Hill will have the use of 2 acres of land and no less than 5 acre-feet of water for an initial term of 25 years and at a lease rate of $1 per year. Through Humble Water Company, our initial capital contribution to Spring Hill will be approximately $100,000 to be used in commencing operations. In addition, we have committed to provide additional capital to be used for a bottling facility and equipment, in an amount up to $530,000, within the next 3 years. Should we fail to provide this additional capital within the next 3 years, our ownership percentage in Spring Hill will be reduced from 49% to 20%. Although we hold a minority ownership percentage in Spring Hill, we will have voting control over the company with 75% of the voting membership units. Further, 100% of the losses, expenditures, and deductions from Spring Hill will be allocated to our subsidiary, Humble Water Company. The activity of Spring Hill is accounted for under the voting interest method and we consolidate 100% of the business activity and record 25% of noncontrolling interest on the balance sheet and 100% of the net losses based on the terms of the agreement. As of December 31, 2018, we recorded noncontrolling interest of $24,184.

As of December 31, 2018, our total investment into Spring Hill to date was $101,470. During the nine months ended December 31, 2018, there have been no significant operations or expenditures in the joint venture except for the amortization of the rent on the prepaid lease.

As of June 19, 2018, the Company formed a majority owned subsidiary, Endo & Centre, LLC and holds a 51% ownership. Centre Manufacturing, an entity owned and controlled by the current Chief Executive Officer, owns the remaining 49%. Profits and losses for the company will be shared on a 50/50 basis. Endo & Centre will be jointly managed by our Chairman, Daniel Crawford, and our President and CEO, Ashok Patel, who is also the head of Centre Manufacturing. As of December 31, 2018, our total investment into Endo & Centre to date was $-0-. During the nine months ended December 31, 2018, there have been no significant operations or expenditures in the joint venture.

NOTE 5. CONVERTIBLE DEBT

During September 2016, the Company agreed to allow four unrelated noteholders holding a total of $129,549 in debt to convert into 5,000,000 shares of common stock which is a conversion rate of approximately $0.03 per share. There is no maturity date and no interest rate. The debt was acquired from John and Vicki Yawn, former officers and former majority shareholders of the Company.

During October 2016, the Company extinguished $129,549 of debt in exchange for 5,000,000 shares of newly issued common stock. A total of 4,200,000 shares were issued to three of the four noteholders. As of December 31, 2016, the remaining balance of 800,000 shares of common stock, which is due to one noteholder, is recorded in common stock payable at the fair value of the common stock of $464,000. The Company recorded a loss on extinguishment of debt of $2,770,451. As of December 31, 2018, none of the shares have not been issued and included in the balance of common stock payable.

The Company acquired convertible debt from the acquisition of Humbly Hemp as described above.

On April 11, 2016, the Company issued a convertible promissory note with an entity for $10,000. The unsecured note bears interest at 8% per annum and is due on February 7, 2017. This note is convertible at $0.01 per share and can be converted on or before the maturity date. The Company and lender mutually agreed to extend the maturity date of the note to December 31, 2018. During the year ended March 31, 2018, the principal amount of $8,000 was converted into 800,000 shares of common stock. The principal balance was $2,000 as of December 31, 2018.

On July 7, 2016, the Company issued a convertible promissory note with an entity for $25,000. The unsecured note bears interest at 6% per annum and is due on January 7, 2017. This note is convertible at $0.10 per share and can be converted on or before the maturity date. The Company and lender mutually agreed to extend the maturity date of the note to December 31, 2018.

On November 21, 2017, the Company issued a convertible promissory note with an entity for $20,000. The unsecured note bears interest at 6% per annum and is due on May 21, 2018. This note is convertible at $0.20 per share and can be converted on or before the maturity date. The Company and lender mutually agreed to extend the maturity date of the note to December 31, 2018.

On April 26, 2018, the Company executed a convertible promissory note for $125,000 with a lender that is a shareholder of the Company. The note bears interest at 12% per annum with default interest at 24% per annum and is due in 6 months. The note is convertible at a discount of 50% of the market price based on the average of the two lowest daily trading prices over the last 20 day trading period.

On November 6, 2018, the Company issued a convertible promissory note with an entity for $91,300. The unsecured note bears interest at 12% per annum and is due on November 6, 2019. This note is convertible at a discount of 28% of market priceoff the lowest trading day in the previous 15 day trading period.

