UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, ~~2017~~2019

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

For the transition period from _____ to ____

Commission File No. 000-55523

~~STONY HILL~~APPLIED BIOSCIENCES CORP.

(Exact name of registrant as specified in its charter)

Nevada		~~None~~ 81-1699502
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9701 Wilshire Blvd., Suite 1000

Beverly Hills, California 90212

(Address of principal executive offices) (Zip Code)

(310) 356-7374

(Registrant’s telephone number, including area code)

___________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨x No x¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one):

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o¨

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

APPLICABLE ONLY TO CORPORATE ISSUERS

As of February ~~13, 2018,~~14, 2020 there were ~~13,345,100~~14,292,956 shares of common stock, $0.00001 par value per share, outstanding.

~~STONY HILL~~APPLIED BIOSCIENCES CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED DECEMBER 31, ~~2017~~

2019

INDEX

Index			Page

Part I. Financial Information

Item 1.	Unaudited Condensed Consolidated Financial Statements		4

	Condensed Consolidated Balance Sheets as of December 31, ~~2017~~2019 (Unaudited) and March 31, ~~2017.~~2019.		4

	Condensed Unaudited Consolidated Statements of Operations for the three and nine months ended December 31, ~~2017~~2019 and December 31, ~~2016 (Unaudited).~~2018.		5

	Condensed Unaudited Consolidated Statements of Stockholders’ Equity for the three and nine months ended December 31, ~~2017 (Unaudited).~~2019 and December 31, 2018.		6

	Condensed Unaudited Consolidated Statement of Cash Flows for the nine months ended December 31, ~~2017~~2019 and December 31, ~~2016 (Unaudited).~~2018.		7 8

	Notes to Condensed Consolidated Financial Statements (Unaudited).		8 9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		16 20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		19 25

Item 4.	Controls and Procedures.		19 26

Part II. Other Information

Item 1.	Legal Proceedings.		20 27

Item 1A.	Risk Factors.		20 27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		20 27

Item 3.	Defaults Upon Senior Securities.		20 27

Item 4.	Mine Safety ~~Disclosures~~Disclosures..		20 27

Item 5.	Other Information.		20 27

Item 6.	Exhibits.		21 28

Signatures		22	29

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of ~~Stony Hill~~Applied Biosciences Corp., a Nevada corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the possibility that we will not receive sufficient customers to grow our business, the Company’s need for and ability to obtain additional financing, other factors over which we have little or no control; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial statements.

APPLIED BIOSCIENCES CORP.

~~STONY HILL CORP.~~
CONDENSED CONSOLIDATED BALANCE SHEETS

December 31,
2017

March 31,
2017

(unaudited)

ASSETS

Current Assets

Cash

$ 416,831

$ 212,637

Accounts receivable, net of allowance for doubtful accounts of $2,232 and nil

4,685

5,677

Inventory

35,004

22,699

Prepaids and other current assets

4,290

16,920

Total Current Assets

460,810

257,933

Property and equipment, net

1,524

-

Equity investments

368,537

300,000

Intangible asset, net

949,795

1,118,179

Other asset

5,500

-

TOTAL ASSETS

$ 1,786,166

$ 1,676,112

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

Accounts payable

$ 31,564

$ 12,297

Accrued expenses

20,208

19,287

Total Current Liabilities

51,772

31,584

Stockholders’ Equity

Preferred stock; $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding at December 31, 2017 (unaudited) and March 31, 2017

-

-

Common stock; $0.00001 par value; 200,000,000 shares authorized; 15,595,100 and 15,247,600 issued and outstanding at December 31, 2017 (unaudited) and March 31, 2017, respectively

154

152

Additional paid in capital

2,437,470

1,742,472

Common stock to be issued, 192,390 and 150,000 shares at December 31, 2017 (unaudited) and March 31, 2017, respectively

538,333

426,000

Accumulated deficit

(1,237,302 )

(525,832 )
Total Stony Hill Corp. Stockholders’ Equity

1,738,655

1,642,792

Non-controlling (deficit) interest

(4,261 )

1,736

Total Stockholders’ Equity

1,734,394

1,644,528

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 1,786,166

$ 1,676,112

	December 31, 2019			March 31, 2019
ASSETS	(unaudited)
Current Assets
Cash	$	21,268		$	47,044
Accounts receivable, net		76,201			163,405
Inventory		101,524			78,737
Prepaids and other current assets		14,666			65,273
Total Current Assets		213,659			354,459

Property and equipment, net		331,323			452,048
Operating lease right-of-use assets, net		350,752			-
Equity investments		570,911			898,292
Goodwill (provisional)		1,941,149			1,941,149
Other asset		10,133			5,500
TOTAL ASSETS	$	3,417,927		$	3,651,448

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable	$	659,682		$	278,546
Note Payable		25,000			25,000
Convertible note payable - related party		192,000			-
Convertible note payable - unrelated parties, net of
debt discount of $153,170 at December 31, 2019		346,769			-
Derivative liability		234,058			-
Current portion of operating lease liabilities		89,136			-
Accrued expenses		472,131			70,720
Total Current Liabilities		2,018,776			374,266
Operating lease liabilities, net of current portion		261,616			-
Total Liabilities		2,280,392			374,266
Commitments and Contingencies
Stockholders' Equity
Preferred stock; $0.00001 par value; 5,000,000 shares authorized; none
issued and outstanding at December 31, 2019 (unaudited) and 2018
and March 31, 2019, respectively		-			-
Common stock; $0.00001 par value; 200,000,000 shares authorized:
14,100,956 issued and outstanding at December 31, 2019 (unaudited)
and 13,397,110 at March 31, 2019		143			135
Additional paid in capital		7,321,615			6,892,242
Common stock to be issued, 808,805 shares at December 31,
2019 (unaudited) and 408,805 shares at March 31, 2019		993,807			773,807
Accumulated deficit		(8,086,293	)		(5,531,260	)
Total Applied BioSciences Corp. Stockholders' Equity		229,272			2,134,924
Non-controlling Equity		908,263			1,142,258
Total Stockholders' Equity		1,137,535			3,277,182
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	3,417,927		$	3,651,448

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

APPLIED BIOSCIENCES CORP.

~~STONY HILL CORP.~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months

Three Months

Nine Months

Nine Months

Ended

Ended

Ended

Ended

December 31,
2017

December 31,
2016

December 31,
2017

December 31,
2016

(unaudited)

(unaudited)

(unaudited)

(unaudited)

REVENUE

Product, net

$ 62,977

$ -

$ 179,534

$ -

Services

-

17,500

-

17,500

62,977

17,500

179,534

17,500

COST OF REVENUE, PRODUCT

50,370

-

140,706

-

GROSS MARGIN

12,607

17,500

38,828

17,500

EXPENSES

Sales and marketing

165,315

-

229,674

-

General and administrative

133,977

54,865

358,193

86,047

Reverse merger costs

-

376,366

-

376,366

Depreciation and Amortization

56,172

-

168,428

-

TOTAL OPERATING EXPENSES

355,464

431,231

756,295

462,413

NET LOSS

(342,857 )

(413,731 )

(717,467 )

(444,913 )
Less: Net loss attributable to non controlling interest

7,131

-

5,997

-

NET LOSS ATTRIBUTABLE TO STONY HILL CORP.

$ (335,726 )

$ (413,731 )

$ (711,470 )

$ (444,913 )

LOSS PER COMMON SHARE

$ (0.02 )

$ (0.03 )

$ (0.05 )

$ (0.04 )

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic and diluted

15,595,100

13,295,532

15,458,775

11,211,460

	Three Months			Three Months			Nine Months			Nine Months
	Ended			Ended			Ended			Ended
	December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
REVENUE, NET
Products	$	22,357		$	413,109		$	192,011		$	472,509
Services		147,218			-			433,295			-
Total revenues, net		169,575			413,109			625,306			472,509

COST OF REVENUE
Products		17,137			379,582			167,546			439,740
Services		34,206			-			81,967			-
Total costs of revenue		51,343			379,582			249,513			439,740

GROSS MARGIN		118,232			33,527			375,793			32,769

EXPENSES
Sales and marketing		50,590			100,730			256,775			556,167
General and administrative		997,055			1,317,469			2,271,546			1,712,667
Depreciation and amortization		40,828			292			120,324			877
TOTAL OPERATING EXPENSES		1,088,473			1,418,491			2,648,645			2,269,711
OPERATING LOSS		(970,241	)		(1,384,964	)		(2,272,852	)		(2,236,942	)
Other Income (Expense)
Change in fair value of equity investments		(327,381	)		-			(327,381	)		404,763
Change in fair value of derivative		(39,231	)		-			(34,977	)		-
Interest Expense		(89,017	)		(506,579	)		(153,818	)		(574,880	)
Total other (expense), net		(455,629	)		(506,579	)		(516,176	)		(170,117	)
NET LOSS		(1,425,870	)		(1,891,543	)		(2,789,028	)		(2,407,059	)

Less: Net income (loss) attributable to non controlling interest		72,480			(234	)		233,995			9,358
NET LOSS ATTRIBUTABLE TO APPLIED
BIOSCIENCES CORP.	$	(1,353,390	)	$	(1,891,777	)	$	(2,555,033	)	$	(2,397,701	)

LOSS PER COMMON SHARE	$	(0.10	)	$	(0.16	)	$	(0.19	)	$	(0.22	)

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic and diluted		13,649,254			11,797,297			13,555,111			11,150,168

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

APPLIED BIOSCIENCES CORP.

~~STONY HILL CORP.~~

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FOR THE ~~NINE MONTHS~~PERIODS ENDED DECEMBER 31, ~~2017 (UNAUDITED)~~

Common Stock

Common Stock

Additional

Non-

$0.00001 Par

to be

Paid In

Controlling

Accumulated

Stockholders’

Number

Amount

Issued

Capital

Interest

Deficit

Equity

Balance, March 31, 2017

15,247,600

$ 152

$ 426,000

$ 1,742,472

$ 1,736

$ (525,832 )

$ 1,644,528

Issuance of common stock for cash

347,500

2

694,998

695,000

Common stock to be issued in

conjunction with consulting agreement

112,333

112,333

Net loss

(5,997 )

(711,470 )

(717,467 )

Balance, December 31, 2017 (unaudited)

15,595,100

$ 154

$ 538,333

$ 2,437,470

$ (4,261 )

$ (1,237,302 )

$ 1,734,394

2019

	Common Stock				Common Stock			Additional		Non-
	$0.00001 Par				to be			Paid In		Controlling			Accumulated			Stockholders’
	Number		Amount		Issued			Capital		Interest			Deficit			Equity

Balance, March 31, 2019		13,397,110	$	135	$	773,807		$	6,892,242	$	1,142,258		$	(5,531,260	)	$	3,277,182
Issuance of common stock previously
committed but not issued		50,000		1		(50,000	)		49,999								-
Beneficial conversion feature associated
with issuance of convertible notes									77,381								77,381
Net loss											(84,031	)		(423,897	)		(507,928	)
Balance, June 30, 2019 (unaudited)		13,447,110		136		723,807			7,019,622		1,058,227			(5,955,157	)		2,846,635
Fair value of common stock issued
to former board member		100,000		1					69,999								70,000
Fair value of common stock issued
upon conversion of convertible note						100,000											100,000
Net loss											(77,484	)		(777,746	)		(855,230	)
Balance, September 30, 2019 (unaudited)		13,547,110	$	137	$	823,807		$	7,089,621	$	980,743		$	(6,732,903	)	$	2,161,405

Fair value of common stock issued
to officers		300,000		3					80,997								81,000
Fair value of common stock issued
to consultants		100,000		1		270,000			50,999								321,000
Fair value of common stock issued
upon conversion of convertible note		153,846		2		(100,000	)		99,998								-
Net loss											(72,480	)		(1,353,390	)		(1,425,870	)
Balance, December 31, 2019 (unaudited)		14,100,956	$	143	$	993,807		$	7,321,615	$	908,263		$	(8,086,293	)	$	1,137,535

