UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 ~~March 31,~~June 30, 2020

[ ]		Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

		For the transition period from ~~______~~March 31, 2020, to ~~______~~June 30, 2020.

Commission File Number: 000-55609

Rocky Mountain High Brands, Inc.

(Exact name of registrant as specified in its charter)

Nevada	90-0895673
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1000 Shiloh Rd., Suite 200, Plano, TX 75074

(Address of principal executive offices)

(800)-260-9062

(Registrant’s telephone number)

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

Securities registered pursuant to Section 12(b) of the Act: None.

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

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

[ ] Large, accelerated filer [ ] Accelerated filer

[ ] Non-accelerated filer [X] Smaller reporting company

[X] Emerging growth company

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. [ ]

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~289,733,237~~284,451,184 common shares as of ~~September 9,~~June 30, 2020.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Table of Contents

	TABLE OF CONTENTS PART 1- FINANCIAL STATEMENTS
	~~Page~~
Item 1:	Consolidated Financial Statements	3Pages F1 - F21
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Pages 4 - 8
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	10Page 8
Item 4:	Controls and Procedures	10Page 8
	PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	11Page 10
Item 1A:	Risk Factors	11Page 10
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	11Page 10
Item 3:	Defaults Upon Senior Securities	11Page 10
Item 4:	Mine Safety Disclosures	11Page 10
Item 5:	Other Information	11Page 10
Item 6:	Exhibits	11Page 10

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

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

F-1	Consolidated Balance Sheets as of ~~March 31,~~June 30, 2020 (unaudited) and December 31, ~~2019 (unaudited);~~2019;
F-2	Consolidated Statements of Operations for the three months ended ~~March 31,~~June 30, 2020 (unaudited) and ~~2019 (unaudited);~~2019;
F-3	Consolidated Statements of Cash Flows for the three months ended ~~March 31,~~June 30, 2020 (unaudited) and ~~2019 (unaudited);~~2019;
F-4	Consolidated Statements of Shareholders’ Deficit for the three months ended ~~March 31,~~June 30, 2020 (unaudited) and ~~2019 (unaudited);~~2019;
F-5	Notes to Consolidated Financial Statements (unaudited).

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended ~~March 31,~~June 30, 2020, are not necessarily indicative of the results that can be expected for the full year.

Table of Contents

Rocky Mountain High Brands, Inc.

Consolidated Balance Sheets

	June 30, 2020			December 31,2019

CURRENT ASSETS

Cash	$	32,240		$	53,606
Restricted Cash					14,474
Accounts Receivable, net of allowance of $0 and $0, respectively					18,162
Inventory		150,039			238,035
Prepaid Expenses and Other Current Assets		1,105,610			174,726
TOTAL CURRENT ASSETS		1,287,889			499,003

Property and Equipment, net		2,136,017			19,342
Intangible Assets		1,408,367			13,008
Other Assets		11,593			14,606

TOTAL ASSETS	$	4,843,866		$	545,959

LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES

Accounts Payable and Accrued Liabilities	$	1,262,740		$	1,143,217
Other Payables & Stock related payables		3,003,912			30,406
Convertible Notes Payable, net of debt discount		971,142			1,008,950
Notes Payable		180,100			30,000
Accrued Interest		115,737			96,134
Deferred Revenue		510,696			445,925
Derivative Liability		771,391			413,678
TOTAL LIABILITIES		6,815,787			3,168,310

SHAREHOLDERS' DEFICIT
Preferred Stock - Series A - Par Value of $.001; 1,000,000 shares designated; No shares issued and outstanding as of June 30, 2020		—			—
Preferred Stock - Series B - Par Value of $.001; 7,000,000 shares designated; No shares issued and outstanding as of June 30, 2020		—			—
Preferred Stock - Series C - Par Value of $.001; 2,000,000 shares designated; No shares issued and outstanding as of June 30, 2020		—			—
Preferred Stock - Series D - Par Value of $.001; 2,000,000 shares designated; No shares issued and outstanding as of June 30, 2020		—			—
Preferred Stock - Series E - Par Value of $.001; 789,474 shares designated; No shares issued and outstanding as of June 30, 2020		—			—
Preferred Stock - Series F - Par Value of $.001; 1,680 shares designated; No shares issued and outstanding as of June 30, 2020					—
Preferred Stock - Series G - Par Value of $.001; 10,000 shares designated; no shares issued and outstanding as of June 30, 2020, and 10 shares issued and outstanding as of December 31, 2019		—			10
Preferred Stock - Series H - Par Value of $.001; 5,000 shares designated; No shares issued and outstanding as of June 30, 2020,					—
Common Stock - Par Value of $.001; 1,000,000,000 shares authorized; 284,451,184 shares issued and outstanding as of June 30, 2020; 137,915,630 shares issued and outstanding as of December 31, 2019		284,451			137,915
Additional Paid-In Capital		40,482,224			37,528,496
Accumulated Deficit		(42,734,969	)		(40,285,145)
Total Rocky Mountain High Brands Shareholders' Deficit		(1,968,294	)		(2,618,724)
Noncontrolling Interests		(3,627	)		(3,627)
TOTAL SHAREHOLDERS' DEFICIT		(1,971,921	)		(2,622,351

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	4,843,866		$	545,959

March 31, 2020 December 31, 2019
(Unaudited)
CURRENT ASSETS

Cash $ 95,805 $ 53,606
Restricted Cash 27,645 14,474
Accounts Receivable, net of allowance of $0 and $0, respectively 6,738 18,162
Inventory 221,733 238,035
Prepaid Expenses and Other Current Assets 138,918 174,726
TOTAL CURRENT ASSETS 490,839 499,003

Property and Equipment, net 14,613 19,342
Intangible Assets 10,407 13,008
Other Assets 24,651 14,606

TOTAL ASSETS $ 540,510 $ 545,959

LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES

Accounts Payable and Accrued Liabilities $ 1,275,362 $ 1,143,217
Related Party Payables —   30,406
Convertible Notes Payable, net of debt discount 1,015,967 1,008,950
Notes Payable 30,000 30,000
Accrued Interest 90,551 96,134
Deferred Revenue 462,791 445,925
Derivative Liability 733,963 413,678
TOTAL CURRENT LIABILITIES 3,608,634 3,168,310

SHAREHOLDERS' DEFICIT
Preferred Stock - Series A - Par Value of $.001; 1,000,000 shares designated; No shares issued and outstanding as of March 31, 2020 and December 31, 2019 —   —
Preferred Stock - Series B - Par Value of $.001; 7,000,000 shares designated; No shares issued and outstanding as of March 31, 2020 and December 31, 2019 —   —
Preferred Stock - Series C - Par Value of $.001; 2,000,000 shares designated; No shares issued and outstanding as of March 31, 2020 and December 31, 2019 —   —
Preferred Stock - Series D - Par Value of $.001; 2,000,000 shares designated; No shares issued and outstanding as of March 31, 2020 and December 31, 2019 —   —
Preferred Stock - Series E - Par Value of $.001; 789,474 shares designated; No shares issued and outstanding as of March 31, 2020 and December 31, 2019 —   —
Preferred Stock - Series F - Par Value of $.001; 1,680 shares designated; 330 shares issued and outstanding as of March 31, 2020 and 130 shares issued and outstanding as of December 31, 2019 —   —
Preferred Stock - Series G - Par Value of $.001; 10,000 shares designated; no shares issued and outstanding as of March 31, 2020 and 10,000 shares issued and outstanding as of December 31, 2019 —   10
Preferred Stock - Series H - Par Value of $.001; 5,000 shares designated; 11 shares issued and outstanding as of March 31, 2020 and no shares issued and outstanding as of December 31, 2019 —   —
Common Stock - Par Value of $.001; 1,000,000,000 shares authorized; 156,549,700 shares issued and outstanding as of March 31, 2020; 137,914,630 shares issued and outstanding as of December 31, 2019 156,550 137,915
Additional Paid-In Capital 38,043,720 37,528,496
Accumulated Deficit (41,264,767 ) (40,285,145)
Total Rocky Mountain High Brands Shareholders' Deficit (3,064,497 ) (2,618,724)
Noncontrolling Interests (3,627 ) (3,627)
TOTAL SHAREHOLDERS' DEFICIT (3,068,124 ) (2,622,351)

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 540,510 $ 545,959

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements

F-1

Table of Contents

Rocky Mountain High Brands, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2020			June 30, 2019		June 30, 2020		June 30, 2019

Sales	$	669,489		$	36,572	$	782,932	$	113,001

Cost of Sales		742,258			38,854		959,338		114,584

Gross Profit (Loss)		(72,769	)		(2,282)		(176,406)		(1,583)

Operating Expenses
General and Administrative		1,248,234			696,846		1,832,303		1,653,486
Advertising and Marketing		24,442			158,985		69,104		368,375
Total Operating Expenses		(1,272,676	)		858,831		(1,901,407)		2,021,861

Loss from Operations		(1,345,445	)		(858,113)		(2,007,813)		(2,023,444)

Other (Income)/Expenses:
Interest Expense		108,863			339,368		260,418		632,754
Loss on Extinguishment of Debt		—			(689,991)		74,164		(230,840)
(Gain) Loss on Change in Fair Value of Derivative Liability		15,894			(390,520)		37,429		195,063
Total Other (Income) Expenses		124,757			(190,943)		369,011		(93,014)

Loss Before Income Tax Provision		(1,470,202	)		(667,170)		(2,815,835)		(1,930,430)

Income Tax Provision		—			—		—		—

Net Loss	$	(1,470,202	)	$	(667,170)	$	(2,815,835)	$	(1,930,430)

Net Loss Attributable to Noncontrolling Interests		—			—		—		—

Net Loss Attributable to Rocky Mountain High Brands	$	(1,470,202	)	$	(667,170)		(2,815,835		(1,930,430)

Net Loss per Common Share - Basic and Diluted	$	(0.01	))	$	(0.01)	$	(0.01)	$	(0.02