On November 12, 2018, the Company issued a convertible promissory note with an entity for $134,400. The unsecured note bears interest at 12% per annum and is due on November 12, 2019. This note is convertible at a discount of 35% of market price off the average of 2 lowest trading days in the previous 20 day trading period.

On November 15, 2018, the Company issued a convertible promissory note with an entity for $81,900. The unsecured note bears interest at 12% per annum and is due on August 15, 2019. This note is convertible at a discount of 35% of the market price based on the lowest daily trading price over the last 25 day trading period.

On December 4, 2018, the Company issued a convertible line of credit with an entity for $150,000. The unsecured note bears interest at 10% per annum and is due on December 4, 2019. This note is convertible at a discount of 35% of market pricebased on the lowest daily trading price over the last 25 day trading period. As of December 31, 2018, a total of $43,000 had been advanced.

During the nine months ended December 31, 2018 interest expense was $981,383, which included derivative expense of $782,889 and amortization of debt discount of $192,704. As of December 31, 2018, the balance of accrued interest was $20,659.

During the nine months ended December 31, 2017 interest expense was $2,648.

NOTE 6. EARNINGS PER SHARE

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations.

Basic earnings (loss) per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

As the Company incurred a loss for all periods presented, any convertible instruments would be anti-dilutive and were therefore excluded from earnings per share calculations.

NOTE 7. STOCKHOLDERS’ EQUITY

Series A Preferred Stock

During October 2016, the Company designated Series A Preferred Stock. The Series A Preferred Stock is convertible to common stock at a rate of five shares for every share held and votes together with our common stock at a rate of sixteen votes for every share held. Our new Series A Preferred Stock ranks equally, on an as-converted basis, to our common stock with respect to rights upon winding up, dissolution, or liquidation. Our Series A Preferred Stock does not have any special dividend rights.

Common Stock

During the nine months ended December 31, 2018, the Company issued a total of 3,040,000 shares of common stock to two investors for cash of $60,000. The Company also issued 40,000 warrants exercisable at $0.75 and 40,000 warrants exercisable at $1.25 for two years. As of December 31, 2018, the Company had an obligation to issue four investors a total of 2,950,000 shares, which resulted in $549,000 recorded as common stock payable.

NOTE 8. RELATED PARTY

During the nine months ended December 31, 2018, the Company purchased inventory totaling $76,946 from an entity owned and controlled by the current Chief Executive Officer of the Company. As of December 31, 2018, the amount owed to this entity was $18,531 and is recorded in accounts payable.

During the nine months ended December 31, 2018, the Company had executive compensation totaling $18,000 to the former Chief Executive Officer and the current Chairman of the Board.

NOTE 9. SUBSEQUENT EVENTS

The Company reviewed material events subsequent to December 31, 2018. None were noted apart from the following:

Item 2. Management’s Discussion and Analysis or Plan of Operation

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Company Overview and Plan of Operation

Item 1. Business

Our business is conducted through our wholly-owned subsidiaries, Humbly Hemp, Endo Brands, and Humble Water Company. Humbly Hemp sells and markets a line of hemp enhanced snack foods. Humble Water Company is in a partnership with Springhill Water Co. to develop a line of High Alkaline, Natural Mineral Water, and a bottling and packaging facility. Endo Brands creates and markets a line of CBD consumer products and through ENDO Labs, a joint venture with Centre Manufacturing, creates white label products and formulations for CBD brands. Right On Brands is at the focus of health and wellness. We create lasting brands with emerging functional ingredients, and our focus right now is industrial hemp, hemp derived CBD, and high alkaline water.

Product Line

Phase 1 (Current Portfolio)

Humbly Hemp Snack Bar:

The Humbly Hemp Snack Bar is a first of its kind hemp powered superfood bar. Our bar is certified vegan, and gluten free. We manufacture in a TOP 12 allergen free facility so NO Soy, and NON-GMO’s. From the research we have done with the current products on the market, it will be hard to find another bar that has as many health benefits, to as many dietary segments. It retails at $2.99.

Flavors:

ENDO BRANDS:

Endo Water (launched February 2018):

ENDO Water is one of a kind Wellness drink. Structured Water, CBSs, and Omegas are some of the biggest wants in the health and wellness market. ENDO Water is created to “Fuel Mind and Body” targeted to increase the performance of the Endo-Cannabanoid System. The endocannabinoid system (ECS) is a group of endogenous cannabinoid receptors located in the mammalian brain and throughout the central and peripheral nervous systems, consisting of neuromodulatory lipids and their receptors. Our water is lightly flavored, almost an essence, and infused with CBDs (Cannabidiol). CBD IS NON PHSYCOACTIVE. Our proprietary blend is Sugar Free, Naturally Flavored, has a high PH level and has emulsified CBD for increased bioavailability.

