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GL Brands, Inc. – ‘10-Q/A’ for 9/30/19

On:  Thursday, 9/10/20, at 6:11pm ET   ·   As of:  9/11/20   ·   For:  9/30/19   ·   Accession #:  1683168-20-3095   ·   File #:  0-55687

Previous ‘10-Q’:  ‘10-Q’ on 1/31/20 for 9/30/19   ·   Latest ‘10-Q’:  This Filing   ·   14 References:   To:  GL Brands, Inc. – ‘8-K’ on 11/26/19 for 11/20/19 To:  GL Brands, Inc. – ‘8-K’ on / for 11/18/19 To:  GL Brands, Inc. – ‘8-K’ on 9/26/19 for 9/24/19 To:  GL Brands, Inc. – ‘8-K’ on 8/29/19 for 8/28/19 To:  GL Brands, Inc. – ‘8-K’ on 6/4/19 for 5/31/19 To:  GL Brands, Inc. – ‘8-K’ on 5/24/19 for 5/21/19 To:  GL Brands, Inc. – ‘8-K’ on 10/3/18 for 9/28/18 To:  GL Brands, Inc. – ‘8-K’ on 8/21/18 for 7/26/18 To:  GL Brands, Inc. – ‘8-K’ on 3/8/18 for 3/6/18 To:  GL Brands, Inc. – ‘8-K’ on 2/7/18 for 1/5/18 To:  GL Brands, Inc. – ‘8-K’ on 5/31/17 for 5/30/17 To:  GL Brands, Inc. – ‘8-K’ on 6/9/16 for 5/25/16 To:  GL Brands, Inc. – ‘8-K’ on 2/25/15 for 2/24/15 To:  GL Brands, Inc. – ‘S-1’ on 7/22/13 

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 9/11/20  GL Brands, Inc.                   10-Q/A      9/30/19    5:467K                                   GlobalOne Filings Inc/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q/A      Amendment No. 1                                     HTML    242K 
 2: EX-31.1     Certification of Principal Executive Officer        HTML     11K 
 3: EX-31.2     Certification of Principal Financial Officer        HTML     10K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML      6K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML      6K 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

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

For the quarterly period ended September 30, 2019

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

For the transition period from _________ to _________

Commission File Number: 000-55687

GL BRANDS, INC.

(Exact name of Registrant as specified in its charter)

3939 Beltline Road, Suite 350

Addison, Texas 75001

888-811-4367

(Registrant’s telephone number)

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

Indicate 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. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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 ☐ No ☒

As January 28, 2020, there were 595,261,939 shares of common stock, par value $0.001 per share issued, issuable, and outstanding.

EXPLANATORY NOTE

The purpose of this amendment to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, originally filed with the Securities and Exchange Commission on January 31, 2020 (the “Quarterly Report”), is to (i) revise the disclosure in Part II, Item 1, Legal Proceedings of the Quarterly Report as required by a settlement agreement, and (ii) revise the disclosure in Part I, Item 4, Controls and Procedures of the Quarterly Report to provide additional disclosure regarding management’s evaluation of its disclosure controls and procedures pursuant to a comment from the Securities and Exchange Commission in a letter to the registrant dated March 11, 2020. No other changes have been made to the Quarterly Report.

Except as set forth above, this amendment speaks as of the original filing date of the Quarterly Report, does not reflect events that may have occurred subsequent to the original filing date and does not modify or update in any way disclosures made in the Quarterly Report. Pursuant to Rule 406T of Regulation S–T, interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

GL BRANDS, INC.

FORM 10-Q

SEPTEMBER 30, 2019

INDEX

PART I. FINANCIAL INFORMATION

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

GL BRANDS, INC.

(fka Freedom Leaf Inc.)

Condensed Consolidated Balance Sheets

See accompanying notes to unaudited condensed consolidated financial statements.

GL BRANDS, INC.

(fka Freedom Leaf Inc.)

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

GL BRANDS, INC.

(fka Freedom Leaf Inc.) 

Condensed Consolidation Statements of Stockholders' Equity

For the Three Months Ended September 30, 2019

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

GL BRANDS INC.

(fka Freedom Leaf Inc.)

Condensed Consolidated Statements of Stockholders' Equity

For the Three Months Ending September 30, 2018

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

GL BRANDS, INC.

(fka Freedom Leaf Inc.) 

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended September 30,

(Unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

GL Brands, Inc.

(fka Freedom Leaf Inc.)

Notes to Condensed Consolidated Financial Statements

September 30, 2019

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Company was incorporated in the State of Nevada on February 21, 2013. On May 31, 2019, Freedom Leaf Inc. closed the purchase of ECS Labs LLC (the Green Lotus Companies), a Texas limited liability company. ECS Labs LLC wholly owns two subsidiaries: B&B Labs, LLC, a Texas limited liability company, and Texas Wellness Center, LLC, a Texas limited liability company.