Weighted Average Shares Outstanding		1,569,700			106,076,970		142,225,592		102,934

Three Months Ended
March 31, 2020 March 31, 2019

Sales $ 113,443 $ 76,429

Cost of Sales 217,080 75,730

Gross Profit (Loss) (103,637 ) 699

Operating Expenses
General and Administrative 584,069 956,640
Advertising and Marketing 44,662 209,390
Total Operating Expenses 628,731 1,166,030

Loss from Operations (732,368 ) (1,165,331)

Other (Income)/Expenses:
Interest Expense 151,555 293,386
Loss on Extinguishment of Debt 74,164 —
(Gain) Loss on Change in Fair Value of Derivative Liability 21,535 (195,457)
Total Other (Income) Expenses 247,254 97,929

Loss Before Income Tax Provision (979,622 ) (1,263,260)

Income Tax Provision —   —

Net Loss $ (979,622 ) $ (1,263,260)

Net Loss Attributable to Noncontrolling Interests —   —

Net Loss Attributable to Rocky Mountain High Brands $ (979,622 ) $ (1,263,260)

Net Loss per Common Share - Basic and Diluted $ (0.01 ) $ (0.01)

Weighted Average Shares Outstanding 142,722,300 99,757,126

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements

F-2

Table of Contents

Rocky Mountain High Brands, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

~~(Unaudited)~~

	Six Months Ended
	June 30, 2020			June 30, 2019
Operating Activities:
Net Loss		(1,470,202	)		1,930,430
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		511,750			110,209
Non-cash interest expense		—			622,367
Non-cash portion of gain on lawsuit judgement and legal settlement		—			(30,840)
(Gain) Loss on change in fair value of derivative liability		357,713			195,063
Loss on extinguishment of debt		—			(689,991)
Bad debt expense		—			1,678
Depreciation and amortization expense		20,482			14,773
Changes in operating assets and liabilities:		—			—
Accounts receivable		6,738			12,029
Inventory		—			(228,905)
Prepaid expenses and other current assets		(966,692	)		(238,945)
Other assets		13,058			49,432
Accounts payable and accrued liabilities		(12,922	)		68,188
Other payables & Stock related payables		3,003,912			—
Deferred revenue		(223,267	)		—
NET CASH (USED) IN OPERATING ACTIVITIES		(1,301,422	)		2,045,372

Financing Activities:
Investments in intangible assets, net		(1,397,960	)		—
Acquisition of property and equipment		(1,828,820	)		—
Disposal of property and equipment					—
NET CASH PROVIDED BY INVESTING ACTIVITIES		(3,226,720	)		—

Financing Activities:
Proceeds from mezzanine Financing					367,500
Assumption of both notes		1,007,000
Increase of notes payable		573,382			(6424)
Proceeds from issuance of common stock		201,523			1,139,173
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,781,905			1,500,249

INCREASE (DECREASE) IN CASH		(154,675	)		(545,123)

CASH AND RESTRICTED CASH - BEGINNING OF PERIOD		123,455			613,686

CASH AND RESTRICTED CASH- END OF PERIOD	$	31,245		$	68,563

Supplemental cash flow information:
Cash paid for interest	$	—		$	10,387
Cash paid for taxes	$	—		$	—
Supplemental disclosure of non-cash financing and investing activities:
Common stock issued for conversion of debt	$	9,976		$	188,870
Debt and accrued interest converted for common stock	$	—		$	271,189
Beneficial conversion feature recognized as debt discount	$	—		$	367,500

Three Months Ended
March 31, 2020 March 31, 2019

Operating Activities:
Net Loss $ (979,622 ) $ (1,263,260)
Adjustments to reconcile net loss to net cash used in operating activities:
  Stock-based compensation 51,862 71,826
  Non-cash interest expense 144,052 303,691
  (Gain) Loss on change in fair value of derivative liability 21,535 (195,457)
  Loss on extinguishment of debt 74,164 —
  Loss on disposal of property and equipment 587 —
  Bad debt expense —   49
  Depreciation and amortization expense 9,240 10,909
Changes in operating assets and liabilities:
  Accounts receivable 11,424 7,366
  Inventory 16,301 (292,344)
  Prepaid expenses and other current assets —   (128,767)
  Other assets (13,750 ) 9,478
  Accounts payable and accrued liabilities 245,908 126,379
  Related party accounts payable (30,406 ) —
  Deferred revenue 16,866 —
NET CASH USED IN OPERATING ACTIVITIES (431,839 ) (1,350,130)

Investing Activities:
  Disposal of property and equipment 1,209 —
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,209 —

Financing Activities:
  Proceeds from issuance of convertible notes 275,000 —
  Repayment of notes payable —   (3,147)
  Proceeds from issuance of series F preferred stock 200,000 —
  Proceeds from issuance of series H preferred stock 11,000 —
  Proceeds from issuance of common stock —   1,017,046
NET CASH PROVIDED BY FINANCING ACTIVITIES 486,000 1,013,899

INCREASE (DECREASE) IN CASH 55,370 (336,231)

CASH AND RESTRICTED CASH - BEGINNING OF PERIOD 68,080 613,686

CASH AND RESTRICTED CASH- END OF PERIOD $ 123,450 $ 277,455

Supplemental cash flow information:
  Cash paid for interest $ 7,503 $ 10,305
  Cash paid for taxes $ —   $ —
Supplemental disclosure of non-cash financing and investing activities:
  Common stock issued for conversion of debt $ 208,400 $ 171,342
  Debt and accrued interest converted for common stock $ 229,935 $ 156,876
  Beneficial conversion feature recognized as debt discount $ 298,750 $ —

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements

F-3

Table of Contents

Rocky Mountain High Brands, Inc.

Consolidated Statements of Shareholders' Deficit for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2020

(Unaudited)

Common Stock Preferred Stock F Preferred Stock G Preferred Stock H
Shares Amount Shares Amount Shares Amount Shares Amount APIC Accumulated Deficit Total RMHB Shareholders' Deficit Noncontrolling Interests Total Equity/(Deficit)
Balance - December 31, 2019 137,914,630 $ 137,915 130 $ —   10,000 $ 10 —   $ —   $ 37,528,496 $ (40,285,145 ) $ (2,618,724 ) $ (3,627 ) $ (2,622,351)
Shares issued for cash —   —   200 —   —   —   11 —   211,000 —   211,000 —   211,000
Shares issued for compensation 802,700 803 —   —   —   —   —   —   15,251 —   16,054 —   16,054
Series G preferred stock shares converted to common shares 500,000 500 —   —   (10,000 ) (10 ) —   —   —   —   490 —   490
Shares issued upon conversion of convertible notes 12,437,084 12,437 —   —   —   —   —   —   195,963 —   208,400 —   208,400
Shares issued for payment of related party payables 4,895,286 4,895 —   —   —   —   —   —   93,010 —   97,905 —   97,905
Net loss for the three months ended March 31, 2020 —   —   —   —   —   —   —   —   —   (979,622 ) (979,622 ) —   (979,622)
Balance - March 31, 2020 156,549,700 $ 156,550 330 $ —   —   $ —   11 $ —   $ 38,043,720 $ (41,264,767 ) $ (3,064,497 ) $ (3,627 ) $ (3,068,124)

	Common Stock			Preferred Stock F			Preferred Stock G					Preferred Stock H
	Shares		Amount	Shares		Amount	Shares			Amount		Shares		Amount		APIC		Accumulated Deficit			Total RMHB Shareholders' Deficit			Noncontrolling Interests			Total Equity/(Deficit)

Balance - December 31, 2019	137,914,630	$	137,915	130	$	—	10,000		$	10		—	$	—	$	37,528,496	$	(40,285,145	)	$	(2,618,724	)	$	(3,627	)	$	(2,622,351)
Shares issued for cash	—		—	200		—	—			—		11		—		211,000		—			211,000			—			211,000
Shares issued for compensation	802,700		803	—		—	—			—		—		—		15,251		—			16,054			—			16,054
Series G preferred stock shares converted to common shares	500,000		500	—		—	(10,000	)		(10	)	—		—		—		—			490			—			490
Shares issued upon conversion of convertible notes	12,437,084		12,437	—		—	—			—		—		—		195,963		—			208,400			—			208,400
Shares issued for payment of related party payables	4,895,286		4,895	—		—	—			—		—		—		93,010		—			97,905			—			97,905
Net loss for the three months ended March 31, 2020	—		—	—		—	—			—		—		—		—		(979,622	)		(979,622	)		—			(979,622)
Balance - March 31, 2020	156,549,700	$	156,500	—	$	—	—		$	—		—	$	—	$	38,043,720	$	(41,264,767	)		(3,064,497	)	$	(3,627)		$	(3,068,124)
Stock issued for services	150,000		150	—		—	—			—		—		—		3,075		—			3,225			—			3,225
Stock issued for Professional services	600,000		600	—		—	—			—		—		—		15,000		—			15,600			—			15,600
Shares issued for compensation	22,250,000		22,250	—		—	—			—		—		—		489,500		—			511,750			—			511,750
Business of Raw Pharma	27,000,000		27,000													513,000		—			540,000			—			540,000
Shares issued upon conversion of convertible notes	9,976,484		9,976	—		—	—			—		—		—		89,004		—			98,980			—			98,980
Stock issued for Prepaid services	50,000,000		50,000	—		—	—			—		—		—		950,000		—			1,000,000			—			1,000,000
Shares issued for legal settlement	17,500,000		17,500	—		—	—			—		—		—		370,000		—			387,500			—			387,500
Stock issued for marketing	425,000		425	—		—	—			—		—		—		8,925		—			9,350			—			9,350
Net loss for the three months ended June 30, 2020	—		—	—		—	—			—		—		—		—		(1,470,202	)		(1,470,202	)		—			(1,470,202)
Balance - June 30, 2020	284,451,184	$	284,451	—	$	—	—		$	—		—	$	—	$	40,482,224	$	(42,734,969	)	$	(1,968,294	)	$	(3,627)		$	(1,971,921)

Rocky Mountain High Brands, Inc.