*The name ENDO Water is in process of being trademarked.

ENDO Drops (launched April 2018):

The easiest and most effective way to get your daily CBD supplementation. These daily drops are blended with amazing essential oils for a no junk taste.

ENDO BRANDS: (Phase 2)

ENDO Mist:

Endo Select Hemp oil infused into a superfood blend with other amazing essential oils and superfoods. We put this potion into a 2 floz spray bottle to make it easy to bring around and supplement anywhere.

ENDO Ease:

Topical Pain relief product, 200mg of Endo Select Hemp Oil infused with an easy pump distribution cap.

Target Market

Health and wellness are becoming a part of everyone’s lives, and eating right is usually the first step. What we have done to test the market for products like this is to take a look at the types of consumer that would be looking for our solution. The number of diets trends in America continues to grow, and hemp is the perfect solution for many of them.

Global Industries Analyst Report (GIA), states that the global market for foods developed for individuals with allergies or intolerances is expected to grow to 24.8 billion by 2020. Food allergies and intolerances are a growing public health problem causing higher demand of products that meet special dietary requirements. The biggest concerns:

Hemp is not only attractive to those with food allergens; individuals who follow a strict diet for any reason will be extremely attracted to hemp. Some of the more popular lifestyle diets include:

Hemp based foods can be consumed by anyone in these segments. In 2014, the Hemp Industries Association (HIA), a non-profit trade association, released final estimates of the size of the U.S. retail market for hemp products. The estimated total retail value of hemp products sold in the U.S. in 2014 was at least $620 million. More importantly, the total retail sales of hemp food and body care products in the United States is estimated at $200 million.

Everyone can consume our hemp-based foods, but it is never smart to market a product that way. In order to pinpoint our ideal consumer, we have used research done by IRI and SPINS. In this study they broke down this new category of health CPG consumers into several segments. Those categories called “True Believers”, and “Enlightened Environmentalists” are the two main shopper segments for organic food. They make up 46% of organic food purchases. They each make up 9% of the shoppers, so 18% together.

True Believers: Their main concern is to keep a healthy body. They buy only organic, they try new things, are college educated, and have a median income of $65,000.

Enlightened Environmentalists: They care about the environment and buy products and live in a way that doesn’t hurt the environment. They specifically shop at places that carry mostly organic and environmentally friendly products; most of them have graduate school degrees and average 57 years of age. They have a median income of $57,000.

By taking these two groups we can highlight some main characteristics of our target consumer:

Competition

In the market we are going to occupy, we face four major competitors:

Our Potential Advantages

Our brands offer a new take on hemp products. Humbly Hemp snacks are positioned to bring hemp into the daily routine of the “everyman”. Our branding and market position take the stigma and fear out of hemp, creating an approachable product for anyone to enjoy. ENDO Brands advantage in the market is our unique formulation, price point, high quality. We are one of the first in the CBD industry to have a testable, full spectrum CBD water product. Our in house formulator allows us to create our proprietary CBD ingredient and infuse our products at a fraction of the cost of other brands.

Marketing, Sales, and Distribution Strategies

Marketing Plan

Growth Hacking: we utilize growth hacking to launch our brand. We promote through all social media channels to build brand awareness for our initial products. The first of these attempts will be sending products to popular Bloggers, Vlogers, and social media celebrities, for promotion on their channels. These techniques cost very little, and are extremely effective for Internet businesses. We will also use Google AdWords to push the product through online advertisements and SEO.

Online Marketing: We tailor an online marketing campaign to attract the two market segments mentioned earlier in the target market segment. This position will assure that we are promoting to the most viable group of consumers.

Instagram: Our goal on IG for our brands is to build an obsessed fan base and an engaged community. Hemp education is a vital part of these channels, we utilize the new stories feature to show daily life at Right On Brands as well as unique info on our products and drive traffic to the Ecommerce store.

