Colorado
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20-8980078
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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Incorporation or organization)
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1350 Independence St., Suite 300
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Lakewood, CO
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80215
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer ☐
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Accelerated filer
☐
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Non-accelerated filer ☐
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Smaller reporting
company ☒
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Emerging growth company ☒
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Page
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PART I - FINANCIAL INFORMATION
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|
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Item 1 - Financial Statements
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3
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|
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Item 2 - Management's Discussion and Analysis of Financial Condition and Results of
Operations
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16
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Item 3 – Quantitative and Qualitative disclosures about market risk
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20
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Item 4 – Controls and Procedures
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20
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PART II - OTHER INFORMATION
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Item 1 – Legal Proceedings
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20
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Item 2 – Unregistered sales of equity securities and use of proceeds
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20
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Item 6 – Exhibits
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21
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SIGNATURES
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22
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STWC HOLDINGS, INC.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited)
|
For the Three Months Ended
April 30,
|
||||||||
2019
|
2018
|
|||||||
Consulting services
|
$
|
20,545
|
$
|
43,813
|
||||
Product sales
|
9,822
|
-
|
||||||
Cost of consulting services
|
(11,467
|
)
|
(10,000
|
)
|
||||
Gross profit
|
18,900
|
33,813
|
|
|||||
Operating costs and expenses
|
||||||||
Rents and other occupancy
|
17,963
|
12,516
|
||||||
Compensation
|
162,892
|
146,204
|
||||||
Professional, legal and consulting
|
114,977
|
49,896
|
||||||
General and administrative
|
60,960
|
52,511
|
||||||
Depreciation and amortization
|
584
|
435
|
||||||
Total operating costs and expenses
|
357,376
|
261,562
|
||||||
Other income (expense)
|
||||||||
Interest expense
|
(67,602
|
)
|
(612
|
)
|
||||
Impairment on investment
|
(2,739
|
)
|
-
|
|||||
Loss on investment in affiliate
|
(22,667
|
)
|
-
|
|||||
Total other income (expense)
|
(93,008
|
)
|
(612
|
)
|
||||
Loss from operations, before provision for taxes on income
|
(431,484
|
)
|
(228,361
|
)
|
||||
Provision for taxes on income
|
-
|
-
|
||||||
Net income/(loss)
|
$
|
(431,484
|
)
|
$
|
(228,361
|
)
|
||
Basic earnings and fully diluted income (loss) per common share
|
||||||||
Continuing operations
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$
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(0.01
|
)
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$
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(0.01
|
)
|
||
Basic and fully diluted weighted average number of shares outstanding
|
||||||||
29,275,708
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27,140,550
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See accompanying notes.
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STWC HOLDINGS, INC.
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|
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
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(Unaudited)
|
|
For the three months ended April 30,
|
||||||||
2019
|
2018
|
|||||||
Cash flows from operating activities:
|
||||||||
Net Loss
|
$
|
(431,484
|
)
|
$
|
(228,361
|
)
|
||
Depreciation and amortization
|
584
|
435
|
||||||
Accretion of debt discount
|
40,909
|
-
|
||||||
Loss from equity investment in unconsolidated subsidiary
|
22,667
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-
|
||||||
Stock based compensation
|
13,181
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-
|
||||||
Changes in assets and liabilities
|
||||||||
Accounts receivable
|
(58
|
)
|
5,000
|
|||||
Inventory
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(11,024
|
)
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(17,377
|
)
|
||||
Right-of-use asset
|
272
|
-
|
||||||
Notes receivable, related party
|
(128,350
|
)
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(10,000
|
)
|
||||
Prepaid expenses and other assets
|
4,205
|
(6,158
|
)
|
|||||
Accounts payable
|
66,517
|
85,440
|
||||||
Accrued expenses
|
58,733
|
81,231
|
||||||
Deferred revenue
|
-
|
53,687
|
||||||
Net cash flow used in operating activities
|
(363,848
|
)
|
(36,103
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchase of fixed assets
|
(8,751
|
)
|
-
|
|||||
Net cash flow used in investing activities
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(8,751
|
)
|
-
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of stock
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80,000
|
-
|
||||||
Proceeds from debt
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150,000
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-
|
||||||
Proceeds from related party loans
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14,369
|
8,765
|
||||||
Proceeds from related party loans, restricted cash
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175,000
|
-
|
||||||
Net cash flows from financing activities
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419,369
|
8,765
|
||||||
Net cash flows
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46,770
|
(27,338
|
)
|
|||||
Cash and equivalent, beginning of period
|
2,965
|
27,925
|
||||||
Cash and equivalent, end of period
|
$
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49,735
|
$
|
587
|
||||
Supplemental cash flow disclosures:
|
||||||||
Cash paid for interest
|
$
|
223
|
$
|
513
|
||||
Cash paid for income taxes
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$
|
-
|
$
|
-
|
||||
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STWC HOLDINGS, INC.
