| Nature of Operations and Summary of Significant Accounting Policies | Organization Freedom Leaf,
Inc. (the Company, we, us, our, or Freedom Leaf) was incorporated
in the State of Nevada on February 21, 2013, under the name of Arkadia International, Inc. The Company was originally engaged
in the business of the acquisition of in demand equipment, cars, and goods with the intent to resale these in the U.S. territory
or export to overseas countries. On October
3, 2014, the Company experienced a change in control. Richard C. Cowan acquired a majority of the issued and outstanding common
stock of the Company in accordance with stock purchase agreements by and between Mr. Cowan and Vladimir and Galina Shekhtman (Sellers).
On the closing date, October 3, 2014, pursuant to the terms of the Stock Purchase Agreement, Cowan purchased from the Sellers
6,950,100 shares of the Companys outstanding restricted common stock for $100,000, representing 93%. On November
6, 2014, the Company merged with Freedom Leaf, Inc., a private Nevada corporation. The Company changed its name from Arkadia International,
Inc., to Freedom Leaf, Inc. As a result of the merger, the private company was dissolved. See Note 2 for related discussion. For
financial reporting purposes, the Share Exchange represents a "reverse merger" rather than a business combination and
Private Company is deemed to be the accounting acquirer in the transaction. The Share Exchange is being accounted for as a reverse-merger
and recapitalization. Private Company is the acquirer for financial reporting purposes and the Public Company (Freedom Leaf, Inc.,
f/k/a Arkadia International, Inc.) is the acquired company. Consequently, the assets and liabilities and the operations that will
be reflected in the historical financial statements prior to the Share Exchange will be those of the Private Company and will
be recorded at the historical cost basis of the Private Company, and the financial statements after completion of the Share Exchange
will include the assets and liabilities of the Public Company and the Private Company, and the historical operations of Private
Company and operations of both companies from the closing date of the Share Exchange. Nature
of Operations We are currently
devoting substantially all of our efforts in migrating to the news, arts and entertainment niche, with both in print and online
publications. Principal business activities are still in the development stage and have not yet commenced. The Company will generate
revenue through paid advertising in publications, both print and online, in the cannabis/hemp marketplace. The Company will also
earn revenue from consulting companies who are in our industry, contracting with companies to brand, market, and sell their products
and/or services, provide seminars in this space, and sell branded products for the Company and others the Company represents. Basis
of Presentation The accompanying
unaudited financial statements of Freedom Leaf, Inc. have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. The results of operations
for the interim period ended September 30, 2015 shown in this report are not necessarily indicative of results to be expected
for the full fiscal year ending June 30, 2016. In the opinion of the Companys management, the information contained herein
reflects all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the Companys
results of operations, financial position and cash flows. The unaudited interim financial statements should be read in conjunction
with the audited financial statements in the Companys Form 10-K for the year ended June 30, 2015 filed on October 6, 2015
and Managements Discussion and Analysis of Financial Condition and Results of Operations. Impairment
of Long-Lived Assets The Company
accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards ASC 360-10, Accounting
for the Impairment or Disposal of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an
asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Fair
Value of Financial Instruments The Company
measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of our
financial instruments, including cash, accounts payable, accrued expenses, deposits received from customers for layaway sales
and short term loans the carrying amounts approximate fair value due to their short maturities. We follow
accounting guidance for financial and non-financial assets and liabilities. This standard defines fair value, provides guidance
for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but
rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply
to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable
market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the
service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: Level 1:
Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2:
Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level 3:
Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by
us, which reflect those that a market participant would use. We currently
measure and report at fair value our intangible assets (due to our impairment analysis) and derivative liabilities. The fair value
of intangible assets has been determined using the present value of estimated future cash flows method. The fair value of derivative
liabilities is measured using the Black-Scholes option pricing method. The following table summarizes our non-financial assets
and liabilities measured at fair value on a recurring basis as of September 30, 2015:
Quoted Prices in Significant
Balance at Active Markets Other Significant
September for Identical Observable Unobservable
30,
2015 Assets Inputs Inputs
(Level 1) (Level 2) (Level 3)
Assets:
Trademarks $ 5,892 $ $ $ 5,892