On November 20, 2019, the Company changed its name to “GL Brands, Inc.” by filing Articles of Merger merging a newly formed Nevada subsidiary, GL Brands Name Change Subsidiary, Inc., into the registrant as permitted by Section 92A.180(5) of the Nevada Revised Statutes. The Company has filed an Issuer Company-Related Notification Form with the Financial Industry Regulatory Authority, Inc. (FINRA) to affect the name change and a corresponding ticker symbol change.

GL Brands, Inc. (fka Freedom Leaf Inc.) is an audited and reporting public company traded under the symbol (OTC Pink: FRLF) with corporate headquarters located at 3939 Beltline Road, Suite 350, Addison, Texas 75001.

Nature of Operations

GL Brands, Inc. (OTC Pink: FRLF) is a global hemp consumer packaged goods house of brands that creates authentic, enduring and culturally relevant brands engaged in the development and sale of hemp derived products.

Through its premier brands Green Lotus™ and IrieCBD™, GL Brands, Inc. delivers a full portfolio of hemp-derived CBD products, including tinctures, softgels, gummies, sparkling beverages, vapes, flower, pre-rolls and topical segments to promote greater wellness and balance, in the U.S. and throughout the world. Our vision is a 21^st century shaped by the acceptance of cannabis as a force for personal, economic, and environmental renewal.

Basis of Presentation

The Company prepares its consolidated financial statements in conformity with generally accepted accounting principles in the United States of America. The unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of such statements. These unaudited condensed consolidated financial statements have been prepared in accordance with GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Additionally, the results of operations for the three months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the entire year. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended June 30, 2019.

Principles of Consolidation

The Company consolidates any variable interest entities of which it is the primary beneficiary. Equity investments through which the Company exercises significant influence over but does not control the investee and is not the primary beneficiary of the investee’s activities are accounted for using the equity method. Investments through which the Company is not able to exercise significant influence over the investee and which do not have readily determinable fair values are accounted for under the cost method. All material inter-company accounts have been eliminated in the consolidation.

Use of Estimates

The preparation of consolidated 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 consolidated 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 consolidated 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.

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. The Company recorded a loss on impairment of assets of $0 and $780,884 for the 3-month period ended September 30, 2019 and year ended June 30, 2019, respectively.

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, 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.

Revenue Recognition

On July 1, 2018, the Company adopted Topic 606. The Company elected to use the modified retrospective approach for contracts that were not completed as of July 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented in accordance with Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting method under Topic 605. As a result of applying the new standard, there were no changes to any financial statement line items.

Performance Obligations. Our performance obligations include providing product and servicing our product. The Company recognizes product revenue performance obligations in most cases when the product is delivered to the customer. Occasionally, the Company ships product on a customer’s account. On these occasions, revenue is recognized when the product has been shipped. At that point in time, the control of the product is transferred to the customer. The Company does not engage in transactions for services or in transactions acting as an agent. The Company typically satisfies its performance obligations within a few months of entering the contract. Depending on the size of the project, the performance obligations could be satisfied sooner or later.

The Company’s sole revenue type going forward is product sales, through its primary brands Green Lotus™ Hemp and IRIE™.

Significant Judgements. For many revenue contracts, the Company invoices the customer when the performance obligation is satisfied, and payment is due 30 days later. Occasionally, other terms such as progress billings or longer terms are agreed to on a case-by-case basis. The Company does not have significant financing components, non-cash consideration, or variable consideration. The Company estimates the transaction price between performance obligations based on stand-alone product prices. The Company elected the practical expedient by which disclosures are not required regarding the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.

Revenue was $2,121,508 for the three months ended September 30, 2019, compared to $608,658 for the three months ended September 30, 2018. Disaggregated Revenue, by class, is as follows:

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. Dilutive common stock equivalent shares that may dilute future earnings per share consist of warrants to purchase 47,644,444 shares of common stock at September 30, 2019. Equivalent shares are not utilized when the effect is anti-dilutive.

Going Concern

The accompanying consolidated 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 had revenue of $2,121,508 and net losses attributable to common stockholders of $14,512,256 for the 3 months ended September 30, 2019, compared to revenue of $608,658 and net losses attributable to common stockholders of $1,111,766 for the 3 months ended September 30, 2018. The Company had a working capital deficit, stockholders’ equity, and accumulated deficit of $9,696,055, $6,023,283 and $36,835,479, respectively, at September 30, 2019. These factors raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The Company is highly dependent on its ability to continue to obtain investment capital from future funding opportunities to fund the current and planned operating levels. The consolidated 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. The Company’s continuation as a going concern is dependent upon its ability to successfully engage in income generating activities and its ability to continue receiving investment capital from future funding opportunities. No assurance can be given that the Company will be successful in these efforts. Please see Note 11 - Subsequent Events, for information regarding a $5,000,000 capital raise completed by the Company on November 18, 2019.