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|
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STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICT)
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|
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(Unaudited)
|
|
Three Months Ended April 30,
|
||||
2019
|
2018
|
|||
Common stock and paid-in capital
|
||||
Balance, beginning of period
|
$ 7,238,699
|
$ 5,325,684
|
||
Common stock issued
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41,353
|
-
|
||
Warrants granted
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38,647
|
-
|
||
Stock-based compensation
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13,181
|
-
|
||
Balance, end of period
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$ 7,331,880
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$ 5,325,684
|
||
Retained Earnings
|
||||
Balance, beginning of period
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$(8,440,108)
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$(6,164,832)
|
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Net Loss
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(431,484)
|
(228,361)
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||
Balance, end of period
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$(8,871,592)
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$(6,393,193)
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||
Total stockholders’ deficit
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$(1,539,712)
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$(1,067,509)
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April 30, 2019
|
January 31, 2019
|
|||||||
Leasehold improvements
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$
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10,951
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$
|
2,200
|
||||
Office equipment, furniture and fixtures
|
26,276
|
26,276
|
||||||
37,227
|
28,476
|
|||||||
Accumulated amortization and depreciation
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(25,960
|
)
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(25,709
|
)
|
||||
$
|
11,267
|
$
|
2,767
|
|||||
Trademarks
|
April 30,
2019
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January
31, 2019
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Gross carrying amount
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$ 13,260
|
$ 13,260
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Accumulated amortization
|
4,141
|
3,808
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Net intangible assets
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$ 9,119
|
$ 9,452
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2019
|
2018
|
|||||||
Hourly fee contracts
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$
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-
|
$
|
-
|
||||
Fixed fee contracts
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19,500
|
42,500
|
||||||
Monthly fee contracts
|
1,045
|
1,313
|
||||||
$
|
20,545
|
$
|
43,813
|
Level 1:
|
Quoted prices in active markets for identical assets or liabilities.
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Level 2:
|
Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.
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Level 3:
|
Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
|
For the Fiscal Year Ending
January 31,
|
||||
2020
|
41,227
|
|||
2021
|
56,250
|
|||
2022
|
42,750
|
|||
Thereafter
|
—
|
|||
Total minimum lease payments
|
$
|
140,227
|
|
|
Number of Warrants
|
|
Exercise Price
|
|
Wtgd Avg Calculation
|
|
Wtgd Avg Remining Life
|
Balance at 1/31/2018
|
|
2,224,700
|
|
$ 5.00
|
|
$ 11,123,500
|
|
1.00
|
|
|
|
|
|
|
|
|
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Granted
|
|
2,000,000
|
|
0.16
|
|
$ 322,000
|
|
|
Exercised
|
|
(311,000)
|
|
0.16
|
|
$ (49,650)
|
|
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Cancelled
|
|
(2,013,700)
|
|
5.00
|
|
$ (11,091,850)
|
|
|
|
|
|
|
|
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Balance at 1/31/2019
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1,900,000
|
|
$ 0.16
|
|
$ 304,000
|
|
1.71
|
|
|
|
|
|
|
|
|
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Granted
|
|
80,000
|
|
2.00
|
|
$ 160,000
|
|
|
Exercised
|
|
-
|
|
-
|
|
-
|
|
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Cancelled
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 4/30/19
|
|
1,980,000
|
|
$ 0.23
|
|
$ 464,000
|
|
1.52
|
Expected term (years)
|
5
|
Risk-free interest rate
|
2.73%
|
Volatility
|
218%
|
Expected dividend yield
|
0.00%
|
ITEM 2. |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
·
|
Opportunity Assessment:
For a standard fee,
we will complete an Opportunity Assessment for a client, which would include financial modeling, completed with our proprietary assessment software.
|
·
|
Application Filing Assistance: Based upon our knowledge of the various rules and regulations of respective state and local
jurisdictions, we will provide turn-key application preparation and submission services for a client, and/or provide consulting assistance to a client who is self-preparing their application.