Total Financial Assets $ 5,892 $ $ $ 5,892 Following
is a summary of activity through September 30, 2015 of the fair value of intangible assets valued using Level 3 inputs:
Accumulated
Asset Amortization Net
Intangibles
- June 30, 2015 $ 4,913 $ (169 ) $ 4,744
Additions 1,230 1,230
Amortization (82 ) (82 )
Intangibles
- September 30, 2015 $ 6,143 $ (251 ) $ 5,892 The Company
evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components of
those contracts qualify as derivatives to be separately accounted for. The result of this accounting treatment is that under certain
circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the
event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other
income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion
date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become
subject to reclassification under this accounting standard are reclassified to liability at the fair value of the instrument on
the reclassification date. Stock-Based
Compensation The Company
accounts for stock-based instruments issued to employees in accordance with ASC Topic 718. ASC Topic 718 requires companies to
recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued
to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite
service periods using the straight-line attribution method. The Company accounts for non-employee share-based awards in accordance
with the measurement and recognition provisions ASC Topic 505-50. The Company estimates the fair value of stock options at the
grant date by using the Black-Scholes option-pricing model. Going
Concern The accompanying
unaudited 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. The Company sustained net losses of $144,166 and used cash in operating
activities of $76,861 for the three months ended September 30, 2015. The Company had working capital deficit, stockholders
deficiency and accumulated deficit of $109,094, $293,973 and $1,143,284, respectively, at September 30, 2015. These factors raise
substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Companys
continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment
capital and loans from third parties to sustain its current level of operations. The Company is in the process of securing working
capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that
the Company will be successful in these efforts. The financial
statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Use
of Estimates The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Significant estimates in the accompanying financial statements include
the amortization period for intangible assets, valuation and impairment valuation of intangible assets, depreciable lives of the
web site and property and equipment, valuation of warrants and beneficial conversion feature debt discounts, valuation of derivatives,
valuation of share-based payments and the valuation allowance on deferred tax assets. Reclassifications Certain amounts
in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications
had no effect on reported losses, total assets, or stockholders equity as previously reported. Development
Stage Company Since inception,
the Company became a development stage company as defined in the Financial Accounting Standards Boards (FASB)
Accounting Standards Codification (ASC) Topic 915 Development Stage Entities. On June 10, 2014 the
FASB issued authoritative guidance which eliminates the concept of a development stage entity. The incremental reporting requirements
for presenting the development stage operations and cash flows since inception will no longer apply to development stage entities.
The amendments of Topic 915 are to be applied retrospectively and are effective for fiscal years beginning after December 15,
2014. The Company has elected early adoption of this guidance effective with the filing of its previous quarterly report. On November
6, 2015, the Company merged with Freedom Leaf, Inc., a private Nevada corporation. The Company changed its name from Arkadia International,
Inc., to Freedom Leaf, Inc. As a result of the merger, the private company was dissolved. See Note 3 for related discussion. Net
Earnings (Loss) Per Share In accordance
with ASC 260-10, Earnings Per Share, basic net earnings (loss) per common share is computed by dividing the net
earnings (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings
(loss) per share are computed using the weighted average number of common and dilutive common stock equivalent shares outstanding
during the period. Segment
Information In accordance
with the provisions of ASC 280-10, Disclosures about Segments of an Enterprise and Related Information, the Company
is required to report financial and descriptive information about its reportable operating segments. The Company does not have
any operating segments as of September 30, 2015 and 2014. Effect
of Recent Accounting Pronouncements The Company
reviews new accounting pronouncements as issued. No new pronouncements had any material effect on these unaudited financial statements.
The accounting pronouncements issued subsequent to the date of these unaudited financial statements that were considered significant
by management were evaluated for the potential effect on these unaudited financial statements. Management does not believe any
of the subsequent pronouncements will have a material effect on these unaudited financial statements as presented and does not
anticipate the need for any future restatement of these unaudited financial statements because of the retro-active application
of any accounting pronouncements issued subsequent to September 30, 2015 through the date these unaudited financial statements
were issued. |