Reclassification of Certain Expenses

The results of operations as of September 30, 2019 were not prepared on a consistent basis with prior periods. The results of operations in this filing were prepared classifying appropriate expenses as cost of goods sold (“COGS”). The term COGS refers to the direct costs of producing the products sold by the Company. The Company has elected to reflect COGS in order to accurately state inventory value and gross margin. Further, this change is reflective of the Company’s transition to a product-based business. Previously, these costs were presented as direct costs of revenue. The result of this presentation method change results in no change to the net income, and no pro forma financial information is necessary.

The Company has evaluated all recent accounting pronouncements and determined that the adoption of pronouncements applicable to the Company has not had or is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

NOTE 2 – INVENTORY

Inventories at September 30, 2019 and June 30, 2019 consisted of the following:

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2019 and June 30, 2019 consisted of the following:

The depreciation expense for the three months ended September 30, 2019 and 2018, was $4,724 and $143,619, respectively.  

NOTE 4 – INTANGIBLE ASSETS

Intangible assets at September 30, 2019 and June 30, 2019 consisted of the following:

Amortization expense for the three months ended September 30, 2019 and 2018 was $98,890 and $219,265 respectively.

The following table presents the amortization for the next five years:

NOTE 5 – BUSINESS COMBINATIONS

ECS Labs, LLC Acquisition

On May 31, 2019, the Company closed the acquisition of Dallas, Texas based ECS Labs LLC (the “Acquisition”), including its two-wholly owned operating subsidiaries, B&B Labs, LLC and Texas Wellness Center, each a Texas limited liability company, which constitute the “Green Lotus” premium hemp CBD products brand.

Green Lotus™ Hemp (“Green Lotus™”) is a rapidly growing premium hemp products brand that manufactures and distributes premium cannabinoid products including tinctures, gel caps, edibles, topicals, vape cartridges, and beverages made from organic industrial hemp. Green Lotus™ has grown rapidly since its inception in 2016 and now has a national presence in over 1,700 locations in the U.S. and is a first mover in the Mexican CBD market, with 3,000 points of initial distribution.

The Company has performed a valuation analysis of the fair market value of ECS Labs, LLC assets and liabilities. The provisional fair value of the purchase consideration issued to the sellers of ECS, Labs LLC was allocated to the net tangible assets acquired. We accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting. The assets and liabilities acquired were recorded as of the acquisition date at their respective fair values and consolidated with those of our company. The excess of the aggregate fair value of the net tangible assets has been allocated to an intangible asset, value of customer accounts and the remainder to goodwill. The purchase price allocation was based, in part, on management’s knowledge of ECS Labs, LLC business and is preliminary. Once we complete our analysis to finalize the purchase price allocation, which includes finalizing the valuation report from a third-party appraiser and a review of potential intangible assets, it is reasonably possible that, there could be significant changes to the preliminary values below.

The provisional purchase price was allocated as follows:

Revenue recognized by ECS Labs, LLC from acquisition through September 30, 2019 was $2,047,479.

The following table summarizes our consolidated results of operations for the 3 months ended September 30, 2019, and 2018, as well as unaudited pro forma consolidated results of operations for the 3 months ended September 30, 2018 as though each acquisition had occurred on July 1, 2018.

The unaudited pro forma information set forth above is for informational purposes only and includes adjustments related to the step-up of acquired inventories, amortization expense of acquired intangible assets, and interest expense on long-term debt. The pro forma information should not be considered indicative of actual results that would have been achieved if each acquisition had occurred on July 1, 2018, or results that may be obtained in any future period.

The goodwill arising from the acquisitions discussed above consists largely of the synergies and economies of scale we hope to achieve from combining the acquired assets and operations with our historical operations.

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than disclosed herein, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

In May 2019, the Company received a demand letter from a former employee for employment-related claims, but this individual has since signed an agreement waiving all claims. In December 2019, the Company received a demand letter from a former employee for employment-related claims. This claim is being disputed.

On or about June 20, 2019, a former Company consultant, Richard Bolandz, filed a complaint against the Company in the District Court for Clark County, Nevada (Richard A. Bolandz, individually and d/b/a International Consultants Consortium LLC v. Freedom Leaf Inc., Case No. A-19-797130-C, Dept. No. XXVII), alleging that the Company breached its consulting agreement with Mr. Bolandz by attempting to terminate the agreement improperly and failing to pay Mr. Bolandz amounts due thereunder, and seeking an award of monetary damages in excess of $15,000 as well as recovery of attorney fees. On or about August 8, 2019, the Company answered the complaint and filed a counterclaim against Mr. Bolandz, alleging that Mr. Bolandz breached the consulting contract by repeatedly missing deadlines, delivering unusable work product, and acting in an unprofessional manner including showing up at the Company’s office intoxicated. The Company is seeking an award of monetary damages in an amount to be determined at trial along with attorney fees. The parties are currently scheduling a settlement conference regarding the matter. 

NOTE 7 – RELATED PARTIES

Carlos Frias, CEO and Director of the Company, has promissory notes payable to him in the amount of $57,041 for various expense reimbursements and they are reflected as liabilities on the financial statements as of September 30, 2019 and June 30, 2019. Mr. Frias also has $2,400,000 in cash incentives as part of his employment agreement in conjunction with the acquisition of ECS Labs, subject to his continued provision of services to the Company. Imputed interest is immaterial. All payment obligations related to this employment agreement have been deferred until June 1, 2020.