Consolidated Statements of Shareholders' Deficit for the ~~Three~~Six Months Ended ~~March 31,~~June 30, 2019

(Unaudited)

	Common Stock			Preferred Stock F			Preferred Stock G			Preferred Stock H
	Shares		Amount	Shares		Amount	Shares		Amount	Shares		Amount		APIC			Accumulated Deficit			Total RMHB Shareholders' Deficit			Noncontrolling Interests		Total Equity/(Deficit)
Balance - December 31, 2018	94,580,869	$	94,581	—	$	—	—	$	—	—	$	—	$	34,221,215		$	(35,018,351	)		(702,555	)	$	—	$	(702,555)
Shares issued for cash	7,813,337		7,813	—		—	—		—	—		—		1,009,233			—			1,017,046			—		1,017,046
Shares issued for compensation	25,403		25	—		—	—		—	—		—		3,976			—			4,001			—		4,001
Shares issued upon conversion of convertible notes	1,750,000		1,750	—		—	—		—	—		—		169,592			—			171,342			—		171,342
Net loss for the three months ended March 31, 2019	—		—	—		—	—		—	—		—		—			(1,263,260	)		(1,263,260	)		—		(1,263,260)
Balance - March 31, 2019	104,169,609	$	104,170	—	$	—	—	$	—	—	$	—	$	35,404,015		$	(36,281,611	)	$	(773,426	)	$	—	$	(773,426)

Shares issued for cash	2,490,932		2,491	—		—	—		—	—		—		119,636			—			122,127			—		122,127
Shares issued upon conversion of convertible notes	2,315,980		2,316	—		—	—		—	—		—		15,213			—			17,529			—		17,529
Stock option forfeiture	—		—	—		—	—		—	—		—		7,530			—			7,530			—		7,530
Beneficial conversion feature recognized on convertible notes payable	—		—	—		—	—		—	—		—		367,500			—			367,500			—		367,500
Fractional shares issued as a result of the reverse stock split	3,470		3	—		—	—		—	—		—		(3	)		—			—			—		—
Net loss for the three months ended June 30, 2019	—		—	—		—	—		—	—		—		—			(667,170	)		(667,170	)		—		(667,170)
Balance - June 30, 2019	108,979,991	$	108,980	—	$	—	—	$	—	—	$	—	$	35,913,891		$	(36,948,781	)	$	(925,910	)	$	—	$	(925,910)

Common Stock Preferred Stock F Preferred Stock G Preferred Stock H
Shares Amount Shares Amount Shares Amount Shares Amount APIC Accumulated Deficit Total RMHB Shareholders' Deficit Noncontrolling Interests Total Equity/(Deficit)
Balance - December 31, 2018 94,580,869 $ 94,581 —   $ —   —   $ —   —   $ —   $ 34,221,215 $ (35,018,351 ) (702,555 ) $ —   $ (702,555)
Shares issued for cash 7,813,337 7,813 —   —   —   —   —   —   1,009,233 —   1,017,046 —   1,017,046
Shares issued for compensation 25,403 25 —   —   —   —   —   —   3,976 —   4,001 —   4,001
Shares issued upon conversion of convertible notes 1,750,000 1,750 —   —   —   —   —   —   169,592 —   171,342 —   171,342
Net loss for the three months ended March 31, 2019 —   —   —   —   —   —   —   —   —   (1,263,260 ) (1,263,260 ) —   (1,263,260)
Balance - March 31, 2019 104,169,609 $ 104,170 —   $ —   —   $ —   —   $ —   $ 35,404,015 $ (36,281,611 ) $ (773,426 ) $ —   $ (773,426)

The Accompanying Notes are an Integral Part of the Consolidated Financial Statements

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Rocky Mountain High Brands, Inc.

Notes to Consolidated Financial Statements

(Unaudited)~~(Unaudited)~~

NOTE 1 – General

Rocky Mountain High Brands, Inc. (“RMHB” or the “Company”) was incorporated under the laws of the State of Nevada. On July 17, 2014, the Company changed its name from Republic of Texas Brands Incorporated to Totally Hemp Crazy, Inc and on October 23, 2015, the Company changed its name to Rocky Mountain High Brands, Inc.

RMHB currently operates through its parent company, ~~four wholly-owned~~three wholly owned subsidiaries, ~~one~~two majority-owned ~~subsidiary,~~subsidiaries, and one minority-owned subsidiary, which the Company controls. All subsidiaries are consolidated for financial reporting purposes.

RMHB is a consumer goods company that specializes in the developing, manufacturing, marketing, and distributing high-quality, health conscious, hemp oil and hemp extract-infused products that span various categories including beverage, food, fitness, skin care, and more. RMHB also markets a naturally high alkaline spring water as part of our brand portfolio. All products comply with federal regulations on hemp products and contain 0.0% tetrahydrocannabinol (“THC”), the psychoactive constituent of cannabis. Recently, through a newly created subsidiary of RMHB, Rocky Mountain Productions, Inc. (“RMPI”), the Company acquired a bottling and canning facility and is now also in the business of canning both its own beverages as well as canning beverages for other customers. Furthermore, as a result of equipment included in the acquisition of the facility, RMHB is also in the business of bottling hand sanitizer. Because of the demand resulting with the COVID-19 pandemic, RMHB anticipates continuing in the bottling of hand sanitizer for the foreseeable future.

In March 2018, the Company launched the HEMPd brand with gummies, water soluble drops, capsules, tinctures, lotions, and salves. The Company introduced four flavors of CBD-infused waters in 12 oz. cans in November 2018.

In July 2018, the Company acquired the assets of BFIT Brands, LLC and formed a new subsidiary, FitWhey Brands Inc. FitWhey marketed a line-up of five water-based protein drinks that include caffeine and B vitamins. In August 2019, the Company suspended the production of FitWhey products.

On June 12, 2019, the Company organized Sweet Rock, LLC (“Sweet Rock”), a 51% owned company, with Sweet Ally, Inc. Sweet Rock will manufacture and market CBD-infused chocolate, hard candies, and baked goods.

On April 29, 2020, the Company formed Rocky Mountain Productions, Inc. (“RMPI”), a ~~wholly-owned~~wholly owned Nevada corporation. On April 30, 2020, RMPI ~~purchased certain assets of~~acquired Raw Pharma, LLC (“Raw Pharma”) ~~including machinery,~~for approximately $1,971,200, as adjusted by the Global Settlement Agreement, November 12, 2020. The company financed the acquisition by assuming bank debt, collateralized by equipment issuing common stock and ~~fixtures.~~cash payments. The facility has the capability to can and bottle products, including 12 oz. regular and sleek cans, 16 oz. cans, shots, and bottles.

The following shows the allocation of the purchase price for Raw Pharma, LLC to acquired intangible assets, assumed liabilities and proforma goodwill:

Total Purchase Price		1,971,200
Production Equipment		1,448,020
Leasehold Improvements		380,000
Total Proforma Goodwill	$	143,180

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Effective April 30, 2020, the company’s subsidiary, Rocky Mountain Productions, Inc acquired all the assets relating and used in the acquired business for cash and 31,700,000 shares of the company’s common stock. The results of operations since April 30, 2020, are included in financial statement. The Company will report in the Annual Report, the balance sheet for comparison purposes as required by agreement with the Securities and Exchange Commission.

During early 2019, the Company continued to market its lineup of naturally flavored hemp-infused functional beverages.

The Company also bottles and distributes its naturally high alkaline spring water under the name Eagle Spirit Spring Water.

On April 22, 2019, the reverse split of the Company’s stock, at a ratio of one share for every 20 shares, was effective. All common stock share and per share amounts in this document ~~reflect~~reflects this reverse split.

NOTE 2 – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States

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of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of ~~March 31,~~June 30, 2020, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended ~~March 31,~~June 30, 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Form 10-K for the year ended December 31, 2019, filed with the SEC on July 9, 2020.

Principles of Consolidation

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The consolidated financial statements include the accounts of the Company, its ~~wholly-owned~~wholly owned and controlled subsidiaries. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

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Cash

The Company maintains cash balances at various financial institutions. At times, these balances may exceed federally insured limits.

Restricted Cash

The Company classifies any cash that is legally restricted as to its withdrawal or usage as restricted cash.

The following table provides a reconciliation of cash and restricted cash reported on the consolidated balance sheets to the total of those same amounts shown in our consolidated statements of cash flows:

March 31, 2020 December 31, 2019 March 31, 2019 December 31, 2018
Cash $ 95,805 $ 53,606 $ 196,704 $ 147,386
Restricted cash 27,645 14,474 80,751 466,300
Cash and restricted cash $ 123,450 $ 68,080 $ 277,455 $ 613,686

	June 30, 2020		December 31, 2019		June 30, 2019		December 31, 2018
Cash	$	31,245	$	53,606	$	196,704	$	147,386
Restricted cash		—		14,474		80,751		466,300
Cash and restricted cash	$	31,245	$	68,080	$	277,455	$	613,686

Accounts Receivable and Allowance for Doubtful Accounts Receivable

The Company has a policy of reserving for uncollectible accounts based on the best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to customers based on an evaluation of their financial condition and other factors. The Company generally does not require collateral or other security to support accounts receivable and perform ongoing credit evaluations of customers and maintain an allowance for potential bad debts if required.

It is determined whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. The Company may also record a general allowance, as necessary.

Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate the collectability of receivables.

Inventories

Inventories, which consist only of the Company’s finished products held for resale, are stated at the lower of cost, determined using the first-in, first-out, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to dispose of the product.

If the Company identifies excess, obsolete, or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company’s statements of operations.

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Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures,” which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions).

The derivative liability, which relates to the conversion feature of convertible debt and common stock warrants and options, is classified as a Level 3 liability, and is the only financial liability measure at fair value on a recurring basis.