Twitter: The Key to twitter is communication. This will be the key to success on this social channel. The best twitter accounts today are ones that do not broadcast to the consumer, but engage the consumer with interesting content in the form of:

Facebook: Facebook has gone from being a publishing channel for brands, to now a landing page of brand identity. We utilize Facebook as a cornerstone of our online identity. We will be careful about being “too promotional” and we will be aiming for content that people will share. To achieve this we will:

Social Contests: We have regular Social Media Channel contests that span from our website to every single channel we have. These range from, Photo contest, video contests, cooking contests, etc. These types of contests really boosts followership, sharing and all drive traffic directly back to the landing page. They are relatively cheap and the prizes we will give away consist of actual product, lifestyle related products, and company marketing materials.

Analysis and Execution: We use Hootsuite to posts, and also analyze all of the social media channels. They are the industry leaders in the field, and it is an application that we have previous knowledge in.

Guerrilla Marketing: Once we have scaled, and doing business with the big box retailers, we will use more traditional marketing techniques including; in store promotions, trade shows, festival, and Brand Ambassador Programs. We will begin this during the second Quarter of our initial year by hiring two college students located in Los Angeles. They will assist in Social Media Content Creation, Event Marketing, and In Store Promotions in the Los Angeles area. We will quickly expand this program and have 2 students in each state we launch into. This will allow us to get our key demographic engaged in the products on campus, creating lifelong fans of Humbly Hemp.

Consumer Outreach &Education: The most important factor in the marketing of our products will be consumer education on the benefits of hemp. We use a page in our websites to promote this, and in our growth we will focus on this more and more. In the future we work on doing some co-branding with Hemp associations, Non Profit Groups that share our goals in keeping people and our planet healthy. Hemp History week is a big collaboration week for us. We have hosted pop ups, and plan on doing much more.

Sales Plan

Retail Distribution: Our partnership with Statewide distribution will give us a leg up on the competition out of the gate. The ability to get our products into so many stores in Southern California is a huge win for our brands. We focus on Southern California and scale our growth from there. We are quickly moving into Northern California, Nevada, Oklahoma, Texas, Missouri, and Colorado next.

Online Sales: Our website is extremely easy to use, and the process of making a purchase will is seamless. We worked with the best website designers to ensure that our marketplace is both beautiful and functional.

B2B Online Sales: The number of online health food stores and especially health food subscription boxes is growing every day. They are always looking for quality products to stock their stores and monthly boxes. We have worked with groups like Sensibox, Gramsly, to bring our products into people monthly boxes.

Manufacturing and Distribution

Humbly Hemp

We are currently producing the Humbly Hemp Snack Bar with a world class co-packer.

Endo Water

We are currently having our proprietary recipe manufactured and packed at a facility in Las Vegas. This will allow us to effectively distribute it along the west coast before a national rollout, and we will be bringing on a second manufacturer soon.

Humble Water Co.

Our partnership in Montana with the Springhill Water Co. allows us to sell our amazing natural water directly from the source in Cut Bank, Montana, at the foothills of Glacier National Park. We are currently working towards building our own bottling facility on site to bring untouched-by-hands bottled natural water to our channels.

Joint Venture with Centre Manufacturing, Inc.

Effective June 19, 2018, we formed a new company, Endo & Centre Venture, LLC (“Endo & Centre”), for the purposes of carrying out a joint venture with Centre Manufacturing, Inc. (“Centre Manufacturing”), a food and beverage manufacturer. Through Endo & Centre, we plan to pursue the manufacture, marketing, and sales of private label food and beverages. Centre Manufacturing will carry out the product manufacturing and, through our subsidiary Endo Brands, Inc., we will focus on marketing and sales of private-label food and beverage products. The joint venture with Centre Manufacturing is governed by the Operating Agreement for Endo & Centre, which is filed herewith as Exhibit 10.1. Our subsidiary, Endo Brands, Inc., owns 51% of Endo & Centre, and Centre Manufacturing owns a 49% membership interest. Profits and losses for the company will be shared on a 50/50 basis. Endo & Centre will be jointly managed by our Chairman, Daniel Crawford, and our President and CEO, Ashok Patel, who is alsothe head of Centre Manufacturing.

Results of Operations

Three and Nine Months Ended December 31, 2018 Compared to Three and Nine Months Ended December 31, 2017

During the nine months ended December 31, 2018, we generated revenue of $153,087 and our cost of goods sold was $105,093, resulting in gross profit of $47,994. We incurred total operating expenses of $1,363,574,interest expense of $981,383, and a net loss of $2,806,395. By comparison, during the ninemonths ended December 31, 2017, we generated revenue of $4,558 and our cost of goods sold was $2,799, resulting in gross profit of $1,759. We incurred operating expenses of $376,781, interest expense of $2,648 and we recorded a net loss of $377,670.