Alexandro Frias, VP of Finance of the Company, has $1,600,000 in cash incentives as part of his employment agreement in conjunction with the acquisition of ECS Labs, subject to his continued provision of services to the Company. Imputed interest is immaterial. All payment obligations related to this employment agreement have been deferred until June 1, 2020.

Ngoc “Daniel” Quong Nguyen, CSO and Director of the Company, has promissory notes payable to him in the amount of $203,269 for various expense reimbursements and asset purchases and they are reflected as liabilities on the financial statements as of September 30, 2019 and June 30, 2019. Mr. Nguyen also has $2,400,000 in cash incentives as part of his employment agreement in conjunction with the acquisition of ECS Labs, subject to his continued provision of services to the Company. Imputed interest is immaterial. All payment obligations related to this employment agreement have been deferred until June 1, 2020.

NOTE 8 – NOTES PAYABLE

Notes payable as of September 30, 2019 and June 30, 2019 consist of the following:

NOTE 9 – STOCKHOLDERS’ EQUITY

Series A Preferred Stock

On May 24, 2016, the Board of Directors of the Company authorized amending the Company’s Articles of Incorporation to authorize 10,000,000 shares of “blank check” preferred stock and designate 1,000,000 of the shares as Series A preferred stock. Each share of the Series A preferred stock is entitled to 500 votes and is convertible into 100 shares of common stock.

As of September 30, 2019, there were no shares of Series A issued and outstanding. On August 27, 2019 Clifford Perry and Richard Cowan converted 684,012 and 264,010 Series A shares, respectively, in to 68,401,200 and 26,401,000 shares of Common Stock, pursuant to Board of Directors approval.

Common Stock

The Company is authorized to issue up to 1,000,000,000 shares of common stock par value $0.001 per share. The number of authorized shares of common stock was increased on June 26, 2019, from 500,000,000, by written consent of the majority stockholders without a special meeting of the stockholders. Please see Form DEF 14C filed on July 17, 2019 for more information on this matter. Each outstanding share of common stock entitles the holder to one vote per share on all matters submitted to a stockholder vote. All shares of common stock are non-assessable and non-cumulative, with no pre-emptive rights.

As of September 30, 2019, 585,983,209 shares were outstanding. During the quarter ended September 30, 2019, the Company issued 275,383,006 shares of common stock.

Warrants

As of September 30, 2019, warrants to acquire 47,644,444 shares of common stock were outstanding. No additional Warrants were issued during the quarter.

A summary of the status of the options and warrants granted as at September 30, 2019 and June 30, 2019, and changes during the years then ended is presented below:

A summary of the status of the warrants outstanding at September 30, 2019 is presented below:

Stock Option Plan

On June 27, 2016, the Board of Directors approved the 2016 Stock Option Plan which has reserved 10,000,000 shares of common stock. There are no stock options outstanding as of September 30, 2019.

NOTE 10 – LEASES

The Company adopted ASC 842 - Leases, using the modified retrospective method on July 1, 2019. The Company elected the package of practical expedients relief option offered in ASU 2016-02 and the accounting policy election for lessees not to separate lease and non-lease components (election applies to leased real property asset class).

The most significant impact of the adoption of ASC 842 was the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases of $524,935. The Company’s accounting for finance leases, which are insignificant, remained unchanged. The adoption of ASC 842 did not have any impact on the Company’s operating results or cash flows.

The Company has 4 office space, warehouse and laboratory lease agreements which are accounted for as operating leases. The real property leases typically are for three to five-year terms with many containing options for similar renewal periods. The Company determines if an arrangement is or contains a lease at inception. Operating leases are included in operating lease right-of-use assets and operating lease liabilities (current and noncurrent) in the condensed consolidated balance sheet. Finance leases are included in property and equipment and finance lease obligations in the condensed consolidated balance sheet.

ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, Management used the Company’s collateralized incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

The lease payment terms may include fixed payment terms and variable payments. Fixed payment terms and variable payments that depend on an index (i.e., Consumer Price Index, or “CPI”) or rate are considered in the determination of the operating lease liabilities. While lease liabilities are not remeasured because of changes to the CPI, changes are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. Variable payments that do not depend on an index or rate are not included in the lease liabilities determination. Rather, these payments are recognized as variable lease expense when incurred. Expenses related to leases with a lease term of one month or less are recognized as variable lease expense when incurred. Variable lease payments are included within operating costs and expenses in the condensed consolidated statement of operations.

Due to the significant assumptions and judgements required in accounting for leases (to include whether a contract contains a lease, the allocation of the consideration, and the determination of the discount rate), the judgements and estimates made could have a significant effect on the amount of assets and liabilities recognized.

Future minimum lease payments under operating leases as of September 30, 2019 were as follows:

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. The Company has determined that there are no other events that warrant disclosure or recognition in the financial statements, except as stated herein.