The change in the Level 3 financial instrument is as follows:

Balance, December 31, 2019 $ 413,678
Issued during the three months ended March 31, 2020 298,750
Exercises/Conversions —
Change in fair value recognized in operations 21,535
Balance, March 31, 2020 $ 733,963

Balance, December 31, 2019	$	413,678
Issued during the three months ended June 30, 2020		357,719
Exercises/Conversions		—
Change in fair value recognized in operations		—
Balance, June 30, 2020	$	771,391

The estimated fair value of the derivative instruments was valued using the Black-Scholes option pricing model, using the following assumptions as of March 31, 2020:

Estimated Dividends	None
Expected Volatility		145.0%
Risk Free Interest Rate		0.041%
Expected term		.1 to 1.5 years

Property and Equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets, which generally range from three to five years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

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Leases

On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as amended, which requires a lessee to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing and uncertainty of cash flows arising from leases. Upon adoption, the Company did not have any leases that would require recognition on its consolidated balance sheet.

Capitalized Software

Direct costs related to software development, including coding, website application development, infrastructure development and graphics development, are capitalized and included in other assets. Amortization is provided for on a straight-line basis over the useful life of the software. Costs related to planning, content development, and operating and maintaining software are expensed as incurred.

Impairment of Long-Lived Assets

The Company evaluates intangible assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flow and recognizes an impairment loss when the estimated undiscounted future cash flow expected to result from the use of the asset plus the net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, it reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. No impairment charges were recorded during the three months ended ~~March 31,~~June 30, 2020, and 2019.

Share-based Payments

Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values, in accordance with FASB ASC Topic 718. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company had no common stock options or common stock equivalents granted or outstanding for all periods presented.

The Company issued restricted stock to consultants and employees for various services. Cost for these transactions ~~are~~is measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The value of the common stock is to be measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to earn the equity instruments is reached or (ii) the date at which the counterparty's performance is complete.

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Convertible Instruments

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities.” Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as freestanding derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

Preferred Stock

We apply the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity” when determining the classification and measurement of preferred stock. Preferred shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. We classify conditionally redeemable preferred shares (if any), which includes

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preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control, as temporary equity. At all other times, we classified our preferred shares in stockholders’ equity. Our preferred shares do not feature any redemption rights within the holders’ control or conditional redemption features not within our control. Accordingly, unless otherwise noted, all issuances of preferred stock are presented as a component of consolidated shareholders’ deficit.

Revenue Recognition

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers,” as amended. It records revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided. Payments received prior to shipment of goods are recorded as deferred revenue.

The following table represents sales by sales channel for each of the periods:

	Three Months Ended				Three Months Ended
	March 31, 2020		March 31, 2019		June 30, 2020		June 30, 2019
Online	$	20,195	$	60,960	$	20,195	$	21,103
Private Label		80,194		—		636,240		—
Distributor		12,224		1,421		12,224		1,421
Retailer		830		14,048		830		14,048
Total	$	113,443	$	76,429	$	669,489	$	36,572

All sales for all periods presented were to domestic customers, except private label sales of $80,194 for the three months ended ~~March 31,~~June 30, 2020. These private label sales were to CBD Life, S.A. (“CBD Life”) of Mexico. All sales to CBD Life are delivered to Laredo, Texas, where the customer takes title.

Due to the nature of the Company’s revenue from contracts with customers, the Company does not have material contract assets or liabilities that fall under the scope of ASC 606.

The Company’s revenues accounted for under ASC 606, generally, do not require significant estimates or judgments based on the nature of the Company’s revenue streams. The sales prices are generally fixed at the point of sale and all consideration from contracts is included in the transaction price. The Company’s contracts do not include multiple performance obligations or material variable consideration.

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In ~~March~~June 2020, the Company produced and delivered 146,880 cans of Rocket High, California Limonada, and California Te Negro branded product to CBD Life. In July 2020 the customer informed the Company that numerous cans of the delivered product were leaking. The Company agreed to replace the entire production run at its own expense and accrued related costs of $68,648 as of ~~March 31,~~June 30, 2020. The production-related costs, including start-up costs and production overruns, were approximately $109,000. The customer has not requested, and the Company has not offered, any refund of the sales amount or to provide any other consideration to the customer. The $80,194 sales amount is included in sales for the three months ended ~~March 31,~~June 30, 2020.

Advertising

Advertising and marketing expenses are charged to operations as incurred.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for

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the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions.

Reclassifications

Certain reclassifications have been made to prior year consolidated financial statements to conform to classifications used in the current year.

NOTE 3 – Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of ~~March 31,~~June 30, 2020, the Company has a shareholders’ deficit of ~~$3,068,124~~$1,207,165 and an accumulated deficit of ~~$41,264,767~~$42,471,932 and has generated operating losses since inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue raising capital.

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The Company has historically funded its operations with sales of equity and debt securities. The COVID-19 pandemic of 2020 has added uncertainty into the financial markets that the Company relies on for its operating and investment funding. It is unclear how long, or to what extent, the pandemic will impact the Company in 2020 and beyond. On April 30, 2020, the Company purchased certain assets of Raw Pharma, LLC (“Raw Pharma”) and agreed to sublease Raw Pharma’s production facility. Management believes its Securities Purchase Agreement dated December 20, 2019, with GHS Investments, LLC (“GHS”), along with bridge financing from GHS or other sources, will provide sufficient funds to make up for any operating cash flows.

The Company’s business has been adversely affected by the instability, disruption, and quarantine restrictions caused by the recent COVID-19 pandemic. The COVID-19 pandemic may cause customers to suspend their decisions on ordering our products, make it impossible to attend or sponsor trade shows or other conferences in which our products are presented to distributors, customers and potential customers, for our customers to visit our physical location, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with purchases of goods, or commitments to develop new brands and private label products.

Significant disruptions to communications and travel, including travel restrictions and other protective quarantine measures against COVID-19 by governmental agencies, have increased the difficulty in delivering goods to our customers and could ultimately make such deliveries impossible. Travel restrictions and protective measures against COVID-19 could cause us to incur additional unexpected labor costs and expenses or could restrain our ability to retain the highly skilled personnel we need for our operations.

The COVID-19 pandemic has added uncertainty to the financial markets that the Company relies on for its operating and investment funding. It has also negatively impacted the Company’s ability to meet its external financial reporting deadlines.

NOTE 4 – Inventory

Inventory consists of the following:

March 31, 2020 December 31, 2019
Finished inventory $ 51,591 $ 160,763
Raw materials and packaging 170,142 77,272
Total $ 221,733 $ 238,035

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	June 30, 2020		December 31, 2019
Finished inventory	$	51,591	$	160,763
Raw materials and packaging		98,349		77,272
Total	$	149,940	$	238,035

NOTE 5 – Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

	March 31, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Prepaid officers’ compensation	$	107,425	$	143,233	$	—	$	143,233
Prepaid production		12,500		—		12,500		—
Other prepaid expenses and current assets		18,993		31,493		1,093,110		31,493
Total	$	138,918	$	174,726	$	1,105,610	$	174,726

NOTE 6 – Property and Equipment

Property and equipment consist of the following:

	March 31, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Vehicles	$	14,687	$	14,687	$	14,687	$	14,687
Furniture and equipment		40,516		45,322		2,101,920		45,322
Personal computers		16,667		17,901		16,667		17,901
		71,870		77,910		2,193,270		77,910
Less: accumulated depreciation		57,257		58,568		57,257		58,568
Total	$	14,613	$	19,342	$	2,136,017	$	19,342

For the three months ended ~~March 31,~~June 30, 2020, and 2019, depreciation expense was $2,933 and $4,161, respectively.

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NOTE 7 – Intangible Assets

Intangible assets consist of capitalized software. For the three months ended ~~March 31,~~June 30, 2020, and 2019, amortization expense was $2,601 and $2,601, respectively.

NOTE 8 – Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following:

	March 31, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Accounts payable	$	633,338	$	440,788	$	458,904	$	440,788
Accrued compensation		—		51,500		—		51,500
Common stock payable		396,850		417,850		396,850		417,850
Other accrued expenses		245,174		233,079		406,986		233,079
Total	$	1,275,362	$	1,143,217	$	1,262,740	$	1,143,217

NOTE 9 – Convertible Notes Payable

Convertible notes payable ~~consist~~consists of the following:

	Interest Rates		Term		Conversion Rates		March 31, 2020			December 31, 2019		Interest Rates		Term		Conversion Rates		June 30, 2020			December 31, 2019
GHS Investments, LLC (fixed conversion)		10%		.3 - .75 years	$	0.01	$	871,074		$	1,035,750		10%		.3 - .75 years	$	0.01	$	849,208		$	1,035,750
Eagle Equities, LLC		8%		1.3 – 1.5 years		(a)		298,750			—		8%		1.3 – 1.5 years		(a)		298,750			—
LSW Holdings, LLC (variable conversion)		6%		—		(b)		179,000			179,000		6%		—		(b)		179,000			179,000
Discount								(332,857	)		(205,800)								(345,048	)		(205,800)
Total							$	1,015,967		$	1,008,950							$	981,910		$	1,008,950

	(a)	Fixed conversion rate for the first 180 days ($0.03 as of March 31, 2020). 40% discount on the lowest closing bid price during the 20 trading days prior to conversion after 180 days.
	(b)	50% discount on the average of the 3 lowest closing bid prices during the 10 trading days prior to conversion ($0.019).

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For the three months ended ~~March 31,~~June 30, 2020, and 2019, interest expense on these notes, including amortization of the discount, was $135,671 and $293,189, respectively.

As of ~~March 31,~~June 30, 2020, and December 31, 2019, the Company’s derivate liability related to its convertible ~~notes~~note’s payable was $728,976 and $403,971, respectively.

All tangible and intangible assets of the Company are pledged as security.

