| 1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Formation
and Business Activity
HealthTalk
Live, Inc. was formed on April 1, 2011 in the State of Nevada and operations commenced immediately. On August 10, 2017, the
Company amended is articles of incorporation and changed its name to Right On Brands, Inc. (“Right On Brands”)(“the
Company”)
Right
On Brands formerly HealthTalk Live, Inc. was created to spread the importance of natural health and wellness throughout North
America and the world. Since inception, the website HealthTalkLive.com has received visitors from North America, Canada, South
America, Europe, Asia and Australia. With its soon-to-be-launched real-time interactive website, HealthTalkLive.com anticipates
becoming one of the primary information websites available in the world. In partnership with naturopathic practitioners, dieticians
and medical doctors, HealthTalkLive.com strives to provide healthy options for all, whether taking prescription drugs or preferring
a total, natural health approach to well-being. Information is disseminated through the live chat forum, reference center,
news, E-newsletters and email. This provides for a common sense approach to health and wellness, diet, exercise, cleanses
and complete regimens, all created individually based upon each person’s unique requirements.
During
the year ended March 31, 2017, the Company acquired Humbly Hemp, Inc. as a wholly owned subsidiary and now operates in two
segments in accordance with accounting guidance Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment
Reporting. Our Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic
280.
Acquisition
of Humbly Hemp, Inc.
Effective
September 9, 2016, our former majority shareholders of Right On Brands, Inc. (“Right On Brands”), Johnie M. Yawn
and Vicki L. Yawn transferred 22,800,000 of their shares of Right on Brands’ common stock to Daniel Crawford for a purchase
price of $125,000 and pursuant to a Stock Purchase Agreement between the parties. The purchase price was paid by Mr. Crawford
in the form of Secured Promissory Note (the “Note”) in favor of Dr. and Mrs. Yawn. The Note is due in full on
or before December 9, 2016 and bears no interest except in case of default. The Note is secured, by a pledge of the shares
purchased, under the terms of a Securities Pledge Agreement (the “Pledge”) between the parties. As a result of
this transaction, a change in control of the company has occurred, and Mr. Crawford is the owner of approximately 70% of the
issued and outstanding common stock of Right On Brands. In connection with the change in control, Mr. Crawford was appointed
as our new sole officer and director. In the event of Mr. Crawford’s future uncured default under the Note, Dr. and
Mrs. Yawn would be entitled to foreclose on the shares purchased pursuant to the terms of the Pledge. There are no other arrangements
known to the company, the operation of which may, at a subsequent date, result in a change in control of the registrant.
On
October 1, 2016, Right On Brands entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Humbly
Hemp, Inc., a private Nevada corporation (“Humbly Hemp”), and our subsidiary formed for the purposes of the transaction,
Humble Merger Sub, Inc. (the “Merger Sub”). Pursuant to the Merger Agreement, Humbly Hemp merged with and into
the Merger Sub, which resulted in Humbly Hemp becoming our wholly-owned subsidiary (the “Acquisition”). Humbly
Hemp is a start-up company planning to offer a line of energy and snack bars featuring all-natural hemp and other healthy
ingredients. Going forward, we intend to continue developing the business of Humbly Hemp, as well as our existing line of
business. The sole officer, director, and controlling shareholder of Humbly Hemp was our own CEO and controlling shareholder,
Daniel Crawford.
In
addition, pursuant to the terms and conditions of the Merger Agreement:
- The
holders of all of the common stock of Humbly Hemp issued and outstanding immediately prior to the closing of the Acquisition
exchanged their shares on a pro-rata basis for a total of 12,048,000 shares newly-issued shares of Right on Brands’
common stock.
- Daniel Crawford,
the holder of 10,000,000 shares of Series A Preferred Stock in Humbly Hemp, exchanged all of his shares of preferred stock
in Humbly Hemp for 5,000,000 shares of our newly-designated Series A Preferred Stock in Right On Brands. Our new Series A
Preferred Stock is convertible to Right On Brands’ common stock at a rate of five (5) shares for every share held and
votes together with our common stock at a rate of sixteen (16) votes for every share held. The Series A Preferred Stock ranks
equally, on an as-converted basis, to our common stock with respect to rights upon winding up, dissolution, or liquidation.
The Series A Preferred Stock does not have any special dividend rights.
- Right On Brands
assumed certain outstanding Convertible Promissory Notes issued by Humbly Hemp, and agreed that such notes shall be convertible
to Right On Brands’ common stock at the same prices, and on the same terms and conditions, as set forth therein.
Upon the closing
of the share exchange with the Right On Brands and Humbly Hemp, Humbly Hemp will become a wholly owned subsidiary of the Company.