On October 15, 2019 the Company amended a promissory note payable to Merida Capital Partners II LP, dated April 15, 2019, in the principal sum of $200,000 to become due and payable on November 30, 2019. This note was part of the November 18, 2019 cancellation of various promissory notes discussed below.

On October 15, 2019, the Company issued a promissory note to Merida Capital Partners III LP in the original principal amount of $900,000, accruing interest at 12.0% per annum. This note was part of the November 18, 2019 cancellation of various promissory notes discussed below.

On October 18, 2019, Clifford Perry and Raymond Medeiros resigned from their officer and director positions with the Company.

On November 18, 2019, the Company issued 9,278,730 share of the Company’s common stock subject to restricted stock agreements as follows: Merida Advisor, LLC, 6,250,000 shares; John Kalkanian Jr., 250,000 shares; David Goldburg, 750,000 shares; David Vautrin, 750,000 shares; Matthew Bartlett, 500,000 shares; Nicholas Shi, 214,286 shares; Anthony Catalano, 120,000 shares; and Rodrigo Chavez, 444,444 shares.

On November 18, 2019, the Company issued a convertible promissory note to MCP Wellness II LP in the original principal amount of $5,000,000 convertible at holder’s election into shares of the Company’s common stock at $0.20 per share, subject to certain adjustments, accruing interest at 8% per annum. Interest will be payable by increasing the principal amount of the note by the accrued interest amounts, maturing on November 18, 2022. As part of the same transaction, the Company issued a three-year warrant to acquire fifteen million (15,000,000) shares of the Company’s common stock exercisable at a purchase price of $0.09 per share. The Convertible Note and the Warrant were issued in exchange for an aggregate purchase price of $5,000,000. This purchase price was paid with $1,884,715 in cash and with $3,019,750 via the cancellation of various promissory notes.

On November 18, 2019, the Company issued a warrant, for services rendered, to Jane Cavalier, entitling her to purchase from the Company at any time after the Issue Date until June 30, 2020, up to two hundred fifty thousand (250,000) fully paid and non-assessable shares of Common Stock, $0.001 par value per share, at the applicable exercise price per share of $0.25. The warrant may be exercised in whole or in part.

On November 20, 2019, the registrant changed its name to “GL Brands, Inc.” by filing Articles of Merger merging a newly formed Nevada subsidiary, GL Brands Name Change Subsidiary, Inc., into the registrant as permitted by Section 92A.180(5) of the Nevada Revised Statutes. The registrant has filed an Issuer Company-Related Notification Form with the Financial Industry Regulatory Authority, Inc. (FINRA) to affect the name change and a corresponding ticker symbol change.

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

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “will,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.

Company Overview

GL Brands, Inc. is a global hemp consumer packaged goods house of brands that creates authentic, enduring and culturally relevant brands engaged in the development and sale of cannabis-derived wellness products. Through its premier brands, Green Lotus and IrieCBD, the Company delivers a full portfolio of hemp CBD products, including tinctures, soft gels, gummies, sparkling beverages, vapes, flower and topical segments to promote greater wellness and balance for consumers in the U.S. and throughout the world.

The Company’s Consumer Product Brands

Each of the Company’s brands is rooted in the fundamentals of product quality, brand authenticity and unmatched customer service. GL Brands, Inc. is driven by a reverence for the cannabis plant and a deep respect for the well-being of the consumer.

Green Lotus Hemp (“Green Lotus”) is a rapidly growing premium hemp oil products brand that manufactures and distributes premium cannabinoid products including tinctures, gel caps, edibles, topicals, vape cartridges, flower, pre-roll, and beverages made from organic industrial hemp. Green Lotus has grown rapidly since its inception in 2016 and now has a national presence in over 1,700 locations in the U.S. and is a first mover in the Mexican CBD market, with 3,000 points of current distribution. The Company expects to grow its national presence to approximately 5,700 locations through calendar 2020. This includes 2,000 additional locations via its announced Greenlane Holdings distribution arrangement and 2,000 additional locations through a major retailer.

IrieCBD’s (“Irie or Irie’s”) mission is to provide full-spectrum, natural solutions for health and wellness. Irie is a premium-priced hemp brand, distributing full-spectrum hemp CBD tinctures, edibles, topicals and capsules to over 300 high-end retailers and health and wellness chains in the United States and abroad. The Company expects to grow this number by approximately 350 domestic locations in 2020. In early calendar 2020, the Company will launch newly rebranded Irie hemp CBD products. This effort is a complete rebranding with the goal of solidifying Irie’s position as a premium brand in the consumer marketplace.

The Company’s Mission

The Company’s mission is to create authentic, meaningful brands and lead the world in the responsible manufacturing and distribution of hemp-derived cannabis consumer packaged goods.

The Company’s Market Opportunity

The Company’s long-term objective is to become a leading global hemp consumer packaged goods company. The Company believes that all the necessary components and capabilities are in place to accomplish this objective. The Company intends to achieve this goal by driving organic growth, as well as possible mergers and acquisitions, supported by a diverse brand and product portfolio of healthy and functional lifestyle products in leading product categories across all distribution channels through an aligned network of retailers and distribution partners.