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NOTE 10 – Notes Payable

Notes payable consist of the following:

Interest Rate

Term
March 31, 2020 December 31, 2019
Notes payable 0% Due $ 30,000 $ 30,000

Interest Rate

Term

June 30, 2020

December 31, 2019

Notes payable

Due

603,382

30,000

As of ~~March 31,~~June 30, 2020, and December 31, 2019, notes payable includes two ~~non-interest bearing~~non-interest-bearing notes totaling $30,000 that originated prior to the Company’s 2014 bankruptcy proceedings.

NOTE 11 – Deferred Revenue

In December 2017, the Company executed a three-year Master Manufacturing Agreement (“MMA”) with CBD Alimentos SA de CV (“CBD-Alimentos”), a Mexican food and beverage distributor. Under the agreement (as amended), CBD Alimentos, through its sister company, CBD Life, is our exclusive distributor in Mexico for all of our CBD-infused energy and functional beverages. In turn, we are CBD Life’s exclusive supplier of such products. The beverages supplied to CBD Life are private label products made to order for CBD Life. On December 24, 2018, the Company received its first purchase order under the MMA. The purchase order is for a total of 2,000,000 cans, consisting of three flavors: Rocket High Energy Drink, California Black Tea (Te Negro), and California Lemonade (Limonada) to be delivered to CBD Life’s facility in Laredo, Texas. Each flavor consists of a sugar and sugar-free version. Based on the pricing the Company agreed to, the total of the purchase order is $932,600. In December 2018, the Company received a deposit of $466,300 to begin the procurement process for packaging (aluminum can bodies, lids, labels) and raw materials (CBD and other ingredients), co-packing services, and the Company’s contracted margin of $.05 per can. During 2019 the Company ordered, received and paid for packaging and raw materials and contracted for co-packing services with Optimus Fulfill, a Coppell, Texas-based beverage processor. The contract with Optimus Fulfill required the Company to make deposits of $156,000 to secure the co-packing services. These deposits were made in January 2019. Subsequent to the Company’s payment of the deposits, Optimus Fulfill filed for bankruptcy protection. The Company received a total of $20,000 in refunds in 2019 and was forced to secure another co-packer. The lengthy lead time associated with procuring co-packing services coupled with the normal lead times for packaging and raw materials pushed the production schedule into the last quarter of 2019. Additionally, a change in Mexico’s Presidential administration resulted in additional scrutiny of CBD Life’s permits in November 2019. Once these hurdles were cleared, production began in December 2019 with an initial run of 38,400 cans with a selling price of $20,375, and production-related costs of $64,526, including start-up costs and production overruns. In January 2020, the Company received an additional deposit of $97,060 from CBD Life to help restore the lost deposit with Optimus Fulfill. The Company procured additional packaging and raw materials and restarted production in March 2020, with a total of 146,880 cans produced and delivered in that month. The revenue recorded in ~~March~~June 2020 was $80,194.

In accordance with the MMA, RMHB opened a separate operating bank account for all deposits made by CBD Life. CBD Life is required to always maintain a positive cash balance in the ~~account at all times.~~account. The Company has full unilateral authority to disburse funds from the bank account to vendors, suppliers, co-packers, and the Company solely for the purposes of production, other administrative costs, and the Company’s margin on the sale. During 2019 the Company transferred $80,000 ($.04 per can ordered) from the CBD Life restricted bank account to its corporate account in accordance with the terms of the MMA. As of ~~March 31,~~June 30, 2020, and December 31, 2019, the balances in the separate operating bank account were $27,645 and $14,474, respectively, and are included in restricted cash on the Company’s balance sheet.

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A summary ~~rollforward~~rolls forward of the Deferred Revenue balance from the December 28, 2018 (receipt of first deposit) until ~~March 31,~~June 30, 2020, is as follows:

December 28, 2018 deposit received $ 466,300
December 2019 delivery (20,375)
Balance as of December 31, 2019 $ 445,925
January 30, 2020 deposit received 97,060
March 2020 deliveries (80,194)
Balance as of March 31, 2020 $ 462,791

December 28, 2018, deposit received	$	466,300
December 2019 delivery		(20,375)
Balance as of December 31, 2019	$	445,925
January 30, 2020, deposit received		97,060
June 2020 deliveries		32,289
Balance as of June 30, 2020	$	462,791

In July 2020 CBD Life informed the Company that numerous cans of the delivered product were leaking. The Company has agreed to replace the production run at its own expense and accrued related cost of $68,648 as of ~~March 31,~~June 30, 2020. The production-related costs, including start-up costs and production overruns, were approximately $109,000. The Company has not agreed to refund the sales amount or provide any other consideration to the customer.

NOTE 12 – Shareholders’ Deficit

Common Stock

As of ~~March 31,~~June 30, 2020, the Company has 1,000,000,000 shares of common stock authorized and ~~156,549,700~~284,451,184 shares issued and outstanding. On April 22, 2019, the Company effected a 1-for-20 reverse stock split. All common share amounts in this report reflect this stock split.

During the three months ended ~~March 31,~~June 30, 2020, the Company issued 18,635,070 shares of common stock, including 12,437,084 shares for convertible notes payable conversions, 4,895,286 shares for amounts due to a board member, 802,700 shares for compensation, and 500,000 shares for Series G Preferred Stock conversions.

Preferred Stock

The Company has 20,000,000 shares of preferred stock authorized as of ~~March 31,~~June 30, 2020, of which 12,801,154 are specifically designated to a series of preferred stock and 7,198,846 remain undesignated.

Series A Preferred Stock

The Company has 1,000,000 shares of Series A Preferred Stock designated, of which none were outstanding as of ~~March 31,~~June 30, 2020 and December 31, 2019. LSW Holdings LLC was the holder of these shares. Lily Li, who was the Company’s Executive Vice President until April 5, 2018, is the Managing Member of LSW and, in that capacity, had the authority to direct voting and investment decisions with regard to its holdings in the Company. On October 26, 2018, these shares were ruled void ab initio by a District Court in Dallas County, Texas. The Company cancelled these shares effective that date.

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Series B Preferred Stock

The Company has 7,000,000 shares of Series B Preferred Stock designated, of which none were outstanding as of ~~March 31,~~June 30, 2020, and December 31, 2019.

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Series C Preferred Stock

The Company has 2,000,000 shares of Series C Preferred Stock designated, of which none were outstanding as of ~~March 31,~~June 30, 2020, and December 31, 2019. Series C Preferred Stock is 12% interest bearing, cumulative, exchangeable, non-voting, convertible preferred stock of the Company. Each Series C Preferred share is convertible to 2.5 shares of common stock.

Series D Preferred Stock

The Company has 2,000,000 shares of Series D Preferred Stock designated, of which none were outstanding as of March 31, 2020, and December 31, 2019. Series D Preferred Stock is a non-voting, ~~non-interest bearing~~non-interest-bearing convertible preferred stock. Each Series D preferred share is convertible to 5 shares of common stock.

Series E Preferred Stock

The Company has 789,474 shares of Series E Preferred Stock designated, of which none were outstanding as of March 31, 2020, and December 31, 2019. Holders of Series E Preferred Stock are entitled to cast 100 votes per share of Series E Preferred Stock on any proposal to increase our authorized capital stock, with no other voting rights. Each share of Series E Preferred Stock is convertible to 20 shares of common stock.

Series F Preferred Stock

On December 20, 2019, the Board of Directors designated 1,680 shares of Series F Preferred Stock. On that same day, the Company sold 130 shares of Series F Preferred Stock to GHS Investments, LLC ("GHS") in accordance with a Securities Purchase Agreement with GHS. The Series F Preferred Stock has a par value of $.001, stated value of $1,200, accrues dividends at 12%, is convertible to common stock based on a 20-day trailing volume weighted average low share price, and is senior to other preferred stock. During the three months ended March 31, 2020, the Company sold 200 shares of Series F Preferred Stock to GHS. As of ~~March 31,~~June 30, 2020, and December 31, 2019, there were 330 and 130 shares issued and outstanding, respectively.

Series G Preferred Stock

On December 20, 2019, the Board of Directors designated 10,000 shares of Series G Preferred Stock. On that same day, the Company granted 10,000 shares of Series G Preferred Stock to Charles Smith, a Board member, and Chief Operating Officer of the Company, in exchange for $10,000 owed to Mr. Smith in compensation. The Series G Preferred Stock has a par value of $.001, is non-interest and non-dividend earning, and each share is convertible to 50 shares of common stock. The holder of Series G Preferred Stock has the right to cast 20,000 votes for every one share of Series G Preferred Stock on any and all proposals to amend the Company’s Articles of Incorporation to increase the authorized capital stock of the Company. Mr. Smith exercised that right in December 2019 and the Series G Preferred Shares were converted to common stock on March 20, 2020. As of ~~March 31,~~June 30, 2020, there were no shares of Series G Preferred Stock issued and outstanding.

Series H Preferred Stock

On February 25, 2020, the Board of Directors designated 5,000 shares of Series H Preferred Stock. The Board amended the designation on April 7, 2020. The Series H Preferred Stock has a par value of $.001, stated value of $1,200, accrues dividends at 12%, and is convertible to common stock based on a 20-day trailing volume weighted average low share price. As of ~~March 31,~~June 30, 2020, there were 11 shares outstanding. As of December 31, 2019, there were no shares issued and outstanding.

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Warrants

During the three months ended ~~March 31,~~June 30, 2020, and 2019 the Company granted no common stock warrants, none were exercised, and none were forfeited. As of ~~March 31,~~June 30, 2020, and December 31, 2019, there were 607,500 warrants outstanding. Exercise prices range from $.02 to $.40 per share.

Options

During the three months ended ~~March 31,~~June 30, 2020, the Company did not grant any options to purchase the Company’s common stock and there were no exercises or forfeitures of such options.

During the three months ended ~~March 31,~~June 30, 2019, the Company granted 500,000 options to purchase common stock to an employee. There were no exercises or forfeitures during that period.