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

~~STONY HILL~~APPLIED BIOSCIENCES CORP.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~CASH FLOWS~~

Nine Months

Nine Months

Ended

Ended

December 31,
2017

December 31,
2016

(unaudited)

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$ (717,467 )

$ (444,913 )
Adjustment to reconcile net loss to net cash used in operating activities:

Costs of reverse merger

-

376,366

Stock compensation issued in exchange for consulting agreements

112,333

-

Depreciation

44

-

Amortization of intangible

168,384

-

Changes in operating assets and liabilities

Accounts receivable

992

(10,000 )
Inventory

(12,305 )

-

Prepaid and other current assets

12,630

-

Other asset

(5,500 )

-

Accounts payable and accrued expenses

20,188

10,492

Net cash used in operating activities

(420,701 )

(68,055 )

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of equity investment

(68,537 )

(50,000 )
Purchase of property and equipment

(1,568 )

-

Increase in cash held in trust account

-

(25,000 )
Deposit on acquisition

-

(325,000 )
Net cash used in investing activities

(70,105 )

(400,000 )

CASH FLOW FROM FINANCING ACTIVITIES

Issuance of common stock for cash

695,000

740,101

Net cash provided by financing activities

695,000

740,101

NET CHANGE IN CASH

204,194

272,046

CASH, BEGINNING OF PERIOD

212,637

-

CASH, END OF PERIOD

$ 416,831

$ 272,046

NON CASH INVESTING AND FINANCING TRANSACTIONS

Liabilities assumed in the reverse merger

$ -

$ 51,366

STOCKHOLDERS’ EQUITY

FOR THE PERIODS ENDED DECEMBER 31, 2018

	Common Stock				Common Stock			Additional		Non-
	$0.00001 Par				to be			Paid In		Controlling			Accumulated			Stockholders’
	Number		Amount		Issued			Capital		Interest			Deficit			Equity

Balance, March 31, 2018		10,499,610	$	105	$	526,000		$	3,054,297	$	(9,027	)	$	(2,901,933	)	$	669,442
Issuance of common stock
previously committed but not issued		50,000		1		(100,000	)		99,999								-
Issuance of common stock for cash						75,000											75,000
Fair value of shares issued to consultant
for services		90,000		1		45,926			179,999								225,926
Fair value of shares issued to advisory
board member		25,000		-					51,000								51,000
Beneficial conversion feature associated
with a convertible note									28,705								28,705
Net loss											(6,256	)		(395,501	)		(401,757	)

Balance, June 30, 2018 (unaudited)		10,664,610		107		546,926			3,414,000		(15,283	)		(3,297,434	)		648,316

Issuance of common stock previously
committed but not issued		12,500				(25,000	)		25,000								-
Fair value of shares issued to consultant
for services						15,926											15,926
Beneficial conversion feature associated
with a convertible note									99,900								99,900
Net loss											(3,336	)		(110,423	)		(113,759	)
Balance, September 30, 2018 (unaudited)		10,677,110	$	107	$	537,852		$	3,538,900	$	(18,619	)	$	(3,407,857	)	$	650,383

Fair value of shares issued to consultants
for services		295,000		3		-			356,447								356,450
Vair value of shares issued to Company
Officers and board member		625,000		6					756,244								756,250
Beneficial conversion feature associated
with a convertible note									309,200								309,200
Conversion of convertible debt						1,444,500											1,444,500
Net loss											234			(1,891,777	)		(1,891,543	)
Balance, December 31, 2018 (unaudited)		11,597,110	$	116	$	1,982,352		$	4,960,791	$	(18,385	)	$	(5,299,634	)	$	1,625,240

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

APPLIED BIOSCIENCES CORP.

~~STONY HILL~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months			Nine Months
	Ended			Ended
	December 31, 2019			December 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES	(unaudited)			(unaudited)
Net loss	$	(2,789,028	)	$	(2,407,059	)
Adjustment to reconcile net loss to net cash used in operating activities:
Change in fair value of equity investments		327,381			(404,763	)
Amortization of debt discount		123,293			437,805
Change in fair value of derivative		34,977			-
Fair value of shares issued to consultants		321,000			649,302
Fair value of shares issued to officers and board member		151,000			756,250
Depreciation		120,724			878
Allowance for bad debt		33,457			-
Amortization of operating lease right-of-use asset		21,737			-
Changes in operating assets and liabilities
Repayment of lease obligations		(21,737	)		-
Accounts receivable		53,748			(5,436	)
Inventory		(22,786	)		(41,031	)
Prepaid and other current assets		45,972			77,699
Accounts payable and accrued expenses		782,547			147,492
Net cash used in operating activities		(817,715	)		(788,863	)

CASH FLOWS FROM INVESTING ACTIVITIES
Deposit on acquisition		-			(550,000	)
Net cash used in investing activities		-			(550,000	)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible notes		791,939			1,444,500
Proceeds from issuance of common stock		-			75,000
Net cash provided by financing activities		791,939			1,519,500

NET CHANGE IN CASH		(25,776	)		180,637

CASH, BEGINNING OF PERIOD		47,044			60,934

CASH, END OF PERIOD	$	21,268		$	241,571

NON-CASH INVESTING AND FINANCING ACTIVITIES
Fair value of common stock issued upon
conversion of convertible notes and accrued interest	$	100,000		$	1,444,500
Fair value of beneficial conversion feature related to
issuance of convertible notes	$	77,381		$	437,805
Initial recognition of operating lease right-of-use assets and
operating lease obligations under adoption of ASC Topic 842	$	372,490		$	-
Recognition of derivative liability upon issuance of note payable	$	199,081		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, ~~2017~~2019 AND ~~2016~~

2018

(unaudited)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Description of the Company

~~Stony Hill~~

Applied BioSciences Corp. (formerly First Fixtures, Inc. and Stony Hill Corp. or the “Company”) was incorporated in the State of Nevada on February 21, 2014 and established a fiscal year end of March 31. The Company is a vertically integrated company focused on the development of science-driven cannabinoid therapeutics / biopharmaceuticals and delivering high-quality CBD products as well as state-of-the-art testing and analytics capabilities.

Effective October 24, 2016 the Company changed its name from First Fixtures Inc. to Stony Hill Corp. ~~The~~and on March 6, 2018, the Company ~~is organized for various investments to be made under the~~changed its name from Stony Hill ~~brand as well as~~Corp. to conduct any other related business and activities. The Company is the owner and has right to intellectual property, including trademark, trade dress, images, likenesses and other associated intellectual property such as the name “Stony Hill”.

~~Merger~~

~~On November 4, 2016,~~Applied BioSciences Corp.

In January 2019, the Company ~~entered into~~closed on a ~~Share Exchange Agreement by and among the Company, Stony Hill Ventures Corp. (“Stony Hill Ventures”), and the holders~~purchase of 520,410 shares of common stock of ~~Stony Hill Ventures,~~Trace Analytics, Inc., a Washington corporation (“Trace Analytics”), for an aggregate purchase price of $1,250,000, of which ~~consisted of 26 stockholders. Stony Hill Ventures~~$750,000 was ~~incorporated on March 15, 2016,~~paid in ~~Nevada~~cash and $500,000 was ~~organized for various investments under the Stony Hill brand as well as to conduct any other related business and activities.~~

~~Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 10,830,000~~paid in shares of common stock of the ~~Company in consideration for all~~Company. Trace Analytics is a cannabis testing laboratory. Immediately following the issued and outstanding shares in Stony Hill Ventures. The effect of the issuance is that the former Stony Hill Ventures stockholders obtained approximately 73% of the then issued and outstanding shares of common stock ofpurchase, the Company ~~and Stony Hill Ventures became a wholly-owned subsidiary of the Company and now represents the Company’s principal business.~~

As a result of the Merger, Damian Marley became the Company’s President and Chief Executive Officer and sole member of the Board of Directors, and is the holder of 3,150,000 shares, now approximately 20.6%, of the outstanding common stock of the Company. On February 10, 2017, Mr. Marley resigned as President and Chief Executive Officer, and the board of directors appointed Chris Bridges as our President. On March 9, 2017, Mr. Bridges was also appointed a director. Dan Dalton became the Company’s Treasurer (a position he held until January 5, 2018), and became the holder of 2,250,000 shares, or approximately 14.7%, of the outstanding common stock of the Company. On February 9, 2018, Mr. Dalton sold his 2,250,000 shares to the Company for consideration of $50,000, and the Company canceled such shares, returning them to the authorized share capital of the Company on the same day. John Brady became the Company’s Secretary and is holder of 2,000,000 shares, now approximately 10.4%, of the outstanding common stock of the Company. On January 5, 2018, Mr. Brady also became the Company’s Treasurer. The Company’s officers and sole director, therefore, controlled an aggregate of 7,400,000, or 49.8%, of the outstanding common stock of the Company after the transaction. After Mr. Dalton’s sale of his shares to the Company, and the Company’s subsequent cancelation of such shares on February 9, 2018, Mr. Marley and Mr. Brady hold an aggregate of 5,150,000 shares of common stock of the Company, or 38.5%51% of the issued and outstanding shares of common stock of Trace Analytics and have included the ~~Company.~~

~~The merger between~~financial results of Trace Analytics in the condensed consolidated financial statements from the date of acquisition, January 1, 2019.

On April 8, 2019, the Company formed Applied Biopharma LLC, a wholly-owned subsidiary, in the state of Nevada, with the intention of establishing and ~~Stony Hill Ventures was treated as a reverse acquisition for financial statement reporting purposes with Stony Hill Ventures deemed~~growing the ~~accounting acquirer and the Company deemed the accounting acquiree. Accordingly, Stony Hill Ventures’ assets, liabilities and results of operations became the historical financial statements~~biopharmaceutical business of the Company. ~~No step-up~~Applied Biopharma LLC is focused on the development and commercialization of novel therapeutics to treat metabolic diseases, peripheral neuropathy, progressive lung disease and ischemic reperfusion injury. Its principal business objective is to develop science-driven synthetic cannabinoid therapeutics that satisfy unmet medical needs and continue to drive innovation in ~~basis or intangible assets or goodwill was recorded in this transaction.~~

~~On October 3, 2016,~~ the ~~Company effected a 1-for-10 stock split. All share and per share amounts have been retro actively restated as if the split had occurred as of the earliest period presented.~~

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endocannabinoid space.

Basis of presentation – Unaudited Financial Statements

The accompanying unaudited condensed consolidated 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 the rules and regulations of the Securities and Exchange Commission. Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results that may be expected for the fiscal year ending March 31, ~~2018,~~2020, or for any other interim period. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements as of and for the year ended March 31, ~~2017,~~2019, which are included in the Company’s Report on Form 10-K for such year filed on ~~June 29, 2017.~~

July 1, 2019.

Going concern

These condensed statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As reflected in the condensed consolidated financial statements, ~~although the Company started to generate revenues from its business operations during its fiscal year ending March 31, 2018,~~ the Company incurred a net loss of ~~$717,467~~$2,789,028 and used ~~$420,701~~$817,715 of cash in operating activities during the nine months ended December 31, ~~2017.~~2019. Further, the Company’s independent auditor in their audit report for fiscal year ended March 31, ~~2017~~2019 expressed substantial doubt about the Company’s ability to continue as a going concern. These and other factors raise substantial doubt about the ~~Company’s~~Company's ability to continue as a going concern within one year after the date the financial statements are issued. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2019 AND 2018

(unaudited)

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional capital and to ultimately achieve sustainable revenues and income from operations. During the nine months ended December 31, ~~2017,~~2019, the Company ~~sold 347,500 shares of its common stock in a private placement to accredited investors at a price of $2.00 per share~~issued convertible notes for total proceeds of ~~$695,000.~~$791,939 in private placements with accredited investors. However, the Company will need and is currently working on obtaining additional funds to operate its business through and beyond the date of this Form 10-Q filing. There is no assurance that such funds will be available or at terms acceptable to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions and covenants on its operations, in the case of debt financing or cause substantial dilution for its stockholders in the case of convertible debt and equity financing.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its ~~wholly~~subsidiaries, Applied Products LLC (100% owned ~~subsidiaries, Vita Products LLC,~~entity), VitaCBD LLC, an 80% owned entity, ~~both~~Trace Analytics, Inc., a 51% owned entity, all Washington limited liability companies, and Applied Biopharma LLC and SHL Management LLC, aboth 100% owned Nevada limited liability ~~company.~~companies. Intercompany transactions and balances have been eliminated in consolidation. Management evaluates its investments on an individual basis for purposes of determining whether or not consolidation is appropriate.