We believe that the hemp CBD industry has the potential to disrupt the pharmaceutical, alcohol, tobacco, textile, and food and beverages sectors. Traditional consumer packaged companies recognize the rapid adoption of cannabis products and have responded by forming partnerships and or have made investments in some of the leading cannabis players in North America. We are already witnessing this phenomenon in the beer industry. It is no coincidence that the first non-cannabis consumer packaged goods companies to make major investments in the sector were beer manufacturers, with Constellation Brands leading the way with its $4.0 billion investment in Canadian-based Canopy Growth Corp. in 2018. This was followed by AB InBev’s investment in a joint venture with Tilray to research cannabis-infused drinks for the Canadian market, and Molson Coors Canada’s joint venture agreement with Hydropothecary Corp. to develop non-alcoholic, cannabis-infused beverages. Big tobacco has joined with Altria Group, Inc.’s $1.8 billion investment in Canadian-based Cronos Group, Inc.

Food and beverages that contain vitamins and other additives and ingredients to enhance health and well-being will see increased competition from products containing cannabinoids including CBD. For example, we believe that many consumers will replace traditional sports or energy drinks with cannabinoid-enhanced beverages. As an example of our ability to meet the anticipated demand for beverages, Green Lotus™ released a suite of hemp CBD carbonated beverages in Q1 of fiscal 2020.

Rich Maturo, VP, Cannabis Practice at The Nielsen Corporation, a global provider of market research and analysis of media, has stated his belief that a battle will emerge in retail as traditional brick-and-mortar CPG retail channels will steal share from online CBD retailers local specialty CBD retailers, and vape and tobacco shops. “Compared with current hemp-CBD users,” Maturo says, “our survey data shows that new CBD consumers who say they’re likely to consume CBD products in the next 12 months but have yet to consume are more than twice as likely to state that they’ll shop for CBD products at a grocery chain or mass merchandiser. These same consumers are more than 3.5 times more likely to state that they’ll purchase hemp-CBD products from a chain drug store.”

The Company believes that its brands are well positioned to compete favorable in terms of emerging distribution opportunities at grocery chain and mass merchandisers through existing agreements and relationships. The following growth strategies describe, in part, these efforts.

The Company’s Growth Strategies

Rebranding and Creating a Leading Consumer Packaged Goods Company. The Company is building a robust hemp CBD consumer packaged goods platform with industry-leading brands in the U.S. and Mexico. These are early days in the development of the hemp CBD sector, and the Company believes that firms that can scale, develop strong distribution networks, and offer high-quality brands will emerge as the industry leaders. The Company is in the final stages of a planned rebranding, including a new holding company name, which was implemented on November 20, 2019, a new stock symbol, and a marketing and e-commerce plan that will reflect a “house of brands” strategy, providing the Company with a more effective platform to organically develop or acquire additional brands to further our growth. The remaining item to complete is the acquisition of a new stock symbol, the process of which is under way. The Company will continue to leverage first-mover advantage to fully penetrate the Mexican market. The Company completed its inaugural shipment of topical hemp CBD products to Mexico on July 31, 2019 and has since followed this with two additional shipments. The Company expects to start shipping additional SKU’s beginning in Q2 of calendar 2020 as part of a larger $26 million order already placed with the Company.

Partnering with established distributors and retailers. As the industry evolves, the distribution of hemp products has increasingly mirrored the distribution of wellness and other consumer packaged goods. To efficiently and rapidly increase our scale, the Company has formed partnerships with established distributors and leading regional and national retailers to expand our domestic footprint. Through these partnerships and an aggressive marketing outreach, the Company has gained traction with some of the largest distributors and leading traditional retailers in the United States. The Company is in advanced talks to partner with both traditional retailers and state-licensed cannabis players. In addition, as an example, the Company is supporting its omnichannel selling approach throughout North America in the following ways:

Focusing on operational excellence and product quality. To support the Company’s robust sales pipeline in the United States and Mexico, the Company has made strategic investments in operations, including supply chain, manufacturing capabilities, product development, research and development, and multi-channel distribution. In doing so, the Company has developed a quality management system that enables it to meet the requirements of the regulatory agencies in the markets where the Company exports products, while consistently delivering high-quality and compliant products in all jurisdictions in which we operate.

Establishing greater transparency and higher level of communication with the capital markets. In Q3 of fiscal 2019, the Company hired a leading investor relations and public relations firm in the cannabis space to assist in communications and to support the underserved and much needed investor relations functions at the Company. The Company intends to aggressively market its story to both investors and retail consumers.