|
·
|
Branding, Marketing and Administrative Consulting Services: Customers may contract with us to use the Strainwise name, logo and
affinity images in their retail store locations. A monthly fee will permit a branding customer to use the Strainwise brand at a specific location. In addition, we will assist operators in marketing and managing their businesses, setting
up new retail locations and general business planning and execution at an hourly rate. This includes services to establish an efficient, predictable production process, as well as, nutrient recipes for consistent and appealing marijuana
strains.
|
·
|
Accounting and Financial Services: For a monthly fee, we will provide customers with a fully implemented general ledger system,
with an industry centric chart of accounts, which enables management to readily monitor and manage all facets of a marijuana medical dispensary and cultivation facility. We will provide bookkeeping, accounts payable processing, cash
management, general ledger processing, financial statement preparation, state and municipal sales tax filings, and state and federal income tax compilation and filings.
|
·
|
Compliance Services: The rules, regulations and state laws governing the production, distribution and retail sale of marijuana
can be complex, and compliance may prove cumbersome. Thus, customers may contract with us to implement a compliance process, based upon the number and type of licenses and permits for their specific business. We will provide this
service on both an hourly rate and stipulated monthly fee.
|
·
|
Lending: We will provide loans to individuals and businesses in the cannabis industry.
|
|
For the three months ended
|
|||||||||||||||
|
April 30,
|
|||||||||||||||
|
2019
|
2018
|
Change
|
|||||||||||||
Consulting services
|
$
|
20,545
|
$
|
43,813
|
$
|
(23,268
|
)
|
-53
|
%
|
|||||||
Product sales
|
9,822
|
-
|
9,822
|
100
|
%
|
|||||||||||
Cost of consulting services
|
(11,467
|
)
|
(10,000
|
)
|
(1,467
|
)
|
-15
|
%
|
||||||||
Gross profit
|
18,900
|
33,813
|
(14,913
|
)
|
-44
|
%
|
||||||||||
Operating costs and expenses
|
||||||||||||||||
Rents and other occupancy
|
17,963
|
12,516
|
5,447
|
44
|
%
|
|||||||||||
Compensation
|
162,892
|
146,204
|
16,688
|
11
|
%
|
|||||||||||
Professional, legal and consulting
|
114,977
|
49,896
|
65,081
|
130
|
%
|
|||||||||||
General and administrative
|
60,960
|
52,511
|
8,449
|
16
|
%
|
|||||||||||
Depreciation and amortization
|
584
|
435
|
149
|
34
|
%
|
|||||||||||
Total operating costs and expenses
|
357,376
|
261,562
|
95,814
|
37
|
%
|
|||||||||||
Other income (expense)
|
||||||||||||||||
Interest expense
|
(67,602
|
)
|
(612
|
)
|
(66,990
|
)
|
10946
|
%
|
||||||||
Impairment on investment
|
(2,739
|
)
|
-
|
(2,739
|
)
|
100
|
%
|
|||||||||
Loss on investment in affiliate
|
(22,667
|
)
|
-
|
(22,667
|
)
|
-100
|
%
|
|||||||||
Total other income (expense)
|
(93,008
|
)
|
(612
|
)
|
(92,396
|
)
|
15097
|
%
|
||||||||
Loss from continuing operations, before provision for taxes on income
|
(431,484
|
)
|
(228,361
|
)
|
(203,123
|
)
|
89
|
%
|
||||||||
Provision for taxes on income
|
-
|
-
|
-
|
0
|
%
|
|||||||||||
Net income (loss)
|
$
|
(431,484
|
)
|
$
|
(228,361
|
)
|
$
|
(203,123
|
)
|
89
|
%
|
·
|
Professional,
legal, and consulting
– Professional legal and accounting/consulting services increased during the year due to additional resources used for compliance.
|
·
|
Interest
expense
– Interest increased as a result of new debt arrangements during the periods, in addition to the amortization of the debt discount in the amount of $40,909.
|
For the three months
ended April 30,
|
||||||||
2019
|
2018
|
|||||||
Consolidated Statements of Cash Flows Data:
|
||||||||
Net cash used in operating activities
|
$
|
(363,848)
|
$
|
(36,103
|
)
|
|||
Net cash used in investing activities
|
(8,751)
|
-
|
||||||
Net cash provided by financing activities
|
419,369
|
8,765
|
||||||
Net change in cash
|
$
|
46,770
|
$
|
(27,338
|
)
|
ITEM 3.
|
QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|
(1) |
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|