Use of Estimates and Assumptions

Preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain 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 period. Among other things, management estimates include the collectability of its accounts receivable, recoverability of inventory, assumptions made in determining impairment of investments and intangible assets, accruals for potential liabilities, and realization of deferred tax assets. These estimates generally involve complex issues and require judgments, involve analysis of historical information and the prediction of future trends, and are subject to change from period to period. Actual amounts could differ significantly from these estimates.

Revenue Recognition

The Company’s revenue is principally derived from its subsidiaries, Applied Products LLC, and Trace Analytics.

	·	Applied Products LLC revenues are generated from sales of high-quality CBD products for consumer and pet health and wellness. Sales of these products are made to individual distributors and through online sales. Revenue from the sale of these products was $192,011 and $472,509 during the nine months ended December 31, 2019 and 2018, respectively

	·	Trace Analytics generates revenue from services by offering state-of-the-art testing and analytics capabilities to CBD and hemp companies. Sales of these services are to marijuana producers and processors, dispensaries, and CBD and hemp companies. Revenue from the sale of these services was $433,295 during the nine months ended December 31, 2019.

The Company recognizes revenue in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying the Company’s performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

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~~STONY HILL~~

APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, ~~2017~~2019 AND ~~2016~~

2018

(unaudited)
~~Revenue Recognition~~
The Company receives revenue from two main sources - license fees and sale of products. For license fees, revenue arrangements provide for the payment of contractually determined monthly ongoing fees in consideration for the grant of right to use intellectual property of the Company, including trademark, trade dress, images, likenesses and other associated intellectual property, such as the name “Stony Hill” and in some cases mutually agreed upon marketing and special appearances by certain members of the Company. Revenue from product sales relate to shipments of cannabidiol (“CBD”) brand products. There is no right of returns other than for goods damaged during shipment.
For both license fees and sale of products, revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) all obligations have been substantially performed pursuant to the terms of the arrangement, (iii) amounts are fixed or determinable, and (iv) the collectability of amounts is reasonably assured.

Advertising

The Company expenses advertising costs as incurred. Advertising expense for the nine ~~months~~month periods ended December 31, ~~2017~~2019 and 2018 amounted to ~~$107,549~~$37,144 and ~~are~~$40,769, respectively, and were included in “Sales and ~~Marketing~~marketing expenses” in the ~~Condensed~~ Consolidated Statements of Operations. ~~There were no such costs in the comparative period in 2016.~~

Earnings (Loss) per Share

The basic earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the weighted average number of common shares during the period. Shares of common stock to be issued are included in weighted average shares calculation from the date of grant. The diluted earnings (loss) per share is calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted average number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items. During the nine months ended December 31, 2017 and 2016, weighted average shares outstanding included 192,390 and 150,000 common shares, respectively, that are vesting as services are being provided and not yet issued.

Weighted average number of shares outstanding has been retroactively restated for the equivalent number of shares received by the accounting acquirer as a result of the reverse merger as if these shares had been outstanding as of the beginning of the earliest period presented.

Investments

~~For investments that are not required to be consolidated, the Company uses either the equity method or the cost method of accounting.~~

The Company uses the equity method for unconsolidated equity investments in which the Company is considered to have significant influence over the operations of the investee. The Company uses the cost method for all other investments. Under the cost method, there is no change to the cost basis unless there is an other-than-temporary decline in value or dividends are received. If the decline is determined to be other-than-temporary, the Company writes down the cost basis of the investment to a new cost basis that represents realizable value. Distributions received from the income of an investee on cost method investments are included in “Equity method investments (loss)/income, net.” Investments accounted for under the equity method or cost method of accounting above are included in the caption “Equity investments” on the Condensed Consolidated Balance Sheets.

~~Intangible Asset~~

Intangible assets are recorded when such assets are acquired and are amortized over the estimated useful life of the intangible asset. The Company regularly reviews intangible assets to determine if facts and circumstances indicate that the useful lives have changed from the original estimate or that the carrying amount of the assets may not be recoverable. If such facts and circumstances exist, the Company assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets and occur in the period in which the impairment determination was made.

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~~STONY HILL CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2017 AND 2016~~

~~(unaudited)~~

~~Recent Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued ASU 2016-08, ASU 2016-10, ASU 2016-11, ASU 2016-12, ASU 2016-20, and ASU 2017-05, all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. The standard can be adopted either retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method). The Company is currently in the process of analyzing the information necessary to determine the impact of adopting this new guidance on its financial position, results of operations, and cash flows. The Company will adopt the provisions of this statement in the quarter beginning April 1, 2018.

In February 2016, the FASB issued ASU No. 2016-02, Leases. This update will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

~~In January 2016, the FASB issued~~follows ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Among other things, this ~~new~~ guidance requires certain equity investments to be measured at fair value with changes in fair value recognized in net income. ~~This~~As such, the Company measures its equity investments at their fair value at end of each reporting period.

Investments accounted for under the equity method or cost method of accounting above are included in the caption “Equity investments” on the Condensed Consolidated Balance Sheets.

Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The Company evaluates goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. The Company conducts its annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of the Company’s operations and comparability of its market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and an impairment loss is measured by the resulting amount. Because the Company has one reporting unit, as part of the Company’s qualitative assessment an entity-wide approach to assess goodwill for impairment is utilized. Based on management’s assessment, no impairment losses have been recorded in the nine month periods ended December 31, 2019.

Stock Based Compensation

The Company issues stock options and warrants, shares of common stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2019 AND 2018

(unaudited)

In prior periods up to March 31, 2019, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. The Company adopted ASU 2018-07 on April 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the three and nine months periods ended December 31, 2019 or the previously reported financial statements.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

To determine the number of authorized but unissued shares available to satisfy outstanding convertible securities, the Company uses a sequencing method to prioritize its convertible securities as prescribed by ASC 815-40-35. At each reporting date, the Company reviews its convertible securities to determine their classification is appropriate.

Leases

Prior to April 1, 2019, the Company accounted for leases under ASC 840, Accounting for Leases. Effective April 1, 2019, the Company adopted the guidance of ASC 842, Leases, which requires an entity to recognize a right-of-use asset and a lease liability for virtually all leases. The Company adopted ASC 842 using a modified retrospective approach. As a result, the comparative financial information has not been updated and the required disclosures prior to the date of adoption have not been updated and continue to be reported under the accounting standards in effect for those periods. The adoption of ASC 842 resulted in the recognition of operating lease right-of-use assets of $372,490 on October 1, 2019 upon commencement of the new leases of the Company. There was no cumulative-effect adjustment to accumulated deficit. See Note 9 for further information regarding the adoption of ASC 842.

Segments

The Company operates in one segment for the distribution of products and services. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying condensed consolidated financial statements.

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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2019 AND 2018

(unaudited)

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to occur for most financial assets, including trade receivables. Credit losses on available-for-sale debt securities with unrealized losses will be recognized as allowances for credit losses limited to the amount by which fair value is below amortized cost. ASU 2016-13 is effective for ~~reporting periods~~the Company beginning ~~after December 15, 2017, with certain provisions allowing for~~January 1, 2020 and early ~~adoption.~~adoption is permitted. The Company ~~will adopt~~does not believe the ~~provisions of this statement in the quarter beginning April 1, 2018. The Company is currently evaluating the~~potential impact of the ~~adoption of ASU 2016-01 on~~new guidance and related codification improvements will be material to its financial ~~statements~~position, results of operations and ~~related disclosures.~~

cash flows.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, 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 consolidated financial statements.

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NOTE 3 – ~~INVESTMENT~~

PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	December 31, 2019			March 31, 2019
Lab Equipment	$	569,484		$	569,484
Office Furniture and Equipment		57,562			57,562
Leasehold Improvements		21,557			21,557
		648,603			648,603
Less: Accumulated Depreciation		(317,280	)		(196,555	)
	$	331,323		$	452,048

NOTE 4 – EQUITY INVESTMENTS

Equity investments relate to purchases of stock in certain entities with ownership percentages of less than 5% and consist of the following:

December 31,
2017

March 31,
2017

(A) Cannabi-Tech Ltd.

$ 68,537

$ 50,000

(B) Hightimes Holdings Corp.

250,000

250,000

(C) Precision Cultivation Systems, LLC

50,000

-

$ 368,537

$ 300,000

	December 31, 2019		March 31, 2019
(A) GemmaCert	$	93,529	$	93,529
(B) Hightimes Holdings Corp.		327,382		654,763
(C) Precision Cultivation Systems, LLC		50,000		50,000
(D) Bailey Venture Partners XII LLC		100,000		100,000
	$	570,911	$	898,292

(A) In November 2016, the Company purchased 29,571 shares of Preferred A stock of Cannabi-Tech Ltd. (“Cannabi”), at a price of $1.69086 per share for total investment of $50,000. In October 2017, the Company purchased 7,309 shares of Preferred A-1 stock of Cannabi at a price of $2.536 per share for total investment of $18,537. As of December 31, 2017, total investment amounted to $68,537, which accounts for less than 5% in Cannabi. Cannabi is a private company incorporated in the State of Israel that provides lab-grade medical cannabis quality control testing systems used to test the quality of medical marijuana flowers.

Cannabi subsequently changed its name to GemmaCert. In October 2017, the Company purchased an additional 7,309 shares of Preferred A-1 stock of GemmaCert at a price of $2.536 per share for total investment of $18,537. As of March 31, 2019, the company valued these investments based on the most recent purchase price at $2.536 per share or total fair value of $93,529.

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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2019 AND 2018

(unaudited)

As a private company, GemmaCert does not have a readily determinable fair value. Additionally, there have been no observable price changes from transactions for similar investments in GemmaCert during the nine months ended December 31, 2019. As such, the Company valued the investment at $2.536 per share, reflecting the most recent purchase price for total value of $93,529, which is believed to approximate market value.

(B) In January 2017, the Company entered ~~in to~~into an agreement to purchase 59,524 shares of Class A common stock at a price of $4.20 per share for total investment of $250,000, which accounts for less than 5% investment in Hightimes Holdings Corp. (“Hightimes”). ~~The agreement was finalized on May 31, 2017.~~ Hightimes owns ~~Hight~~High Times Magazine and hosts festivals, events and competitions including the High Times Cannabis Cup and multiple e-commerce properties, including HighTimes.com, CannabisCup.com and 420.com.

As of March 31, 2019, the Company was able to obtain observable evidence that the investment had a market value of $11.00 per share, or an aggregate value of $654,763. As of December 31, 2019, the Company obtained further observable evidence that the investment had a market value of $5.50 per share, or an aggregate value of $327,382 for a decrease in value of $327,381, which was reflected as a change in fair value of our equity investments in the condensed consolidated statements of operations.

(C) In June 2017, the Company entered in a Subscription Agreement to purchase 0.5% interest in Precision Cultivation Systems, LLC (“Precision”), a Delaware limited liability ~~private~~ company, ~~incorporated in Delaware,~~ for a purchase price of $50,000. Precision is developing a growth system that capitalizes on a patent-pending cultivation method that utilizes proprietary irrigation and root zone conditioning. As part of the Subscription Agreement, $42,500 of the investment is subject to repayment on a pro-rata basis with other investors who have entered into similar Subscription Agreements. Amounts subject to repayment are solely at the discretion of Precision.