Implementing corporate restructuring plan. Following the Acquisition of Green Lotus, the Board of Directors of the Company (the “Board”) approved a strategic plan with the following objectives: (a) to transform the Company into a leading consumer packaged goods hemp CBD company with a concentration on the Green Lotus and IrieCBD brands in the United States and Mexico, rather than building a vertically-integrated hemp company in the U.S. and Europe; (b) sell or shut down non-core and non-accretive business segments; (c) consolidate the Company’s manufacturing, sales, distribution and corporate functions into the newly acquired Green Lotus infrastructure, resulting in operational synergies and cost savings; and (d) formulate a comprehensive corporate rebranding plan for the Company.

The following actions have been executed or are underway as part of the Company’s Board-approved strategic review and restructuring plan:

The Company is an audited and reporting publicly traded company under the symbol (OTC Pink: FRLF) with corporate headquarters located at 3939 Beltline Rd., Suite 350, Addison, Texas.

Results of Operations

For the three months ended September 30, 2019 and September 30, 2018

Revenues

Our revenue was $2,121,508 for the three months ended September 30, 2019, compared to $608,658 for the three months ended September 30, 2018. Revenue, by class, is as follows:

Comparative results for the quarter reflect the consummation of our acquisition of ECS Labs LLC and recent launch of various hemp derived cannabis consumer packaged goods products. Note that the Company is no longer engaged in magazine related activities, which is reflective of the Company’s focus on becoming a leading consumer packaged goods house of brands.

Operating Expenses

Cost of goods sold (“COGS”) were $659,737 and $269,125 for the three months ended September 30, 2019 and 2018, respectively. COGS, by class, is as follows:

The increase in direct costs reflects that the Company’s revenues now derive from the sale of products.

For the three months ended September 30, 2019, our general and administrative expenses, compensation accruals and marketing and selling expenses (“Selected Expenses”) were $15,879,477 compared to $1,152,756 for the three months ended September 30, 2018, resulting in an increase of $14,726,721. The increases were largely attributable to: (1) one-time, accrued expenses related to cash incentive compensation resulting from employment agreements of $2,126,131; (2) one-time, non-cash expenses related to stock incentive compensation accruals resulting from employment agreements of $11,621,197; (3) increased general and administrative expenses and marketing and selling expenses in reflection of actual and future product sales following the acquisition of ECS Labs LLC; and (4) one-time transactional expenses related to the acquisition of ECS Labs LLC of $250,453. The compensation accruals in items (1) and (2) above and transactional expenses in item (4) represent 88% of Selected Expenses and 95%, respectively, of the period over period increase in Selected Expenses.

Other income (expenses)

Other income (expense) was $9,064 for the three months ended September 30, 2019, compared to $93,239 for the three months ended September 30, 2018. The September 30, 2019 figure includes a gain on sale of property and equipment of $45,086 and interest expense of $81,955 for the three months ended September 30, 2019.

Net loss attributable to common shareholders was $14,512,256 for the three months ended September 30, 2019, compared to net loss of $1,111,766 for the three months ended September 30, 2018. The higher net loss for the three months ended September 30, 2019 as compared to the same period in 2018 is largely attributable to: (1) one-time expenses related to compensation accruals resulting from employment agreements; (2) increased general and administrative expenses and marketing and selling expenses in reflection of actual and future product sales following the acquisition of ECS Labs LLC; and (3) one-time transactional expenses related to the acquisition of ECS Labs LLC.

Liquidity and Capital Resources

Liquidity and Capital Resources during the three months ended September 30, 2019 compared to the three months ended September 30, 2018

As of September 30, 2019, the Company had $328,279 in cash. The Company used cash in operations of $1,139,610 for the three months ended September 30, 2019, compared to cash used in operations of $525,800 for the three months ended September 30, 2018. The negative cash flow from operating activities for the three months ended September 30, 2019 was attributable to the Company's net loss attributable to common shareholders primarily due to: (1) increased overhead associated with ECS Labs LLC operations; (2) increased general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities; (3) increased inventory based on pending orders and in anticipation of growing sales in the amount of $885,995; and (4) payment of prior obligations of Freedom Leaf Inc. entities in the amount of $1,099,911.

The Company satisfied $1,099,911 in obligations of Freedom Leaf Inc., AccuVape, Leafceuticals, Tierra Science Global and Freedom Leaf Europe that were incurred prior to the acquisition of ECS Labs LLC (“Acquisition Obligations”). An additional $602,294 in Acquisition Obligations were paid subsequent to the filing period. $165,446 in Acquisition Obligations are not yet paid. These cash expenditures are non-recurring.

The Company generated (used) cash from investing activities of $70,203 and $(1,489) for the three months ended September 30, 2019 and 2018, respectively. The increase in cash generated from investing activities of $71,692 was primarily related to proceeds from the sale of fixed assets.

The Company had cash provided by financing activities of $1,038,500 and $470,427 for the three months ended September 30, 2019 and 2018, of which $1,100,000 was from the proceeds of notes payable compared to $60,000 for the same period in 2018.

The Company anticipates raising funds to pay for our expenses in the second half of calendar year 2020. We may borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us.

Going Concern

The accompanying financial statements and the factors within it, 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 and the ability of the Company to continue as a going concern for a reasonable period of time. The Company sustained net losses attributable to common shareholders of $14,512,256 and cash used in operating activities of $1,139,610 for the three months ended September 30, 2019.