As of ~~March 31,~~June 30, 2020, and December 31, 2019, there were no options outstanding.

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NOTE 13– Noncontrolling Interests

In July 2019, the Company invested $500 in Sweet Rock, LLC, a Michigan limited liability company. The Company owns 51% and Sweet Ally, Inc. (“Sweet Ally”) invested $495 and owns 49%. The Company consolidates the financial statements of Sweet Rock and accounts for Sweet Ally’s ownership as a noncontrolling interest. During the three months ended ~~March 31,~~June 30, 2020, Sweet Rock recorded no revenue or expenses.

NOTE 14– Concentrations

During the three months ended ~~March 31,~~June 30, 2020, the Company’s two largest customers accounted for approximately 71% and 12% of sales, respectively. During the three months ended ~~March 31,~~June 30, 2019, the Company’s two largest customers accounted for approximately 17% and 2% of sales, respectively.

NOTE 15 – Income Taxes

The reconciliation of income tax benefit at the U.S. statutory rate of 21% to the Company’s effective rate for the periods presented is

Three Months Ended
March 31, 2020 March 31, 2019
U.S. federal statutory rate (21 %) (21%)
State income tax, net of federal benefit (0.0 %) (0.0%)
Increase in valuation allowance 21 % 21%
Income tax provision (benefit) 0.0 % 0.0%

	Three Months Ended
	June 30, 2020			June 30, 2019
U.S. federal statutory rate		(21	%)		(21	%)
State income tax, net of federal benefit		(0.0	%)		(0.0	%)
Increase in valuation allowance		21	%		21	%
Income tax provision (benefit)		0.0	%		0.0	%

The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of ~~March 31,~~June 30, 2020, and December 31, 2019, are:

	March 31, 2020			December 31, 2019		June 30, 2020			December 31, 2019
Deferred Tax Assets
Net Operating Losses	$	4,700,000		$	4,620,000	$	4,700,000		$	4,620,000
Less: Valuation Allowance	$	(4,700,000	)	$	(4,620,000	$	(4,700,000	)	$	(4,620,000)
Deferred Tax Assets – Net		—			—		—			—

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As of ~~March 31,~~June 30, 2020, the Company had approximately $22,000,000 of federal and state net operating loss carryovers (“NOLs”), which begin to expire in 2028. Utilization of the NOLs may be subject to limitation under the Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under regulations.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

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On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. We have estimated our provision for income taxes in accordance with the Tax Act and guidance available as of the date of this filing but have kept the full valuation allowance. As a result, the Company has recorded no income tax expense during the three months ended ~~March 31,~~June 30, 2020, and 2019.

The Company’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 34% to 21%, resulting in a deferred tax expense of approximately $2,000,000 in 2017 that is still fully valued against as of March 31, 2020. This expense is attributable to the Company being in a net deferred tax asset position at the time of remeasurement. As the company maintains fully valuation allowance, this amount can be seen on the rate reconciliation as an adjustment to deferred tax asset and corresponding valuation allowance.

NOTE 16 – Commitments

The Company executed a three-year lease for corporate office space effective September 1, 2016. The lease included monthly payments of $7,715 in year one, $7,972 in year two, and $8,229 in year three plus common area maintenance. The lease was accounted for on a straight-line basis over its term.

On September 5, 2019, the Company executed a six-month extension of its corporate office lease at $8,065 per month plus common area maintenance. The lease expired on February 29, 2020.

On February 28, 2020, the Company executed a second six-month extension of its corporate office lease. The lease includes new, smaller space within the same office building at a monthly payment of $3,549 per month plus common area maintenance.

On January 18, 2018, WFLC entered into a 12-month office use agreement for office space in Denver, Colorado. Monthly payments were $91. The lease automatically renews for 12 months each January. Monthly payments are $122.

Other Leases

The Company rents storage space from various third parties on a month-to-month basis.

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NOTE 17 – Legal Proceedings

Rocky Mountain High Brands, Inc. v Lyonpride Music, LLC, United States District Court Northern District of Texas, 3:18-cv-00045-C, now Lyonpride Music LLC v Rocky Mountain High Brands, Inc., Before the American Arbitration Association, 01-18-0003-1428.

The parties have settled the matter and the settlement documents have been signed by the parties. This matter has been concluded.

Dallas County Texas, Case Number DC-17-15441 filed November 8, 2017. Rocky Mountain High Brands, Inc. f/k/a Republic of Texas Brands, Inc. Plaintiff, vs. Jerry Grisaffi, Joe Radcliffe, LSW Holdings, LLC, Lily Li, Epic Group One, LLC, Kenneth Radcliffe, Dennis Radcliffe, Phil Uhrik, Michael Radcliffe, Frank Izzo, Morgan Albright, John Garrison, BB Winks, LLC, Crackerjack Classic, LLC, and Universal Consulting, LLC.

The Company sought the return of the Series A Preferred Stock (“Series A”) issued to Jerry Grisaffi (“Grisaffi”), RMHB’s former Chairman of the Board. The Company further alleged, among other things, that Grisaffi breached his fiduciary duty to the Company by issuing these Series A shares to himself. On August 30, 2018, the Trial Court in the 192nd District Court of Dallas County, Texas entered a final judgment in the Company’s favor and against Grisaffi in the amount of $3,500,000 for fraud, breach of fiduciary duty, and conversion with respect to the Series A preferred stock. The Court further voided ab initio the Series A Preferred Shares. The Court further ruled that Grisaffi take nothing by his counterclaims in the case.

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In The Court Ofof Appeals For The Fifth District Of Texas Dallas, Texas, Jerry Grisaffi, Appellant v. Rocky Mountain High Brands, Inc, f/k/a Republic of Texas Brands, Inc., Appellee, No. 05-18-01020-CV.

Grisaffi appealed the Judgment described above. The Court of Appeals affirmed in part and reversed in part the Judgment and remanded it to the trial court for the purpose of the Company electing its remedy. The Company has elected its remedy of the $3,500,000 judgment against Grisaffi. Grisaffi has again appealed this matter. On November 19, 2019, Grisaffi filed a chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Texas, Case No. 19-33855-sgj. The Company has filed an Adversary Proceeding to deny Grisaffi the ability to discharge the judgment. A Motion for Summary Judgment on the Adversary Proceeding has been filed and is set for hearing. The Chapter 11 case has been converted by the Bankruptcy Court to a Chapter 7 case. The Trustee who has been appointed is actively conducting proceedings to locate assets of Grisaffi.

Dallas County Texas, Case Number DC-18-13491. Rocky Mountain High Brands, Inc. f/k/a Republic of Texas Brands, Inc. Plaintiff, vs. Joe Radcliffe, LSW Holdings, LLC, Lily Li, Epic Group One, LLC, Kenneth Radcliffe, Dennis Radcliffe, Phil Uhrik, Michael Radcliffe, Frank Izzo, Morgan Albright, John Garrison, BB Winks, LLC, Crackerjack Classic, LLC, and Universal Consulting, LLC.

This Final Judgment against Lily Li and LSW Holdings, LLC is final for all purposes and was not appealed. The Company plans to outsource the collection of this Judgment. Other than collection of the Judgment this matter has been finalized.

Rocky Mountain High Brands, Inc. v La Dolce Vita Trust and Christine Guthrie, In Her Capacity Asas Trustee, In The 382nd District Court of Rockwall County, Texas, Cause No. 1-18-1608.

This is a case whereby the Company is attempting to collect on the Judgment obtained against Grisaffi. More specifically the Company is requesting the Court to order the La Dolce Vita Trust to turnover fraudulently transferred assets and for additional relief necessary to enforce the Company’s judgment against Grisaffi. The case has been stayed, and the Company will seek an order from the Bankruptcy Court to continue in this case or will work in conjunction with the Trustee appointed in the Chapter 7 case on this matter.

Chet – 5 Broadcasting, Inc. v Rocky Mountain High Brands, Inc., Supreme Court of the State of New York, County of Ulster, Case No. 18-4416.

The parties have settled this matter and the settlement documents have been signed by the parties. This matter has been concluded.

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NOTE 18 – Other (Income)/Expenses

Loss on Extinguishment of Debt

For the three months ended ~~March 31,~~June 30, 2020, the Company recorded ano loss on extinguishment of debt . The Company recorded a gain on the extinguishment of ~~$74,164~~debt of $689,991 related to the ~~amendment and settlement~~change in the market value of ~~convertible notes payable. There was no gain or loss on extinguishment of debt~~the Company’s common stock during the three months ended ~~March 31, 2019.~~June 30, 2019

Gain (Loss) on Change in Fair Value of Derivative Liability

For the three months ended ~~March 31,~~June 30, 2020, the Company recorded a loss on the change in fair value of derivative liability of ~~$21,535~~$15,894 compared to a gain of ~~$195,457~~$390,520 for the three months ended ~~March 31,~~June 30, 2019. In 2020 the loss resulted from the change in the convertibility of two convertible notes payable that were made in February and March 2020 and increase in the valuation of the related derivative liability based on the change in the market value of the Company’s common stock. The gain in 2019 was due to the decrease in the market value of the Company’s common stock between January 1, 2019, and ~~March 31,~~June 30, 2019.

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NOTE 19 – Subsequent Events

Between April 1 and September 8, 2020, the Company issued 133,183,537 shares of common stock, including 27,000,000 for the acquisition of the assets of Raw Pharma, 21,925,000 for legal settlements, 9,976,484 for convertible notes payable conversions, 22,000,000 for director and employee compensation, 51,000,000 for payments to vendors, and 1,282,053 for cash.

Between April 1 and September 8, 2020, holders of convertible notes payable converted $98,742 of outstanding principal.