The acquisition will be treated as a business combination. However, since Humbly Hemp was owned and controlled by Daniel Crawford,
an officer and director of the Company, the assets will not be adjusted to fair value and will carry over as book value.
The Company may
be subject to segment reporting in accordance with ASC 280-10 in future filings.
Addition of New
Wholly Owned Subsidiary, Humble Water Company
On May 11, 2017,
the Company formed a wholly owned subsidiary, Humble Water Company. (“Humble”) Humble was formed to handle the
joint venture with Spring Hill Water Co. As of March 31, 2018, the Company has invested $101,470 in the joint venture and
no significant activity has occurred during the year ended March 31, 2018.
Addition of New
Wholly Owned Subsidiary, Endo Brands, Inc.
On June 27,
2017, the Company formed a wholly owned subsidiary, Endo Brands, Inc. (“Endo”). Endo Brands will have products
in the CBD and hemp oil marketplace. During the year ended March 31, 2018, the Company launched Endo Water, a wellness drink
that is infused with CBD.
Principles of
Consolidation
The consolidated
financial statements of the Company include the accounts of Right On Brands, Inc. and its wholly owned subsidiaries and majority
owned business (Humbly Hemp, Inc., Endo Brands, Inc., Humble Water Company and Springhill Water Co). Intercompany accounts
and transactions have been eliminated upon consolidation.
Cash and Cash
Equivalents
The Company considers
all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Property and
Equipment
Property and equipment
are stated at cost. Depreciation is provided by the straight-line method over the useful lives of the related assets, from
three to five years.
The cost of building
the Company’s website has been capitalized and amortized over a period of three years. Expenditures for minor enhancements
and maintenance are expensed as incurred.
Inventory
Inventories are
stated at the lower of cost (average cost) or market (net realizable value). Inventory consists of raw materials, work in
process inventory and finished goods inventory of $0, $0 and $14,044, respectively as of March 31, 2018. Inventory consists
of raw materials, work in process inventory and finished goods inventory of $26,144, $0 and $0, respectively as of March 31,
2017.
Use of Estimates
The preparation
of consolidated statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Long-lived Assets
The Company’s
long-lived assets and other assets (consisting of property and equipment) are reviewed for impairment in accordance with the
guidance of the FASB Topic ASC 360,” Property, Plant, and Equipment”, and FASB ASC Topic 205 “ Presentation
of Financial Statements “. The Company tests for impairment losses on long-lived assets used in operations whenever
events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of
an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash
flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the asset exceeds its fair value. Impairment evaluations involve management’s
estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated
by management which could have a material effect on our reporting results and financial positions. Fair value is determined
through various valuation techniques including discounted cash flow models, quoted market values and third-party independent
appraisals, as considered necessary. Through March 31, 2018 and 2017, the Company had not experienced impairment losses on
its long-lived assets. However, there can be no assurances that demand for the Company’s products or services will continue,
which could result in an impairment of long-lived assets in the future.
Stock Based Compensation
The Company accounts
for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with
FASB ASC 505-50. Costs are measured at the estimated fair market value
of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.
The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance
commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.
Revenue Recognition
The Company expects
to recognize revenues in accordance with the guidelines of the Securities and Exchange Commission (“SEC”) Staff
Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition”.
Under SAB 104, four
conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an arrangement exists, (ii)
delivery has occurred or service has been rendered, (iii) the price is fixed or determinable, and (iv) collection is reasonably
assured.
Revenue was recorded
when the products were shipped to the customers.
Income Taxes
The Company is subject
to income taxes in the U.S. Significant judgment is required in evaluating our uncertain tax positions and determining our
provision for income taxes. In accordance with FASB ASC Topic 740, “Income Taxes,” the Company provides for the
recognition of deferred tax assets if realization of such assets is more likely than not. The Company accounts for income
tax under the provisions of FASB ASC Topic 740, “Income Taxes”, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of the events that have been included in the consolidated financial
statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and
consolidated financial statements bases of assets and liabilities. Valuation allowances are established against net deferred
tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Fair Value of
Financial Instruments
The Company applies
the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial
instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to
estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged
in a current transaction between willing parties. As of March 31, 2018 and 2017 the fair value of cash and accounts payable,
approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate
with market rates.
Convertible
Instruments
The Company evaluates
and account for conversion options embedded in convertible instruments in accordance with ASC 815 “ Derivatives and
Hedging Activities
Applicable GAAP
requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative
financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks
of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract
is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a
separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts
for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from
their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value
of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common
stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts
under these arrangements are amortized over the term of the related debt to their stated date of redemption.
Recent Accounting
Pronouncements
The Company has
evaluated new accounting pronouncements that have been issued and are not yet effective for the Company and determined that
there are no such pronouncements expected to have an impact on the Company’s future consolidated financial statements. |