As a private company, Precision does not have a readily determinable fair value. Additionally, there have been no observable price changes from transactions for similar investments in Precision during the nine months ended December 31, 2019. As such, the Company has measured the value of the investment at cost as of December 31, 2019, which management believes approximates market value.

(D) In January 2018, the Company paid $100,000 for the purchase of a Membership Interest in Bailey Venture Partners XII LLC (“Bailey”) representing less than 5% interest in Bailey. Along with other funds received from third-party investors, Bailey plans to invest funds received in various strategic investments.

As a private company, Bailey does not have a readily determinable fair value. Additionally, there have been no observable price changes from transactions for similar investments in Bailey during the fiscal year ended March 31, 2019. As such, the Company has measured the value of the investment at cost as of December 31, 2019, which management believes approximates market value.

As the Company does not participate in the management of these companies nor has the ability to exercise significant influence over these companies, the Company recorded these investments at cost and ~~will recognize dividends,~~adjusts the cost basis to market at the end of each reporting period. Dividends, if any, are recognized when ~~received,~~received.

NOTE 5 – ACQUISITION OF TRACE ANALYTICS, INC.

On January 7, 2019, the Company closed on a purchase of 520,410 shares of common stock of Trace Analytics, Inc., a Washington corporation (“Trace Analytics”). Pursuant to a Common Stock Purchase Agreement, the Company purchased Trace Analytics at a purchase price of $2.40 per share, for an aggregate purchase price of $1,250,000, of which 141,850 shares remain to be issued. Trace Analytics is a cannabis testing laboratory acquired to enable the Company to position itself as the leading provider of testing solutions for CBD products for both compliance requirements and ~~will recognize gains or loss upon either selling~~consumer safety as these products continue to increase in popularity. Immediately following the ~~securities or recognize a loss prior to selling~~purchase, the ~~securities if there is evidence that the fair market value~~Company held 51% of the ~~investment has declined to below~~issued and outstanding shares of common stock of Trace Analytics and have included the ~~recorded historical cost.~~

financial results of Trace Analytics in the condensed consolidated financial statements from the date of acquisition, January 1, 2019.

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~~STONY HILL~~

APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, ~~2017~~2019 AND ~~2016~~

2018

(unaudited)
~~NOTE 4 –INTANGIBLE ASSET~~

~~On February 23, 2017,~~

The Common Stock Purchase Agreement included the option for Trace to repurchase 205,410 shares of Common Stock based on the occurrence of certain Repurchase Triggering Events. Based on a review of the Repurchase Triggering Events, the Company considers it unlikely that any of the events will occur. Additionally, the Company entered into a Voting Agreement with Trace concurrent with the Common Stock Purchase Agreement. The Voting Agreement provided for the designation of three out of five positions on the Trace Analytics Board of Directors by the Company. The Voting Agreement also detailed certain transactions that require two-thirds approval by the Board of Directors. The Voting Agreement is not considered to impact the ability of the Company to control the operations and assets of Trace Analytics.

The Company accounted for the transaction as a business combination in accordance with ASC 805 “Business Combinations” in which the Company recorded an ~~Asset Purchase Agreement (the “Asset Purchase Agreement”~~initial goodwill amount of $1,941,149 as of March 31, 2019. The Company is in the process of performing an allocation of the purchase price paid for the assets acquired and the liabilities assumed. The fair values of the assets acquired as recognized at the date of the transaction on January 1, 2019 are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). The provisional allocation of the purchase price is based on management’s preliminary estimates. Any prospective adjustments would change the fair value allocation as of the acquisition date. The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill.

NOTE 6 – CONVERTIBLE NOTES PAYABLE

Convertible notes payable consisted of the following:

	December 31, 2019			March 31, 2019
Convertible notes	$	249,939		$	-
12% Senior Convertible Promissory Note		250,000			-
Less: Debt Discount		(153,170	)		-
Total Convertible Notes, Net of Debt Discount	$	346,769		$	-

Convertible Notes

During the nine months ended December 31, 2019, the Company issued separate Convertible Promissory Notes (“Notes”) ~~with mCig, Inc., a Nevada corporation (“mCig”) for~~having a total ~~purchase price~~principal amount of ~~$1,144,000, consisting~~$349,939 to accredited holders at an interest rates ranging from 0% to 1% per month. The note holder, at their sole discretion and election, are allowed to convert any part or all of the ~~issuance of an aggregate of 350,000~~then outstanding principal and/or interest on these Notes into shares of common stock ~~valued~~of the Company at ~~$994,000,~~conversion prices ranging from $0.65 to $1.00 per share. As of December 31, 2019, $100,000 of the Notes were converted, into 153,846 shares of the Company’s common stock based on a conversion price of $0.65 per share. As such, balance of the notes at December 31, 2019 was $249,939.

Certain of the Notes were issued when the market price of the Company’s common stock was in excess of conversion price per share creating a beneficial conversion feature associated with these Notes with an aggregate amount of $71,381 at issuance dates. As such, the Company recorded the $71,381 intrinsic value of the beneficial conversion feature at issuance dates of the Notes as additional paid-in capital and recognized as a debt discount. The debt discount is being amortized as interest expense over the terms of the related notes. During the nine month period ended December 31, 2019, the Company recorded amortization of the debt discount of $52,933 as interest expense. As such, unamortized debt discount as of December 31, 2019 related to these Notes was $18,449.

12% Senior Convertible Promissory Note

On September 4, 2019, the Company entered into a Senior Convertible Promissory Note due September 12, 2020 (the “Note”) in the principal amount of $500,000, of which an initial tranche of $250,000 was received on September 9, 2019, to an accredited investor (the “Purchaser”). The maturity date for each tranche funded (each, a “Maturity Date”) under the Note shall be twelve (12) months from the effective date of the payment of the respective tranche, less any amounts converted or redeemed prior to the Maturity Date. As such, the initial tranche matures on September 8, 2020. The Note accrues interest at a rate of 12% per annum, payable on the Maturity Date or upon any conversion, prepayment, event of default or other acceleration of payment under the Note. All interest payments under the Note are payable, at the Company’s option, in cash or shares of ~~$150,000. Of~~Common Stock.

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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2019 AND 2018

(unaudited)

All principal and interest due and owing under the ~~350,000~~Note is convertible into shares of Common Stock at any time at the election of the Purchaser at a conversion price per share equal to the lower of (i) $1.00 (the “Fixed Conversion Price”) or (ii) 70% multiplied by the average of the three (3) lowest closing prices of the Common Stock during the fifteen (15) consecutive trading-day period immediately preceding the date of the respective conversion (the “Alternate Conversion Price”) (the “Conversion Price”), which Conversion Price is subject to adjustment for (i) stock splits, stock dividends, combinations, or similar events and (ii) full ratchet anti-dilution protection. The Purchaser will have participation rights in subsequent rights offerings and pro rata distributions. However, the Purchaser does not have the right to convert the Note to the extent that such conversion would result in such Purchaser being the beneficial owner in excess of 4.99% (or, upon election of such Purchaser, 9.99%), which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice to the Company.

In the event the Company has a DTC “Chill” on the Company’s shares, an additional discount of 10% shall apply to the Conversion Price while that “Chill” is in effect. The Alternate Conversion Price shall be subject to a floor price of $0.25 per share (the “Floor Price”) provided, however, that the Floor Price shall no longer apply (1) after August 1, 2020, (2) if certain events of default occurs under the Note, and/or (3) the Company fails to pay an amount in cash to the Purchaser equal to 125% multiplied by the respective conversion amount with respect to any notice of conversion as provided in the Note.

The Company may prepay in cash any portion of the outstanding principal amount of the Note and any accrued and unpaid interest upon one (1) days’ written notice to the Purchaser, at any time prior to or as of (but not following) the earlier of the (i) the first conversion date under the Note for the respective tranche under the Note and (ii) the 180th calendar day after the funding date of the respective tranche under the Note. If the Company exercises its right to prepay any respective tranche under the Note at any time within the initial 180 calendar days following the funding date of the respective tranche under the Note, the Company will be required to pay a premium amount above the related principal amount ranging from 10% to 25% depending on when the prepayment notice is provided to the Purchaser.

In connection with the offer and sale of the Note, the Company and the Purchaser entered into a Security Agreement, dated as of September 4, 2019 (the “Security Agreement”). Under the Security Agreement, the Company granted a security interest in all of their respective assets, rights, interests and after-acquired assets and properties, except for the Company’s ownership interest in its subsidiary, Trace Analytics, Inc., as collateral for repayment of the principal and interest owed under the Note.

Also in connection with the offer and sale of the Note, the Company entered into a Registration Rights Agreement, dated September 4, 2019, with the Purchaser (the “Registration Rights Agreement”). Under the Registration Rights Agreement, the Company is obligated to register all shares of common stock ~~consideration, 150,000 shares have~~underlying the Note resale in a registration statement to be filed with the Securities and Exchange Commission if the company files with the Securities and Exchange Commission a registration statement registering any securities, except a registration statement filed (i) in connection with any employee stock option or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan or (iii) in connection with a merger or acquisition.

The Company considered the FASB guidance of “Contracts in Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability of whether or not ~~been issued~~within the issuers’ control means the instrument is not indexed to the issuer’s own stock. Accordingly, the Company determined that the conversion prices of the Notes was not a fixed amount because they were subject to an adjustment based on the occurrence of future offerings or events. As a result, the Company determined that the conversion features of the Note was not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance. The Company determined that upon issuance of the Note, the initial fair value of the embedded conversion feature was $199,081. As such, the Company recorded a $199,081 derivative liability which was recorded as debt discount offsetting the fair value of the Note (see Note 7). During the nine months ended December 31, 2019, the Company amortized $64,360 of the debt discount to interest expense. The balance of the unamortized discount was $134,721 at December 31, 2019.

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APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2019 AND 2018

(unaudited)

NOTE 7 – DERIVATIVE LIABILITY

In accordance with the FASB authoritative guidance, the conversion feature of the Note was separated from the host contract and recognized as a derivative instrument with a fair value of $199,081, which is re-measured at the end of every reporting period with the change in value reported in the condensed statement of operations. The initial derivative liability was valued using a weighted-average Black-Scholes-Merton model with the following assumptions: risk-free interest rate of 1.69%; expected volatility of 189%; expected life of 1 year; and expected dividend yield of 0%. The derivative liability was re-measured to be $234,058 as of December 31, ~~2017~~2019 using a weighted-average Black-Scholes-Merton model with the following assumptions: risk-free interest rate of 1.60%; expected volatility of 196%; expected life of .68 years; and ~~have been reflected~~expected dividend yield of 0%. This resulted in an increase in the ~~condensed consolidated balance sheet as common stock to be issued as~~initial value of the ~~period then ended. Upon acquisition,~~derivative of $34,977, which was recognized as other expense in the ~~Company recorded an intangible asset~~Company’s Condensed Statement of $1,138,135 consisting of the Vita CBD brand name and $5,865 of inventory received from mCig. The VitaCBD business is primarily a line of cannabidiol (“CBD”) retail brand products that include CBD tinctures, ejuices, edibles, islates, salves, waxes, oils and capsules, as well as related trade names, social media, accounts and other related assets.

~~The intangible is being amortized over a period of 5 years, the estimated life of the brand acquired. Amortization totaled $168,384~~Operations for the nine months ended December 31, ~~2017~~2019.