On April 7, 2020, the Company executed a three-year consulting agreement with Eagle Processing & Distribution, Inc. (“EPD”). Under the agreement, EPD is to provide outsourced services related to sales and distribution, marketing, social media, and website maintenance, logistics and order fulfillment, production, inventory management, customer service, risk management, and assistance with obtaining financing. EPD was granted 50,000,000 shares of common stock as compensation for the first eight months of the contract with compensation for the remainder of the contract to be negotiated prior to the end of the initial eight months. On June 30, 2020, EPD returned 25,000,000 common shares of the previously issued 50,000,000 shares pending the execution of an amendment to the April 7, 2020, consulting agreement. These common shares have not been cancelled and are included in shares outstanding.

On April 21, 2020, the Company filed a Registration on Form S-8 to register 600,000 shares of common stock issued to a vendor as compensation for services provided.

On April 29, 2020, the Company formed Rocky Mountain Productions, Inc. (“RMPI”), a ~~wholly-owned~~wholly owned Nevada corporation. On April 30, 2020, RMPI purchased certain of the assets of Raw Pharma, LLC (“Raw Pharma”) including machinery, equipment, and fixtures. The facility has the capability to can and bottle product, including 12 oz. regular and sleek cans, 16 oz. cans, shots, and bottles. The purchase price for the assets consists of a combination of $1,750,000 in cash, 27,000,000 shares of common stock, and the assumption or refinancing of Raw Pharma’s bank debts secured by equipment in the amount of $1,007,000. The Company is also assuming the lease of Raw Pharma’s 20,000 square foot facility and certain equipment leases. The Company assumed no other liabilities in the transaction. In March and April 2020, the Company produced and delivered 146,880 and 149,760, respectively, cans of beverage to CBD Life. In July 2020 CBD Life informed the Company that numerous cans of the delivered product were leaking. The Company has agreed to replace the production run at its own expense and accrued related cost of $68,648 as of March 31, 2020. The production-related costs, including start-up costs and production overruns, were approximately $109,000 in ~~March~~June 2020. The Company has not agreed to refund the sales amount or provide any other consideration to the customer. The Company has investigated the cause of the leaking cans and is in the process of remediating the equipment issues it believes caused the packaging failures. Management believes the manufacturing issues will be resolved and the plant will be able to resume all production by September 15, 2020. Management has also held discussions with the prior owners of Raw Pharma (where the product was produced prior to our acquisition) and is negotiating an agreement to compensate the Company for losses related to the equipment issues.

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On April 29, 2020, the Company executed a $150,100 loan agreement with Comerica Bank under the Paycheck Protection Program (“PPP”) of the Small Business Administration (“SBA”). The loan bears interest at 1% and is due on April 29, 2022. If the Company meets certain PPP qualifications the loan will be forgiven by the SBA. Otherwise, monthly loan payments will commence November 1, 2020.

On May 12, 2020, the Company executed a Settlement Agreement and Release with Texas Wellness Center (“TWC”), a subsidiary of GL Brands, Inc., related to the 200,000 can production run the Company ran for TWC in September 2019. Pursuant to the Settlement Agreement the Company agreed to issue 17,500,000 shares of common stock, with a market value of $367,500, on the settlement date. As of December 31, 2019, the Company reversed the $322,000 previously recorded in September 2019, recorded a common stock payable of $367,500 and accrued a $15,000 payment made to TWC in January 2020 to assist with TWC’s customer service-related issues. The companies mutually released each other from all other liabilities, including a $75,000 account payable to TWC for CBD used in the manufacturing of the beverages. The companies further agreed that if RMHB files a lawsuit seeking damages against its can vendor, it would pay TWC 30% of any net recovery. RMHB is not required to take any further action.

On May 20, 2020, the Company executed a Release and Settlement Agreement with CHET-5 Broadcasting, Inc. (“CHET-5”) related to a breach of contract lawsuit filed by CHET-5 related to an advertising contract between the Company and CHET-5. The Company agreed to pay CHET-5 $9,000 in cash and 425,000 shares of common stock in exchange for full mutual releases.

On September 9, 2020, the Company issued 420 shares of Series F Preferred Stock to GHS Investments, LLC in exchange for the maturity date extensions on three convertible notes payable and to waive any breaches related to the Company’s delinquent first and second quarter 2020 financial statement filings.

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

Forward-Looking Statements

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

Company Overview

Rocky Mountain High Brands, Inc. is a Nevada corporation. RMHB currently operates through its parent company, ~~four wholly-owned~~three wholly owned subsidiaries, ~~one~~two majority-owned ~~subsidiary,~~subsidiaries, and one minority-owned subsidiary, which the Company controls. All subsidiaries are consolidated for financial reporting purposes:

~~Rocky Mountain High Brands, Inc., an active Nevada corporation (Parent)~~

Rocky Mountain High Brands, Inc., an active Nevada corporation (Parent)

~~Wellness For Life Colorado, Inc. (“WFLC”) (f/k/a Rocky Mountain Hemp Company and Wellness For Life, Inc.), an active Colorado corporation (Subsidiary)~~

Wellness For Life Colorado, Inc. (“WFLC”) (f/k/a Rocky Mountain Hemp Company and Wellness For Life, Inc.), an active Colorado corporation (Subsidiary)

~~Rocky Mountain Productions, Inc. (“RMPI”), an active Nevada corporation (Subsidiary)~~

Rocky Mountain Productions, Inc. (“RMPI”), an active Nevada corporation (Subsidiary)

~~Eagle Spirit Land & Water Company (“Eagle Spirit”), an active Oklahoma corporation (Subsidiary)~~

Eagle Spirit Land & Water Company (“Eagle Spirit”), an active Oklahoma corporation (Subsidiary)

~~Rocky Mountain High Water Company, LLC (“WaterCo”), an active Delaware limited liability~~ ~~company~~ ~~(Subsidiary)~~

Rocky Mountain High Water Company, LLC (“WaterCo”), an active Delaware limited liability company (Subsidiary)

~~FitWhey Brands Inc. (“FitWhey”), an active Nevada corporation (Subsidiary)~~

FitWhey Brands Inc. (“FitWhey”), an active Nevada corporation (Subsidiary)

~~Sweet Rock, LLC (“Sweet Rock”), an active Michigan limited liability company (Subsidiary)~~

Sweet Rock, LLC (“Sweet Rock”), an active Michigan limited liability company (Subsidiary)

~~Rocky Mountain High Clothing Company, Inc., an inactive Texas Corporation (Subsidiary)~~

Rocky Mountain High Clothing Company, Inc., an inactive Texas Corporation (Subsidiary)

~~Smarterita, LLC, an inactive Texas limited liability company (Subsidiary)~~

Smarterita, LLC, an inactive Texas limited liability company (Subsidiary)

RMHB is a consumer goods company that specializes in the developing, manufacturing, marketing, and distributing high-quality, health conscious, hemp oil and hemp extract-infused products that span various categories including beverage, food, fitness, skin care, and more. RMHB also markets a naturally high alkaline spring water as part of our brand portfolio. All products comply with federal regulations on hemp products and contain 0.0% tetrahydrocannabinol (“THC”), the psychoactive constituent of cannabis. Recently, through a newly created subsidiary of RMHB, Rocky Mountain Productions, Inc., the Company acquired a bottling and canning facility and is now also in the business of canning both its own beverages as well as canning beverages for other customers. Furthermore, as a result of equipment included in the acquisition of the facility, RMHB is also in the business of bottling hand sanitizer. Because of the demand resulting with the COVID-19 pandemic, RMHB anticipates continuing in the bottling of hand sanitizer for the foreseeable future.

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In March 2018, the Company launched the HEMPd brand with gummies, water soluble drops, capsules, tinctures, lotions, and salves. The Company introduced four flavors of HEMPd CBD-infused waters in 12 oz. cans in November 2018 and sold those beverages in carbonated and non-carbonated offerings in 2019.

In July 2018, the Company acquired the assets of BFIT Brands, LLC and formed a new subsidiary, FitWhey Brands LLC. FitWhey marketed a line-up of five water-based protein drinks that include caffeine and B vitamins. In August 2019 management determined the Company would suspend the production of FitWhey branded products until it develops a related hemp or CBD-infused product.

On June 12, 2019, the Company organized Sweet Rock, LLC (“Sweet Rock”), a 51% owned company, with Sweet Ally, Inc. Sweet Rock will manufacture and market CBD-infused chocolates, hard candies, and baked goods for distribution in the United States.

RMHB also bottles and distributes its naturally high alkaline spring water under the name Eagle Spirit Spring Water.

RMHB has entered into the business of producing National Brand Equivalent (NBE) products. RMHB is currently finalizing the production process for the filling of Pediatric Electrolyte drink under the Great Choice brand, which brand was licensed by RMHB.

Results of Operations

Three Months Ended ~~March 31,~~June 30, 2020, Compared to Three Months Ended ~~March 31,~~June 30, 2019

Financial Summary

The Company’s sales for the three months ended ~~March 31,~~June 30, 2020, were ~~$113,443~~$669,489 compared to sales of ~~$76,429~~$36,572 for the three months ended ~~March 31,~~June 30, 2019.

The Company’s net loss for the three months ended ~~March 31,~~June 30, 2020, was ~~$979,622~~1,207,165 compared to a net loss of ~~$1,263,260~~$667,170 for the three months ended ~~March 31,~~June 30, 2019.

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Sales

For the three months ended ~~March 31,~~June 30, 2020, sales were ~~$113,443~~$669,489 compared to sales of ~~$76,429~~$36,572 for the three months ended ~~March 31,~~June 30, 2019, an increase of ~~$37,014~~$632,917 or ~~48%~~1.73%. The sales increase was driven by the sale of private label beverages to CBD Life. The increase was partially offset by a reduction in sales of HEMPd branded products as the Company sold off inventory in anticipation of a change in suppliers and lower Eagle Spirit Water sales in 2020. For the three months ended ~~March 31,~~June 30, 2020, sales consisted of approximately 70% private label sales, 18% online sales, 11% distributor sales, and 1% direct to retailer sales, compared to approximately 80% online sales, 2% distributor sales, and 18% direct to retailer sales for the three months ended ~~March 31,~~June 30, 2019.