During the three months ended December 31, 2018, we generated revenue of $57,476 and our cost of goods sold was $41,293, resulting in gross profit of $16,183. We incurred total operating expenses of $480,695, interest expense of $784,892, a loss on change in the fair value of a derivative in the amount of $534,387, and a net loss of $1,783,791. By comparison, during the three months ended December 31, 2017, we generated revenue of $1,852 and our cost of goods sold was $907, resulting in gross profit of $945. We incurred operating expenses of $140,090, interest expense of $1,459 and we recorded a net loss of $140,604.

Our revenues increased significantly compared to the same periods last year due to increased product distribution and sales. Our operating expenses also increased significantly due primarily to consulting fees incurred in the amount of $1,054,813 and an inventory impairment of $35,387, with other expense items being roughly comparable.

We expect that our expenses, as well as our revenues, will continue to increase over the current fiscal year as we work to expand sales and distribution of our products.

Liquidity and Capital Resources

As of December 31, 2018, we had current assets in the amount of $1,417,636, consisting of cash in the amount of $207,611, accounts receivable of $95,732, current portion of prepaid expense in amount of $10,902, the current portion of prepaid stock compensation in the amount of $997,997, and inventory of $105,394.As of December 31, 2018, we had current liabilities of $2,118,717.The current liabilities consisted of accounts payable of $51,137, accrued interest payable of $20,659, convertible debt net of discount in the amount of $241,704, and a derivative liability of $1,805,217.

We have funded our operations to date through the issuance of common stock in offerings exempt under Rule 506, as well as through the issuance of convertible notes. During the period ended December 31, 2018:

Our ability to successfully execute our business plan is contingent upon us obtaining additional financing and/or upon realizing sales revenue sufficient to fund our ongoing expenses. Until we are able to sustain our ongoing operations through sales revenue, we intend to fund operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all.

Off Balance Sheet Arrangements

As of December 31, 2018, there were no off-balance sheet arrangements.

Going Concern

We have experienced recurring losses from operations and to date, we have not been able to produce sufficient sales to become cash flow positive and profitable. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. For these reasons, our auditor has raised substantial doubt about our ability to continue as a going concern.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following accounting policies currently fit this definition:

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of six months or less to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided by the straight-line method over the useful lives of the related assets, from five to seven years.

The cost of building the Company’s website has been capitalized and amortized over a period of six years. Expenditures for minor enhancements and maintenance are expensed as incurred.

Inventory

Inventories are stated at the lower of cost (average cost) or market (net realizable value). Inventory consists of raw materials, work in process inventory and finished goods inventory valued at $105,394 and $14,044 as of December 31, 2018 and March 31, 2018, respectively.

Use of Estimates

The preparation of 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. Actual results could differ from those estimates.

Income Taxes

The Company is subject to income taxes in the U.S. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. In accordance with FASB ASC Topic 740, “Income Taxes,” the Company provides for the recognition of deferred tax assets if realization of such assets is more likely than not. The Company accounts for income tax under the provisions of FASB ASC Topic 740, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Fair Value of Financial Instruments

The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of December 31, 2018 and March 31, 2018 the fair value of cash and accounts payable, approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

Convertible Instruments

The Company evaluates and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

Recently Issued Accounting Pronouncements

We do not believe that any recently issued accounting pronouncements will have a material effect on our results of operations, financial position and cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2018. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Ashok Patel and our Chief Financial Officer, A. David Youssefyeh. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2018, our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the period ended December 31, 2018.

Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. 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 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. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is 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, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

A smaller reporting company is not required to include this information. For a description of the risk factors applicable to our business and operations, please refer to our Annual Report on Form 10-K for the year ended March 31, 2018, filed with SEC on August 13, 2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the nine months ended December 31, 2018, we issued convertible notes to several third partiestotaling $514,500 in exchange for cash proceeds of $476,200, with an original issuance discount of $38,300. The notes bear interest at 12% per annum, are due between 6-12 months from the date of issuance, and convert into common stock at the rate of 65% of the average two lowest trading prices over the 20-day period prior to conversion.

During the nine months ended December 31, 2018, we sold 4,100,000 shares of common stock for proceeds of $91,000. Of this amount, 1,000,000 shares, representing $30,000, had not been issued as of December 31, 2018 and were recorded as Stock Payable.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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.