The Company used a risk-free interest rate based on rates established by the Federal Reserve Bank and ~~will total $224,512 for~~used its own stock’s volatility as the ~~fiscal year ending March 31, 2018 and $224,512 in each~~estimated volatility. In addition, the expected life of the ~~following 4 years and $15,575 thereafter.~~

~~In accordance with the Asset Purchase Agreement, if the average common stock market price~~conversion feature of the ~~Company’s common stock held by mCig falls below $1.57 per share, or $550,000 total value (“Market Value”), during any 7-day period during~~notes was based on the ~~first year following~~remaining terms of the ~~Second Stock Issuance (May 24, 2017), then~~Note. Further, the expected dividend yield was based on the fact that the Company ~~is obligated~~has not customarily paid dividends to ~~issue~~its holders of Common Stock in the past and does not expect to ~~mCig additional shares~~pay dividends to holders of its Common Stock in the ~~Company’s common stock to increase the then Market Value held by mCig to $550,000. As of December 31, 2017, the trading price of common stock held by mCig was above the Market Value threshold.~~

future.

NOTE 58 – RELATED PARTY TRANSACTIONS

~~In view of~~

During the period SBS Management LLC, a company controlled by Mr. Scott Stevens, who was appointed to the Company’s ~~limited operations~~board of directors on April 15, 2019, made advances to the Company to cover certain operating expenses. These advances are unsecured, non-interest bearing, with no formal terms of repayment. As of December 31, 2019, the amounts due SBS were $96,300 and ~~resources, none of~~are included in accounts payable on the ~~Company’s directors and/or officers received any compensation from~~accompanying consolidated condensed balance sheets. During the nine months ended December 31, 2019, the Company paid SBS Management LLC $75,000 for management services. In addition, the Company reimbursed SBS Management LLC $35,000 for rent expense which amount has been included in general and administrative expense for the period. There were no such amounts invoiced during the nine months ended December 31, ~~2017.~~

~~Upon~~2018.

During the nine months ended December 31, 2019, the Company incurred $63,286 of which the Company paid $54,566 and $8,720 is included in accounts payable on the accompanying consolidated condensed balance sheets, from Emmess Group, Inc., a strategic advisory company, of which the Company’s President of Applied Biopharma LLC is the Executive Vice President and Managing Director of Emmess Group Inc. In addition, in October 2019 the Company issued 250,000 shares of the Company’s common stock to the President of Applied Biopharma at a price per share of $0.60 or $150,000, which was based on the fair market value of the Company’s common stock on date of issuance.

On May 15, 2019, the Company’s Board of Directors approved the issuance of a convertible promissory note (the “Note”) in the ~~initial~~principal amount of $250,000 to Greys Peak Ventures LLC, an investment firm whose partners include Scott Stevens and Chris Bridges, both directors of the Company. The Note was due December 31, 2019, holds a 0% interest rate, and is convertible at any time, in the sole discretion of the holder of the Note, into shares of common stock of the Company ~~to Damian Marley,~~at a purchase price of $1.00 per share. As of December 31, 2019, the Company ~~obtained~~had borrowed $192,000 against the Note.

A portion of the Notes were issued when the market price of the Company’s common stock was in excess of the $1.00 per share conversion price creating a beneficial conversion feature associated with these Notes with an exclusive, perpetual, royalty-free license from Damian Marley with respect to his name, likeness, image and voice for use in our businesses. The Company also obtained the right to intellectual property, including trademark, trade dress, images, likenesses and other associated intellectual property,aggregate amount of $6,000 at issuance dates. As such, ~~as the name “Stony Hill” related to Damian Marley.~~

~~NOTE 6 – LICENSE AND MARKETING AGREEMENTS~~

~~On May 25, 2017,~~ the Company entered into two separate Marketing Agreements (the “Agreements”), effective May 15, 2017, with BTE LLC, a Colorado limited liability company (“BTE”) and SBR Broadway Retail LLC, a Colorado limited liability company (“SBR”), both separate and unaffiliated entities. Pursuant torecorded the Agreements, the Company licensed the name and phrase “Damian Marley’s Stony Hill” to BTE and SBR for use in the State of Colorado and Oregon, respectively, for a term which expires on February 28, 2018. BTE and SBR operates a retail cannabis businesses in Colorado and Oregon, respectively, and has agreed to rename the its retail business to “Damian Marley’s Stony Hill by Tru Cannabis.” As consideration for the license, BTE and SBR is obligated to pay a cash fee to the Company for each retail location in which it uses the “Damian Marley’s Stony Hill” name. Additionally, if either BTE or SBR sells a dispensary, BTE or SBR is obligated to pay the Company that amount equal to a percentage$6,000 intrinsic value of the ~~net profits~~beneficial conversion feature at issuance dates of the ~~sale. During~~Notes as additional paid-in capital, and recognized as a debt discount, which was amortized as interest expense during the ~~nine months~~nine-month period ended December 31, ~~2017, the Company had not received any revenues related to these agreements.~~

2019.

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~~STONY HILL~~

APPLIED BIOSCIENCES CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, ~~2017~~2019 AND ~~2016~~

2018

(unaudited)

NOTE 79 – EQUITY

~~Establishment~~Preferred Stock

The Company has authorized 5,000,000 shares of ~~Advisory Board and Adoption~~$0.00001 par value, undesignated Preferred Stock. As of ~~Charter~~

~~On April 28, 2017,~~December 31, 2019, the Company ~~established an advisory~~has not issued any shares of Preferred Stock nor has the Company designated any class of Preferred Stock.

Stock Option Plan

On May 17, 2019, the board ~~(the “Advisory Board”) and~~of directors of the Company approved and adopted the terms and provisions of a ~~charter~~2019 Stock Option Plan (the ~~“Advisory Board Charter”~~“Plan”) ~~to govern~~for the ~~Advisory Board. The Advisory Board shall be comprised~~Company. No stockholder approval has been obtained approving the Plan. An aggregate of ~~one or more directors (“Advisors”), and up to nine independent, non-Board, non-employee members, all of whom shall be appointed and subject to removal by the Board of Directors at any time.~~

On May 1, 2017 and again on November 1, 2017 the Board of Directors appointed two Advisors both independent, non-Board and non-Company employees to the Advisory Board. In connection with appointments to the Advisory Board, the Company entered into two separate consulting agreements (the “Consulting Agreement”) with the Advisors dated effective May 1, 2017 and November 1, 2017, respectively, whereby the Company shall pay an annual consulting fee of $50,000 each to be paid in shares of common stock of the Company, based on the stock price of the Company on the last day of each calendar year, and reimburse the Advisors for reasonable out-of-pocket expenses. As the shares were not issued as of December 31, 2017, the Company is recognizing the shares ratably over the 12-month term of Consulting Agreement and revalues such shares as of period end. For the period ended December 31, 2107, the Company accrued the total value of $41,666 commitment as a consulting fee based on a price per share of $2.65 at December 31, 2017 and total shares of 15,723 with such amount accrued as a commitment to issue common stock in the Company’s accompanying condensed consolidated statement of stockholders’ equity. In addition, the Advisors may be eligible for an annual discretionary bonus based on performance and entirely at the discretion of Board. The Consulting Agreement has a term of three years.

~~Stock Subscription~~

During July through December 31, 2017, the Company sold 347,500 shares of common stock in a private placement to accredited investors at a price of $2.00 per share for total proceeds of $695,000. There shares were issued pursuant to a Subscription Agreement whereby the Company offered up to one million2,000,000 shares of the Company’s common stock ~~at a price per share~~are initially reserved for issuance upon exercise of ~~$2.00 per share. The Company made this offering solely to accredited investors, as defined~~nonqualified and/or incentive stock options which may be granted under ~~Rule 501(a) of Regulation D promulgated~~Plan. No options have yet been issued under the ~~Securities Act~~Plan.

Shares Issued to Board Members and President

In conjunction with the resignation of ~~1933, as amended.~~

~~Financial Advisory Services Agreement~~

~~On November 1, 2017,~~a board member in September 2019, the Company ~~entered into a Financial Advisory Consulting Services Agreement (the “Agreement”) whereby~~issued 100,000 shares to the Company hired an advisor to provide certain financial advisory services. The term of the agreement is segmented into two segments with the first segment ended on January 31, 2018 and the second segment expiring on October 31, 2018. The second segment was cancelable upon 15-day notice prior to commencement of the second segment of February 1, 2018. Under the first segment and second segment, the Company is required to issue 40,000 and 22,222 shares of the Company’s restricted common stock, respectively,former board member for past services rendered at a price of ~~$2.25~~$0.70 per ~~share. Such~~share for a total cost of $70,000, which represented the market price of the shares ~~are deemed~~as of the date of issuance. In addition, in December 2019, the Company issued 300,000 shares of which 150,000 shares were issued to a board member of the company and 150,000 were issued to the President of CBD Products for past services at a price of $0.27 per share for a total cost of $81,000, which represented the market price of the shares as of the date of issuance. The value of these shares was reflected in general and administrative expenses is the Company’s condensed consolidated statements of operations.

Shares Issued for Services

During the nine months ended December 31, 2019, the Company issued 550,000 shares to four consultants for services rendered at a prices ranging from $0.51 to $0.60 per share for a total cost of $321,000, which represented the market price of the shares as of the date of relevant agreements. As of December 31, 2019, 450,000 of these shares have not been issued, and as such, the total fair value of these shares was reflected as “Common stock to be ~~earned and vested on November 1, 2018 and February 1, 2018, respectively. As~~issued” in the ~~shares under the first segment were not issued~~accompanying condensed consolidated balance sheets as of December 31, ~~2017,~~2019. The value of these shares was reflected in general and administrative expenses is the ~~Company is recognizing~~Company’s condensed consolidated statements of operations.

Shares Issued for Debt

During the ~~shares ratably over the segments and revalues such shares as of period end until the respective segment ends. For the period~~nine months ended December 31, ~~2107,~~2019, the Company ~~accrued the value of the first segment of~~issued 153,846 shares ~~of $70,667 as a consulting fee based on a price per share of $2.65 at December 31, 2017 and total shares of 26,667 with such amount accrued as a commitment to issue common stock~~ in ~~the Company’s accompanying condensed consolidated statement of stockholders’ equity.~~

~~In accordance~~conjunction with the ~~Agreement, if the Company’s average closing price~~conversion of ~~its stock falls below $2.25 (“threshold price per share”) on~~ a split adjusted basis within a period of 90 days before and including May 4, 2018 and August 1, 2018, respectively, the Company will be required to issue an adjusted number of shares based on a set formula defined in the Agreement. As of December 31, 2017, the trading price of the Company’s stock was above the threshold price per share.

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~~STONY HILL CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE NINE MONTHS PERIODS ENDED DECEMBER 31, 2017 AND 2016~~

~~(unaudited)~~

$100,000 convertible note.

NOTE 810 – ~~COMMITMENT~~
~~Lease~~

LEASE OBLIGATIONS

On October 1, ~~2017,~~2019, the Company entered into a two-year ~~Commercial Lease Agreement (“Lease”) whereby the Company’s subsidiary, Vita Products LLC, leased~~extension related to 2,100 square feet of office ~~space.~~space leased by its subsidiary, Applied Products LLC. The lease ~~commenced on October 1, 2017 and~~ requires the Company to pay rent of $2,750 per month ~~(“Base Rent”)~~ or $33,000 per ~~year for a total commitment of $66,000. Beginning~~year. The rent shall be increased at the end of ~~the first~~each year ~~of the Lease and annually thereafter, the Base Rent shall be increased~~ by the same percentage as any increase in the Consumer Price Index (“CPI”) as published by the U.S. Department of Labor for the most recent preceding 12 month period. ~~In addition to the Base Rent, the Company is required to pay,~~Also beginning on a pro rata basis, any common area expenses. The Lease required a security deposit of $5,500, which the Company paid in September 2017. At the end of the Lease the Company, at its sole discretion, has the right to extend the Lease term for one additional 12 month period at a rental rate commensurate with the then current market conditions for a similar space in the same area.

~~NOTE 9 – SUBSEQUENT EVENTS~~

~~Advisory Board Agreement~~

~~On January 15, 2018,~~October 1, 2019, the Company entered into ~~an Advisory Board Agreement (the “Agreement”) whereby~~a five-year extension related to 3,734 square feet of office space leased by its subsidiary, Trace Analytics. The new rent is $5,716 per month or $68,592 per year.