Cost of Sales

For the three months ended ~~March 31,~~June 30, 2020, cost of sales was ~~$217,080~~$624,209 or ~~191%~~.93% of sales, compared to ~~$75,730~~$38,855 or ~~99%~~1.06% of sales for the three months ended ~~March 31,~~June 30, 2019, an increase of $141,350 or 187%. The increase in 2020 was primarily due to the accrual of additional production costs related to CBD Life, our private label customer. In July 2020, the customer informed the Company that numerous cans of the delivered product were leaking. The Company agreed to replace the entire production run at its own expense. As of ~~March 31,~~June 30, 2020, the Company established an accrual of $68,648 for the estimated production costs with a corresponding increase in cost of sales. The Company also incurred start-up costs and production overruns related to CBD Life that increased the related cost of sales to approximately $109,000, resulting in a negative gross margin. Additionally in 2020, the Company sold off HEMPd inventory in anticipation of supplier changes and the resulting promotions caused a deterioration in gross margin.

Operating Expenses

For the three months ended ~~March 31,~~June 30, 2020, operating expenses were ~~$628,731~~$1,096,091 or ~~554%~~1.63% of sales, compared to ~~$1,166,030~~$858,831 or ~~1526%~~2.35% of sales for the three months ended ~~March 31,~~June 30, 2019. Areas in which the Company experienced significant changes in operating expenses are discussed below.

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General and Administrative

For the three months ended ~~March 31,~~June 30, 2020, general and administrative expenses were ~~$584,069~~$1,094,09169 or ~~515%~~1.63% of sales, compared to ~~$956,640~~$696,846 or ~~1252%~~19.05% of sales for the three months ended ~~March 31,~~June 30, 2019, a ~~decrease~~increase of ~~$372,571~~$397,282 or ~~39%~~59%. The decrease in general and administrative expenses in 2020 was primarily driven by decreases in compensation and legal expenses.

Advertising and Marketing

For the three months ended ~~March 31,~~June 30, 2020, advertising and marketing expenses were ~~$44,662~~$1,963 or ~~39%~~.3% of sales, compared to ~~$209,390~~$158,985 or ~~274%~~4.34% of sales for the three months ended ~~March 31,~~June 30, 2019, a decrease of ~~$164,728~~$157,022 or ~~79%~~23%. The decrease in advertising and marketing expenses in 2020 was primarily due to the Company’s reduction in online advertising and outside marketing consultant and agency fees. Additionally, the Company incurs no advertising or marketing expenses related to private label sales.

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Other (Income) Expense

Interest Expense

For the three months ended ~~March 31,~~June 30, 2020, interest expense was ~~$151,555,~~$119,525, compared to ~~$293,386~~$339,368 for the three months ended March 31, 2019, a decrease of ~~$141,831.~~$219,843. The decrease in interest expense, which includes the amortization of the discount on convertible debt, and the excess of the beneficial conversion feature on certain convertible notes payable, was due to decreased debt activity in 2020.

Loss on Extinguishment of Debt

For the three months ended ~~March 31,~~June 30, 2020, the Company recorded a loss on extinguishment of debt of ~~$74,164~~$37,429 related to the amendment and settlement of convertible notes payable. There ~~was no gain or loss on~~$689,991 extinguishment of debt during the three months ended ~~March 31,~~June 30, 2019.

Gain on Change in Fair Value of Derivative Liability

For the three months ended ~~March 31,~~June 30, 2020, the Company recorded a loss on the change in fair value of derivative liability of ~~$21,535~~$37,429 compared to a ~~gain~~loss of ~~$195,457~~$390,520 for the three months ended ~~March 31,~~June 30, 2019. In 2020 the loss resulted from the change in the convertibility of two convertible notes payable that were made in February and March 2020 and increase in the valuation of the related derivative liability based on the change in the market value of the Company’s common stock. The gain in 2019 was due to the decrease in the market value of the Company’s common stock between January 1, 2019, and March 31, 2019.

Income Taxes

For the three months ended ~~March 31,~~June 30, 2020, and 2019 the Company recorded no income tax provision due to a full valuation allowance provided on deferred tax assets resulting from net operating losses.

Net Loss Attributable to Noncontrolling Interests

For the three months ended ~~March 31,~~June 30, 2020, the Company recorded no income or loss attributable to noncontrolling interests as there was no activity in its 51%-owned subsidiary, Sweet Rock. There were no noncontrolling interests in 2019.

Liquidity and Capital Resources

As of ~~March 31,~~June 30, 2020, the Company had working capital of ($~~3,117,795)~~3,300,316). The Company had current assets of ~~$490,839,~~$1,215,178, consisting of cash and restricted cash of ~~$123,450,~~$31,245, accounts receivable (net) of ~~$6,738,~~$0, inventory of ~~$221,733,~~$149,940, and prepaid expenses and other current assets of ~~$138,918.~~$1,033,993. As of March 31, 2020, the Company had current liabilities of ~~$3,608,634,~~$4,515,494, consisting of accounts payable and accrued liabilities of ~~$1,275,362,~~$1,100,928, convertible notes payable (net) of ~~$1,015,967,~~$1,033,776, notes payable of $30,000, accrued interest of $90,551, deferred revenue of ~~$462,791,~~$445,925, and derivative liability of ~~$733,963.~~$413,678.

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Cash flows from operating activities

Net cash used in operating activities during the three months ended ~~March 31,~~June 30, 2020, was ~~$431,839~~$1,720,087 compared to ~~$1,350,130~~$2,045,372 used during the three months ended March 31, 2019. The change was principally driven by the reduced net loss and increase in accounts payable in 2020.

Cash flows from investing activities

Net cash provided by investing activities was ~~$1,209~~$1,549,025 during the three months ended ~~March 31,~~June 30, 2020. This represents the Company’s proceeds from the sale of miscellaneous office furnishings. There were no cash flows from investing activities during the three months ended ~~March 31,~~June 30, 2019.

Cash flows from financing activities

Net cash provided by financing activities during the three months ended ~~March 31,~~June 30, 2020, was ~~$486,000~~$3,717,947 compared to ~~$1,013,899~~$1,500,249 during the three months ended ~~March 31,~~June 30, 2019. During the three months ended March 31, 2020, the Company received proceeds of $275,000 from the issuance of convertible notes payable and $211,000 from the issuance of preferred stock. During the three months ended ~~March 31,~~June 30, 2019, the Company received proceeds from the issuance of common stock of ~~$1,017,046~~$1,139,173 and paid ~~$3,147~~$6,424 on notes payable.

Outstanding Material Indebtedness

Recently, the Company’s operations have been funded primarily through the private sales of common stock or the issuance of convertible promissory notes, which are currently convertible to common stock at a fixed prices ranging from $0.01 to $0.03 or at a discount to market price (as defined in the agreements) of 50%. As of ~~March 31,~~June 30, 2020, the Company had total notes payable outstanding of ~~$1,378,824,~~$1,607,158, less a discount of $332,857.

Known Trends and Uncertainties Expected to Have a Material Impact on Revenues

We expect our revenues to increase materially during the remainder of 2020 and in 2021, primarily due to anticipated sales of hand sanitizer. We also expect revenue growth from our HEMPd branded CBD-infused flavored waters and other HEMPd branded products.

Future Liquidity Requirements

The Company’s anticipated operational shortfall for the next twelve months is $1,500,000 to $2,000,000. We plan to utilize the SPA executed with GHS in June 2018, as well as bridge financing, to raise the required capital.

Off Balance Sheet Arrangements

As of ~~March 31,~~June 30, 2020, there are no off-balance sheet arrangements.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of ~~March 31,~~June 30, 2020, the Company has a shareholders’ deficit of ~~$3,068,124~~$1,709,064 and an accumulated deficit of ~~$41,264,767~~$42,471,932 and has generated operating losses since inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue raising capital.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~March 31,~~June 30, 2020. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, David Seeberger, and our Chief Financial Officer, Jens Mielke. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~March 31,~~June 30, 2020, our disclosure controls and procedures are not effective. There have been no changes in our internal controls over financial reporting during the three months ended ~~March 31,~~June 30, 2020.

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

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

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to our Annual Report on Form 10-K filed July 9, 2020, for information regarding our pending legal proceedings. There are no updates to the information disclosed in that filing.

Item 1A. Risk Factors

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

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

The following equity securities were issued between June 1, 2020 and September 2, 2020:

Date	Name	Shares Issued	Issue Price	Description	Exemption
7/15/2020	Brian Rose	854,701	$ 0.0234	Shares Sold	Rule 506
7/21/2020	Charles Smith	213,676	$ 0.0234	Shares Sold	Rule 506
7/28/2020	Lyon Pride Media, LLC	4,000,000	$ 0.02905	Legal Settlement	Rule 506
8/17/2020	Winton Morrison	213,676	$ 0.0234	Shares Sold	Rule 506

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~June 30, 2020 formatted in Extensible Business Reporting Language (XBRL)

910

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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.

Rocky Mountain High Brands, Inc.

Date: ~~September 10, 2020~~August 20, 2021

By: /s/ David Seeberger

David Seeberger

Title: President and Chief Executive Officer

Date: ~~September 10, 2020~~August 20, 2021

By: /s/ ~~Jens Mielke~~Charles Smith

~~Jens Mielke~~Charles Smith

Title: Chairman and Chief Operating Officer

Date: August 20, 2021

By: /s/ Wally Stock

Wally Stock

Title: Chief Financial Officer

1011

Balance, December 31, 2019	$	413,678
Issued during the three months ended March 31, 2020		298,750
Exercises/Conversions		—
Change in fair value recognized in operations		21,535
Balance, March 31, 2020	$	733,963

December 28, 2018 deposit received	$	466,300
December 2019 delivery		(20,375)
Balance as of December 31, 2019	$	445,925
January 30, 2020 deposit received		97,060
March 2020 deliveries		(80,194)
Balance as of March 31, 2020	$	462,791