Effective April 1, 2019, the Company ~~hired~~adopted the guidance of ASC 842, Leases, which requires an ~~advisor~~entity to recognize a right-of-use asset (“~~Consultant”~~ROU”) and a lease liability for virtually all leases. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company’s right to ~~provide business~~use an underlying asset for the lease term and ~~strategic development and advisory services~~lease liabilities represent the Company’s obligation to ~~the Company. The term of the Agreement expires six months~~make lease payments arising from the ~~date of Agreement unless terminated earlier by either party.~~lease. In ~~exchange for~~conjunction with the ~~services,~~lease extensions entered into on October 1, 2019, the Company ~~agreed~~recorded a ROU asset and liability of $372,490. The Company used an implicit rate of interest to ~~issue 20,000 shares~~determine the present value of lease payments utilizing its ~~restricted common stock payable on~~incremental borrowing rate, as the ~~last day~~implicit rate of interest in the ~~calendar year and pro-rated for each partial month or year. In addition, the Consultant may be eligible for an annual discretionary bonus~~respective leases is not readily determinable. The Company’s incremental borrowing rate is a hypothetical rate based on ~~performance and entirely at the discretion~~its understanding of ~~Board.~~

~~Investment~~

On January 19, 2018, the Company paid $50,000 for the purchase of a Membership Interest in Bailey Venture Partners XII LLC (“Bailey”) representing less than 5% interest in Bailey. Along with other funds received from third-party investors, Bailey plans to invest funds received in various strategic investments. The Company will record this investments at cost and will recognize dividends, if any, when received, and will recognize gains or loss upon either selling the securities or recognize a loss prior to selling the securities if there is evidence that the fair market value of the investment has declined to below the recorded historical cost.

what its credit rating would be.

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The components of rent expense and supplemental cash flow information related to leases for the period are as follows:

	Nine Months Ended December 31, 2019
Lease Cost
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)	$	25,398

Other Information
Cash paid for amounts included in the measurement of lease liabilities	$	-
Weighted average remaining lease term – operating leases (in years)		4.3
Average discount rate – operating leases		4	%

The supplemental balance sheet information related to leases for the period is as follows:

	At December 31, 2019
Operating leases
Long-term right-of-use assets	$	350,752

Short-term operating lease liabilities	$	89,136
Long-term operating lease liabilities		261,616
Total operating lease liabilities	$	350,752

Maturities of the Company’s lease liabilities are as follows:

Fiscal Year Ending March 31,	Operating Leases
2020 (remaining 3 months)	$	25,398
2021		101,593
2022		85,092
2023		60,593
2024		68,593
2025		34,296
Total lease payments		383,565
Less: Imputed interest/present value discount		(32,813	)
	$	350,752

Rent expense for the nine months ended December 31, 2019 and 2018 was $85,950 and $24,750, respectively.

NOTE 11 – SUBSEQUENT EVENT

In February 2020, the principal amount of debt owed to Greys Peak Ventures LLC of $192,000 was converted to 192,000 shares of the Company’s common stock.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This section of this Form 10-Q includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

~~Merger~~

Acquisition of Trace Analytics, Inc.

On ~~November 4, 2016,~~January 7, 2019, we ~~entered into~~closed on a ~~Share Exchange Agreement by and among the Company, Stony Hill Ventures Corp. (“Stony Hill Ventures”), and the holders~~purchase of 520,410 shares of common stock of ~~Stony Hill Ventures,~~Trace Analytics, Inc., a Washington corporation (“Trace Analytics”). Pursuant to a Common Stock Purchase Agreement, the Company purchased Trace Analytics at a purchase price of $2.40 per share, for an aggregate purchase price of $1,250,000, of which ~~consisted of 26 stockholders. Stony Hill Ventures was incorporated on March 15, 2016, in~~141,850 shares remain to be issued. Trace Analytics is a cannabis testing laboratory acquired to enable the ~~State of Nevada and is organized for various investments under the Stony Hill brand as well as~~Company to conduct any other related business and activities. Specifically, Stony Hill is the owner and has right to intellectual property, including trademark, trade dress, images, likenesses and other associated intellectual property, suchposition itself as the ~~name “Stony Hill” related~~leading provider of testing solutions for CBD products for both compliance requirements and consumer safety as these products continue to ~~Damian Marley.~~

~~Under~~increase in popularity. Immediately following the ~~terms and conditions~~purchase, we held 51% of the Share Exchange Agreement, we offered, sold and issued 10,830,000 shares of our common stock in consideration for all the issued and outstanding shares in Stony Hill Ventures. The effect of the issuance is that former Stony Hill Ventures stockholders obtained approximately 73% of the then issued and outstanding shares of our common stock and Stony Hill Ventures became a wholly-owned subsidiary of our Company and now represents our principal business activity.

Upon completion of the Merger, Damian Marley became our President and Chief Executive Officer and sole member of the Board of Directors and holder of 3,150,000 shares, or 21.2%, of our then outstanding common stock. Dan Dalton became our Treasurer (an office he held until January 5, 2018) and holder of 2,250,000 shares, or 15.1%, of our then outstanding common stock. John Brady became our Secretary and holder of 2,000,000 shares, or 13.4%, of our then outstanding common stock. Thus, our officers and sole director, at the time of the merger, controlled an aggregate of 7,400,000, or 49%, of our outstanding common stock, on a fully diluted basis. Mr. Marley now controls approximately 23.6% of our issued and outstanding shares of common ~~stock. Mr. Brady now controls approximately 14.9%~~stock of Trace Analytics and have included the financial results of Trace Analytics in our ~~issued and outstanding~~condensed consolidated financial statements from the date of acquisition, January 1, 2019.

The Common Stock Purchase Agreement included the option for Trace to repurchase 205,410 shares of ~~common stock. On February 9, 2018, Mr. Dalton sold 2,250,000 shares~~Common Stock based on the occurrence of ~~common stock~~certain Repurchase Triggering Events. Based on a review of the Repurchase Triggering Events, we consider it unlikely that any of the events will occur. Additionally, we entered into a Voting Agreement with Trace concurrent with the Common Stock Purchase Agreement. The Voting Agreement provided for the designation of three out of five positions on the Trace Analytics Board of Directors by the Company. The Voting Agreement also detailed certain transactions that require two-thirds approval by the Board of Directors. The Voting Agreement is not considered to impact the ~~Company for consideration of $50,000, and the Company canceled such shares, returning them to the authorized share capital~~ability of the Company to control the operations and assets of Trace Analytics.

Applied Biopharma LLC

On April 8, 2019, the Company formed Applied Biopharma LLC, a wholly-owned subsidiary, in the state of Nevada, with the intention of establishing and growing the biopharmaceutical business of the Company. Applied Biopharma LLC is focused on the ~~same day.~~

~~The Merger between our Company~~development and ~~Stony Hill Ventures was treated as a reverse acquisition for financial statement reporting purposes, with Stony Hill Ventures deemed~~commercialization of novel therapeutics to treat metabolic diseases, peripheral neuropathy, progressive lung disease and ischemic reperfusion injury. Its principal business objective is to develop science-driven synthetic cannabinoid therapeutics that satisfy unmet medical needs and continue to drive innovation in the accounting acquirer and Stony Hill Corp. deemed the accounting acquiree. Accordingly, Stony Hill Ventures’ assets, liabilities and results of operations became the historical financial statements of our company. Further, no step-up in basis or intangible assets or goodwill was recorded in this transaction.

~~On October 3, 2016, the Company declared a 1-for-10 stock split. All share and per share amounts have been retro actively restated as if the split had occurred as of the earliest period presented~~

endocannabinoid space.

Results of Operations

~~Stony Hill Ventures, now the principal business~~

Our revenue, operating expenses, and ~~historical financial statements of~~net loss from operations for our ~~Company, began operations on March 16, 2016. The following reflects activity for the~~ three and nine months ended December 31, ~~2017~~2019 as compared to ~~the~~our three and nine months ended December 31, ~~2016:~~

2018 were as follows:

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Three Months Ended December 31, ~~2017~~2019 Compared to Three Months Ended December 31, ~~2016~~2018

	Three Months			Three Months						Percentage
	Ended			Ended			$ Change			Change
	December 31, 2019			December 31, 2018			Inc (Dec)			Inc (Dec)

REVENUE, NET
Products	$	22,357		$	413,109		$	(390,752	)	(95		)%
Services		147,218			-			147,218			-
Total costs of revenue		169,575			413,109			(243,534	)	(59		)%

COST OF REVENUE
Products		17,137			379,582			(362,445	)	(95		)%
Services		34,206			-			34,206			-
Total costs of revenue		51,343			379,582			(328,239	)	(86		)%

GROSS MARGIN		118,232			33,527			84,705			253	%

EXPENSES
Sales and marketing		50,590			100,730			(50,140	)	(50		)%
General and administrative		997,055			1,317,469			(320,414	)	(24		)%
Depreciation and Amortization		40,828			292			40,536			13,882	%
TOTAL OPERATING EXPENSES		1,088,473			1,418,491			(330,018	)	(23		)%
OPERATING LOSS		(970,241	)		(1,384,964	)		(414,723	)	(30		)%
Other Income (Expense)
Unrecognized loss on equity investment		(327,381	)		-			(327,381	)		-
Change in fair value of derivative		(39,231	)		-			(39,231	)		-
Interest Expense		(89,017	)		(506,579	)		417,562		(82		)%
Total other income, net		(455,629	)		(506,579	)		50,950		(10		)%
NET LOSS		(1,425,870	)		(1,891,543	)		(465,673	)	(25		)%
Less: Net loss attributable to non controlling interest		72,480			(234	)		72,714		(31,074		)%
NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.	$	(1,353,390	)	$	(1,891,777	)	$	(538,387	)	(28		)%

Revenues: ~~Revenue from products~~Revenues relate to shipments of cannabidiol (“CBD”) brand products ~~which we acquired in late February 2017 from mCig, Inc.~~and lab testing services. During the three months ended December 31, ~~2017, we earned~~2019, revenue ~~of $62,977, which comprised entirely~~ from ~~sales of products. During~~our CBD product lines was $22,357 as compared to $413,109 for the ~~prior~~ three months ended December 31, ~~2016, we received $17,500~~2018. The decrease of $390,752 related to lower sales of bulk hemp seed and raw CBD. Service revenue resulting from ~~a license agreement.~~

our lab testing is attributable solely to the acquisition of Trace Analytics in January 2019, and totaled $147,218 for the three months ended December 31, 2019.

Cost of ~~Goods Sold~~Revenue: Cost of goods sold is driven by product sales, and primarily consists of purchases of inventory for sale. We generally purchase products that are private labels and brand the products using our tradenames. During the three months ended December 31, ~~2017,~~2019, we incurred ~~$50,370~~$17,137 of costs ~~primarily related~~ to purchase product ~~purchases representing 80%~~which represented 77% of our product ~~revenues. Since we began sales~~revenues as compared to $379,582 or 92% of ~~CBD products in March 2017, we did not incur similar expenses during the three months ended December 31, 2016.~~

~~Gross Margin: Gross margin comprised entirely from sale of~~our product ~~and was $12,607 or 20% of revenue~~revenues for the three months ended December 31, ~~2017. During this~~2018. Similar to revenues, lower product costs for the three months ended December 31, 2019 as compared to the same period ~~we changed~~in 2018 were driven by lower purchases of bulk hemp seed and raw CBD. Cost of services were $34,206 or 23% of service revenues and related to our lab testing services, which is attributable solely to the ~~branding~~acquisition of Trace Analytics.

Gross Margin: For the three months ended December 31, 2019, gross margin from sale of our ~~then existing~~ CBD products was $5,220 or 23% of product revenues as compared to ~~be consistent with~~a gross margin of $33,527 or 8% for the three months ended December 31, 2018. The improved gross margin percentage is primarily due to reduced sales lower margin bulk hemp seed and raw CBD. Gross margin from our ~~Stony Hill brand. This required the purchase~~lab testing services, which started January 1, 2019, totaled $113,012 or 77% of ~~labels in the amount of $12,694, which negatively impacted~~ our ~~margin by 20%.~~lab testing revenues.

Sales and ~~Marketing~~marketing: Sales and marketing expenses are mainly comprised of advertising, public relations, investor relations, events, and website marketing costs. Sales and marketing expenses ~~increased~~decreased to ~~$165,315~~$50,590 for the three months ended December 31, ~~2017~~2019 as compared to ~~nil~~$100,730 for the three months ended December 31, ~~2016.~~2018. The ~~majority of the increase related~~decrease is due to ~~public relation services, website~~lower spending for investor relations and other marketing ~~development and increased advertising and promotion costs.~~professional services.

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General and ~~Administrative~~administrative: General and administrative expenses are mainly comprised of professional fees, travel expenses, meals and entertainment and other office support costs. General and administrative expenses ~~increased $79,112~~decreased $320,414 to ~~$133,977~~$997,055 for the three months ended December 31, ~~2017~~2019 as compared to ~~$54,864~~$1,317,469 for the three months ended December 31, ~~2016.~~2018. The ~~majority~~decrease was mainly attributable to lower issuance of common stock for services offset somewhat by the ~~increase related to higher professional fees~~acquisition of Trace Analytics and addition of our Applied Biopharma subsidiary, with general and administrative expenses ~~related to our CBD products launched in March 2017.~~

~~Amortization: Amortization relates~~for the remainder of the Company essentially flat compared to the three months ended December 31, 2018.

Depreciation and amortization ~~of a brand that we acquired in February 2017, which is being amortized over a period of 5 years. Amortization totaled $56,172~~: Depreciation expense was $40,828 for the three months ended December 31, ~~2017 and will total $224,512 per year.~~ 2019 as compared to $292 for the three months ended December 31, 2018. The increase was driven solely by depreciation on equipment acquired in connection with the acquisition of Trace Analytics in January 2019.

Unrecognized Gain on Equity Investments: We ~~did not own any similar intangibles~~remeasure our equity investments at each reporting period at fair value with changes in fair value recognized in net income. During the three months ended December 31, 2019, we obtained observable evidence that ~~required amortization~~the fair value of certain equity investments had decreased by $327,381. As such, we recorded an unrecognized loss from the change in market value of $327,281 during the three months ended December 31, ~~2016.~~

2019. There was no observable evidence in the change in fair market value for any of our equity investments during the three months ended December 31, 2018.

~~Reverse merger costs~~Change in Fair Value of Derivative Liability: In accordance with the FASB authoritative guidance, the conversion feature of our senior secured convertible note issued by us in December 31, 2019 was separated from the host contract (i.e., the notes) and recognized as a derivative instrument. The conversion feature of this note is characterized as a derivative liability, which is re-measured at the end of every reporting period with the change in value recognized as a gain or loss in our consolidated statement of operations. During the three months ended December 31, 2019, we recorded an expense of $39,231 due to the change in the fair value of our derivative liability.

Interest Expense: During the three months ended December 31, 2019 and 2018, we recorded $16,621 and $111,498, respectively, of interest costs related to convertible notes along with amortization of $72,396 and $395,090, respectively, of debt discount recorded in conjunction with the ~~Share Exchange Agreement, Stony Hill Ventures paid us $325,000 and we assumed $51,366~~convertible notes. The decreases were driven by timing of ~~liabilities, which was recorded~~loans along with related interest rates from convertible notes for the three months ended December 31, 2019 as ~~a cost of~~compared to the ~~reverse merger.~~

three months ended December 31, 2018.

Nine ~~Months~~months Ended December 31, ~~2017~~2019 Compared to Nine Months Ended December 31, ~~2016~~2018

	Nine Months			Nine Months						Percentage
	Ended			Ended			$ Change			Change
	December 31, 2019			December 31, 2018			Inc (Dec)			Inc (Dec)

REVENUE, NET
Products	$	192,011		$	472,509		$	(280,498	)	(59		)%
Services		433,295			-			433,295			-
Total costs of revenue		625,306			472,509			152,797			32	%

COST OF REVENUE
Products		167,546			439,740			(272,194	)	(62		)%
Services		81,967			-			81,967			-
Total costs of revenue		249,513			439,740			(190,227	)	(43		)%

GROSS MARGIN		375,793			32,769			343,024			1,047	%

EXPENSES
Sales and marketing		256,775			556,167			(299,392	)	(54		)%
General and administrative		2,271,546			1,712,667			558,879			33	%
Depreciation and Amortization		120,324			877			119,447			13,620	%
TOTAL OPERATING EXPENSES		2,648,645			2,269,711			378,934			17	%
OPERATING LOSS		(2,272,852	)		(2,236,942	)		35,910			2	%
Other Income (Expense)
Unrecognized (loss) gain on equity investments		(327,381	)		404,763			(732,144	)	(181		)%
Change in fair value of derivative		(34,977	)		-			(34,977	)		-
Interest Expense		(153,818	)		(574,880	)		421,062		(73		)%
Total other income, net		(516,176	)		(170,117	)		(346,059	)		203	%
NET LOSS		(2,789,028	)		(2,407,059	)		381,969			16	%
Less: Net loss attributable to non controlling interest		233,995			9,358			224,637			2,400	%
NET LOSS ATTRIBUTABLE TO APPLIED BIOSCIENCES CORP.	$	(2,555,033	)	$	(2,397,701	)	$	157,332			7	%

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Revenues: During the nine months ended December 31, ~~2017, we earned~~2019, revenue ~~of $179,534, which comprised entirely~~ from ~~sales of products. During~~our CBD product lines was $192,011 as compared to $472,509 for the ~~prior~~ nine months ended December 31, ~~2016, we received $17,500~~2018. The decrease of $280,498 related to lower sales of bulk hemp seed and raw CBD. Service revenue resulting from ~~a license agreement.~~

our lab testing totaled $433,295 for nine months ended December 31, 2019.

Cost of ~~Goods Sold~~Revenue: During the nine months ended December 31, ~~2017,~~2019, we incurred ~~$140,706~~$167,546 of costs ~~primarily~~to purchase product which represented 87% of our product revenues as compared to $439,740 or 93% of our product revenues for the nine months ended December 31, 2018. Similar to revenues, lower product costs for the three months ended December 31, 2019 as compared to the same period in 2018 were driven by lower purchases of bulk hemp seed and raw CBD. Cost of services related to ~~product purchases representing 78%~~our lab testing for the nine months ended December 31, 2019 were $81,967 or 19% of service revenues.

Gross Margin: For the nine months ended December 31, 2019, gross margin from sale of our CBD products was $24,465 or 13% of products revenue as compared to a gross margin of $32,769 or 7% of product revenues for the nine months ended December 31, 2018. The improved gross margin percentage is primarily due to reduced sales lower margin bulk hemp seed and raw CBD. Gross margin for the nine months ended December 31, 2019 from our lab testing services totaled $351,328 or 81% of our lab testing revenues. ~~Since~~

Sales and marketing: Sales and marketing expenses decreased to $256,775 for the nine months ended December 31, 2019 as compared to $556,167 for the nine months ended December 31, 2018. The decrease was due to lower spending for investor relations and other marketing services.

General and administrative: General and administrative expenses increased by $558,879 to $2,271,546 for the nine months ended December 31, 2019 as compared to $1,712,667 for the nine months ended December 31, 2018. The increase was mainly attributable to the acquisition of Trace Analytics and the addition of our Applied Biopharma subsidiary, offset somewhat by lower issuance of common stock for services.

Depreciation and amortization: Depreciation expense was $120,324 for the nine months ended December 31, 2019 as compared to $877 for the nine months ended December 31, 2018. The increase was driven solely by depreciation on equipment acquired in connection with the acquisition of Trace Analytics in January 2019.

Unrecognized Gain on Equity Investments: We remeasure our equity investments at each reporting period at fair value with changes in fair value recognized in net income. During the nine months ended December 31, 2019, we ~~began sales~~obtained observable evidence that the fair value of ~~CBD~~certain equity investments had decreased by $327,381. As such, we recorded an unrecognized loss from the change in ~~March 2017,~~market value of $327,281 during the three months ended December 31, 2019. During the nine months ended December 31, 2018, we ~~did not incur similar expenses~~were able to obtain observable evidence that the fair value of certain equity investments had increased by $404,763. As such, we recorded an unrecognized gain from the change in market value of $404,763 during the nine months ended December 31, ~~2016.~~

2018.

~~Gross Margin~~Change in Fair Value of Derivative Liability: ~~Gross margin comprised entirely~~In accordance with the FASB authoritative guidance, the conversion feature of our senior secured convertible note issued by us in December 31, 2019 was separated from ~~sale~~the host contract (i.e., the notes) and recognized as a derivative instrument. The conversion feature of ~~product~~this note is characterized as a derivative liability, which is re-measured at the end of every reporting period with the change in value recognized as a gain or loss in our consolidated statement of operations. During the nine months ended December 31, 2019, we recorded an expense of $34,977 due to the change in the fair value of our derivative liability.

Interest Expense: During the nine months ended December 31, 2019 and ~~was $38,828 or 22%~~2018, we recorded $30,525 and $137,075, respectively, of ~~revenue~~interest costs related to convertible notes along with amortization of $123,293 and $437,805, respectively, of debt discount recorded in conjunction with the convertible notes. The decreases were driven by timing of loans and related interest rates from convertible notes for the nine months ended December 31, ~~2017. During this period, we changed the branding of our then existing CBD products~~2019 as compared to ~~be consistent with our Stony Hill brand. This required the purchase of rebranding labels, which negatively impacted our margin by 12%.~~

~~Sales and Marketing: Sales and marketing expenses increased to $229,674 for~~ the nine months ended December 31, 2017 as compared to nil for the nine months ended December 31, 2016. The majority of the increase related to public relation services, website marketing development and increased advertising and promotion costs.

~~General and Administrative~~: General and administrative expenses increased $272,146 to $358,193 for the nine months ended December 31, 2017 as compared to $86,046 for the nine months ended December 31, 2016. The majority of the increase related to higher professional fees and general and administrative expenses related to our CBD products launched in March 2017.

2018.

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~~Amortization~~: Amortization totaled $168,428 for the nine months ended December 31, 2017 and will total $224,512 per year. We did not own any similar intangibles that required amortization during the nine months ended December 31, 2016.

~~Reverse merger costs: In conjunction with the Share Exchange Agreement, Stony Hill Ventures paid us $325,000 and we assumed $51,366 of liabilities, which was recorded as a cost of the reverse merger.~~

Liquidity and Capital Resources

Cash Flows

A summary of our cash flows for the nine months ended December 31, ~~2017~~2019 is as follows:

Net cash used in operating activities was ~~$420,701~~$817,715 for the nine months ended December 31, ~~2017~~2019 as compared to ~~$68,055~~$788,863 for the nine months ended December 31, ~~2016. Net~~2018. The increase in cash used in operations was primarily ~~comprised~~driven by the acquisition of Trace Analytics and the general and administrative ~~expenses.~~

costs associated with Trace operations. Additional increases were due to our addition of Applied Biopharma subsidiary along with sales and marketing costs related to growth in CBD products revenue.

Net cash used in investing activities ~~was $70,105~~ during the nine months ended December 31, ~~2017,~~2018 was the $550,000, which ~~primarily comprised~~related to the deposit on the purchase price of ~~a $68,537 equity investment we made~~Trace Analytics, Inc. that was completed in January 2019. We had no investing activities during the nine months ended December 31, 2017. During the nine months ended December 31, 2016, net cash used in investing activities was $400,000, which comprised $25,000 from cash held in a trust account related to the sale of our common stock, $325,000 related to a deposit related to the Merger and $50,000 equity investment we made.

2019.

Net cash provided by financing activities for the nine months ended December 31, ~~2017~~2019 was ~~$695,000~~$791,939 as compared to ~~$740,101~~$1,519,500 for the nine months ended December 31, ~~2016.~~2018. The ~~amounts received~~decrease in ~~2017~~cash provided by financing activities was driven by lower issuances of convertible notes. We anticipate additional financing activities in the coming months to support continued growth in our products and ~~2016 were proceeds from the sale~~services revenue along with acquisitions of ~~shares of~~assets to establish and grow our ~~common stock during the comparative periods.~~

biopharmaceutical operations.

Going Concern

As reflected in the condensed consolidated financial statements contained elsewhere is this Form 10-Q, as of December 31, 2019 we had cash on hand and had an accumulated deficit of $21,268 and $8,086,293, respectively, and during the nine months ended December 31, 2019, we utilized cash for operations and incurred a net loss of $817,715 and $2,789,028, respectively. Our uses of cash have been primarily for strategic investments along with support for operations and marketing efforts to promote and develop our CBD products and our company. Our principal sources of liquidity have been cash provided by financing, primarily through the sale of equity securities and issuance of convertible notes, along with revenues from our principal business ~~activities from our CBD products. Our uses of~~activities. Further, we have used cash ~~have been primarily~~ for ~~operations and marketing efforts to promote our intellectual property and company along with~~various strategic investments for which we ~~have made in various companies. We anticipate that significant additional expenditures will be necessary to expand~~typically receive returns when such investments are sold and bring to market our license and marketing services before sufficient and consistent positive operating cash flows will be achieved. Additional funds will be needed to continue operations, obtain profitability and to achieve our objectives. when or if dividends are declared.

As ~~such,~~of the date of this Form 10-Q, our cash resources are insufficient to meet our current operating expense requirements and planned business objectives without additional financing. Our ability to continue as a going concern is dependent on our ability to raise additional capital and to ultimately achieve sustainable revenues and income from our operations. During the nine months ended December 31, 2019, we raised $791,939 through the issuance of convertible notes to accredited. However, we anticipate that significant additional expenditures will be necessary to expand and bring to market our products and investments before sufficient and consistent positive operating cash flows will be achieved. Additionally, substantial cash will be needed to establish and advance our biopharmaceutical operations. As such, we will need additional funds to operate our business through and beyond the date of this Form 10-Q ~~filing without~~filing. There can be no assurance that such funds will be available or at terms acceptable to us. Even if we are able to obtain additional ~~financing.~~

~~As reflected~~financing, it may contain undue restrictions and covenants on our operations, in the ~~condensed financial statements contained elsewhere is this Form 10-Q, we had cash on hand as~~case of ~~December 31, 2017~~debt financing or cause substantial dilution for our stockholders in the case of ~~$416,831~~convertible debt and ~~utilized $420,701 of cash for operations including a net loss of $717,467 during the nine months ended December 31, 2017.~~ equity financing.

These and other factors raise substantial doubt about our ability to continue as a going concern. Further, our independent auditors in their audit report for our fiscal year ended March 31, ~~2017~~2019 expressed substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately achieve sustainable revenues and profit from operations. As of the date of the filing of this Form 10-Q, we did not have any commitments from any third parties to provide this capital, and there can be no assurance that any additional funds will be available to us. Even if we can obtain additional financing, it may contain undue restrictions and covenants on our operations, in the case of debt financing, or cause substantial dilution for our shareholders in the case of convertible debt and equity financing.

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Summary of Significant Accounting Policies

Use of Estimates

~~Financial~~

Preparation of the condensed consolidated financial statements ~~prepared~~ in ~~accordance~~conformity with generally accepted accounting principles ~~generally accepted in the United States require~~requires us to make estimates and assumptions that affect ~~the~~certain 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. Among other things, our estimates include the collectability of our accounts receivable, recoverability of inventory, assumptions made in determining impairment of investments and intangible ~~useful life of our intangible, and~~assets, accruals for potential ~~liabilities.~~liabilities, and realization of deferred tax assets. These estimates generally involve complex issues and require judgments, involve analysis of historical information and the prediction of future trends, and are subject to change from period to period. Actual amounts could differ significantly from these estimates.

Investments

~~For~~

We measure our equity investments ~~that are not required~~at their fair value at end of each reporting period. Specifically, we follow ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Among other things, this guidance requires certain equity investments to be ~~consolidated, we use either~~measured at fair value with changes in fair value recognized in net income.

Investments accounted for under the equity method or ~~the~~ cost method of ~~accounting. We use~~accounting are included in the ~~equity method~~caption “Equity investments” in our Condensed Consolidated Balance Sheets.

Goodwill

Goodwill will be tested for ~~unconsolidated equity investments in which we are considered to have significant influence over~~impairment at the ~~operations of the investee. We use the cost method for all other investments. Under the cost method, there is no~~reporting unit level (operating segment or one level below an operating segment) on an annual basis and between annual tests if an event occurs or circumstances change to the cost basis unless there is an other-than-temporary decline in value or dividends are received. If the decline is determined to be other-than-temporary, we write down the cost basis of the investment to a new cost basis that ~~represents realizable value.~~

~~Intangible Asset~~

Intangible assets are recorded when such assets are acquired and are amortized over the estimated useful life of the intangible asset. We regularly review intangible assets to determine if facts and circumstances indicate that the useful lives have changed from the original estimate or that the carrying amount of the assets maywould more likely than not be recoverable. If such facts and circumstances exist, we assess the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount overreduce the fair value of ~~those assets~~a reporting unit below its carrying value.

Derivative Financial Instruments

We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and ~~occur~~is then re-valued at each reporting date, with changes in the ~~period~~fair value reported in ~~which~~ the ~~impairment determination was made.~~

condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

To determine the number of authorized but unissued shares available to satisfy outstanding convertible securities, we use a sequencing method to prioritize its convertible securities as prescribed by ASC 815-40-35. At each reporting date, we review our convertible securities to determine their classification is appropriate.

Recent Accounting Pronouncements

See our discussion of recent accounting policies in Footnote 2 to the condensed consolidated financial statements contained elsewhere in this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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Item 4. Controls and Procedures.

Disclosure Controls and Procedures

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 Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period 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 or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

In connection with this quarterly report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company’s management, including our company’s principal executive officer and principal financial officer. Based upon that evaluation, ~~our company’s principal executive officer and principal financial officer~~management concluded that as of December 31, ~~2017,~~2019, our disclosure controls and procedures were not effective.

The most significant issues identified were: 1) lack of segregation of duties due to very small staff and significant reliance on outside consultants, 2) risks of executive override also due to lack of established policies, and small employee staff and, 3) ineffective closing procedures and financial statement disclosure controls. As the company’s operations increase, the company intends to take measures to mitigate the issues identified and implement a functional system of internal controls over financial reporting. Such measures will include, but not be limited to hiring of additional employees in its finance and accounting department; preparation of risk-control matrices to identify key risks and develop and document policies to mitigate those risks; and identification and documentation of standard operating procedures for key financial activities.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the nine months ended December 31, ~~2017~~2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

Currently we are not subject to any pending litigation or legal proceeding.

Item 1A. Risk Factors.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act we are not required to provide the information required under this item.

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

Not applicable

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

On February 9, 2018, Dan Dalton, formerly a Treasurer of the Company, sold 2,250,000 shares of common stock to the Company for consideration of $50,000, and the Company canceled such shares, returning them to the authorized share capital of the Company on the same day. After the transaction, Mr. Dalton holds no securities of the Company and is no longer an affiliate of the Company. Mr. Dalton served as Treasurer of the Company from October 3, 2016 until January 5, 2018.

None.

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Item 6. Exhibits.

(a) Exhibits required by Item 601 of Regulation SK.

Number		Description

2.1		Share Exchange Agreement, dated November 4, 2016, by and among the ~~Stony Hill~~Applied Biosciences Corp., Stony Hill Ventures Corp., a Nevada corporation, and the holders of common stock of Stony Hill Ventures Corp. (3)

3.1.1		Articles of Incorporation (1)

3.1.2		Certificate of Amendment (3)

3.1.3		Certificate of Change (3)

~~3.2~~3.1.4		Certificate of Amendment (4)

3.2		Bylaws (2)

~~31.1~~
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS *		~~XBRL Instance Document~~

32.2		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS *		XBRL Instance Document

101.SCH *		XBRL Taxonomy Extension Schema Document

101.CAL *		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF *		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB *		XBRL Taxonomy Extension Label Linkbase Document

101.PRE *		XBRL Taxonomy Extension Presentation Linkbase Document

~~______________~~

_____________

(1)	Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-197443), filed with the Securities and Exchange Commission on July 16, 2014.

(2)	Incorporated by reference to the Registrant’s Registration Statement on Form S-1/A (File No. 333-197443), filed with the Securities and Exchange Commission on October 16, 2014.

(3)	Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-52223), filed with the Securities and Exchange Commission on November 10, 2016.

* (4)	Incorporated by reference to the Registrant’s Current Report on Form 8-K (File No. 000-52223) filed with the Securities Exchange Commission on April 13, 2018

*	XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	~~STONY HILL~~ APPLIED BIOSCIENCES CORP.
	(Name of Registrant)

Date: February ~~14, 2018~~ 18, 2020	By:	/s/ ~~John Brady~~Raymond W. Urbanski
	~~Name:~~	~~John Brady~~	Name: Raymond W. Urbanski M.D, Ph.D.
	~~Title:~~	~~Secretary and Treasurer (principal~~ Title: Chief Executive Officer (principal executive officer, principal accounting officer and principal financial officer)

	December 31, 2017			March 31, 2017
	(unaudited)
ASSETS
Current Assets
Cash	$	416,831		$	212,637
Accounts receivable, net of allowance for doubtful accounts of $2,232 and nil		4,685			5,677
Inventory		35,004			22,699
Prepaids and other current assets		4,290			16,920
Total Current Assets		460,810			257,933

Property and equipment, net		1,524			-
Equity investments		368,537			300,000
Intangible asset, net		949,795			1,118,179
Other asset		5,500			-

TOTAL ASSETS	$	1,786,166		$	1,676,112

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable	$	31,564		$	12,297
Accrued expenses		20,208			19,287
Total Current Liabilities		51,772			31,584

Stockholders’ Equity
Preferred stock; $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding at December 31, 2017 (unaudited) and March 31, 2017		-			-
Common stock; $0.00001 par value; 200,000,000 shares authorized; 15,595,100 and 15,247,600 issued and outstanding at December 31, 2017 (unaudited) and March 31, 2017, respectively		154			152
Additional paid in capital		2,437,470			1,742,472
Common stock to be issued, 192,390 and 150,000 shares at December 31, 2017 (unaudited) and March 31, 2017, respectively		538,333			426,000
Accumulated deficit		(1,237,302	)		(525,832	)
Total Stony Hill Corp. Stockholders’ Equity		1,738,655			1,642,792
Non-controlling (deficit) interest		(4,261	)		1,736
Total Stockholders’ Equity		1,734,394			1,644,528
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,786,166		$	1,676,112

	Common Stock				Common Stock		Additional		Non-
	$0.00001 Par				to be		Paid In		Controlling			Accumulated			Stockholders’
	Number		Amount		Issued		Capital		Interest			Deficit			Equity

Balance, March 31, 2017		15,247,600	$	152	$	426,000	$	1,742,472	$	1,736		$	(525,832	)	$	1,644,528
Issuance of common stock for cash		347,500		2				694,998								695,000
Common stock to be issued in
conjunction with consulting agreement						112,333										112,333
Net loss										(5,997	)		(711,470	)		(717,467	)

Balance, December 31, 2017 (unaudited)		15,595,100	$	154	$	538,333	$	2,437,470	$	(4,261	)	$	(1,237,302	)	$	1,734,394

	December 31, 2017		March 31, 2017
(A) Cannabi-Tech Ltd.	$	68,537	$	50,000
(B) Hightimes Holdings Corp.		250,000		250,000
(C) Precision Cultivation Systems, LLC		50,000		-
	$	368,537	$	300,000