In recent months, the Company has begun to execute its strategy of selling or shutting down non-core and non-accretive business segments and consolidating the Company’s manufacturing, sales, distribution and corporate functions into the newly acquired ECS Labs LLC infrastructure. These initiatives should result in operational synergies and cost savings.

The Company’s 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. See Note 11 - Subsequent Events, provides information regarding a $5,000,000 capital raise consummated by the Company on November 18, 2019.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of 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. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 1, “Summary of Significant Accounting Policies” in our audited financial statements for the year ended June 30, 2019, included in our Annual Report on Form 10-K as filed on November 14, 2019, for a discussion of our critical accounting policies and estimates.

Reclassification of Certain Expenses

The results of operations as of September 30, 2019 were not prepared on a consistent basis with prior periods. The results of operations in this filing were prepared classifying appropriate expenses as cost of goods sold (“COGS”). The term COGS refers to the direct costs of producing the products sold by the Company. The Company has elected to reflect COGS in order to accurately state inventory value and gross margin. Further, this change is reflective of the Company’s transition to a product-based business. Previously, these costs were presented as direct costs of revenue. The result of this presentation method change results in no change to the net income, and no pro forma financial information is necessary.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and chief financial officer to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified. Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report to provide reasonable assurance of the achievement of these objectives.

Changes in Internal Control over Financial Reporting

There are no changes in our internal controls over financial reporting.

Limitations on the Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits 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. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on 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. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than disclosed herein, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

In May 2019, the Company received a demand letter from a former employee for employment-related claims, but this employee has since signed an agreement waiving all claims. In October of 2019, the Company settled a potential dispute regarding its AccuVape brand with the original seller of that brand. The Company has honored the terms of the settlement agreement. On or about June 20, 2019, a former Company consultant, Richard Bolandz, filed a complaint against the Company in the District Court for Clark County, Nevada (Richard A. Bolandz, individually and d/b/a International Consultants Consortium LLC v. Freedom Leaf Inc., Case No. A-19-797130-C, Dept. No. XXVII), alleging that the Company breached its consulting agreement with Mr. Bolandz by attempting to terminate the agreement improperly and failing to pay Mr. Bolandz amounts due thereunder, and seeking an award of monetary damages in excess of $15,000 as well as recovery of attorney fees. On or about August 8, 2019, the Company answered the complaint and filed a counterclaim against Mr. Bolandz. The parties have now settled the matter. In early December 2019, the Company received a demand letter from a former employee for employment-related claims. This claim was disputed. In mid-December 2019, the Company received a demand letter from a former employee for employment-related claims. This claim was also disputed.

Item 1A. Risk Factors

Not required.

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

During the quarter ending September 30, 2019, the Company issued an aggregate of 94,802,200 shares of common stock as described herein. Effective August 27, 2019, by consent of the board of Freedom Leaf Inc., Richard Cowan’s 264,010 shares of Series A Preferred Stock was converted into 26,401,000 shares of Company common stock, and Clifford Perry’s 684,012 shares of Series A Preferred Stock was converted into 68,401,200 shares of Company common stock. These shares of common stock were issued in reliance upon the exemption from registration provided by Sections 3(a)(9) and 4(a)(2) of the Securities Act of 1933, as amended, as the shares were issued in exchange for preferred stock of the Company held by each shareholder, there was no additional consideration for the exchange, there was no remuneration for the solicitation of the exchange, there was no general solicitation, and the transactions did not involve a public offering. In consideration for the common share issuances, the Company received the preferred shares from the shareholders, which preferred shares were cancelled and of no further effect.

On or about August 28, 2019, the Company issued an aggregate of 180,580,806 shares of common stock pursuant to the Company’s employment agreements with the shareholders as follows: Carlos Frias, 72,314,814 shares; Alex Frias, 48,072,390 shares; and Daniel Nguyen, 60,193,602 shares, as further described in the Company’s Current Report on Form 8-K filed on August 29, 2019. These shares of common stock were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, as there was no general solicitation, and the transactions did not involve a public offering.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

EXHIBIT INDEX

__________

* Filed herewith.

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

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.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q/A’ Filing		Date		Other Filings
		11/18/22
Filed as of:		9/11/20
Filed on:		9/10/20
		6/30/20		UPLOAD
		6/10/20
		6/1/20
		5/31/20
		3/13/20		CORRESP
		3/11/20		UPLOAD
		3/3/20
		2/20/20
		1/31/20		10-Q
		1/28/20
		1/24/20
		12/18/19
		12/17/19		8-K
		11/30/19
		11/21/19
		11/20/19		8-K
		11/18/19		10-K/A,  8-K
		11/14/19		10-K,  NT 10-Q
		10/18/19		8-K
		10/15/19
		10/10/19
For Period end:		9/30/19		10-Q,  NT 10-K,  NT 10-Q
		9/13/19
		8/29/19		8-K
		8/28/19		8-K
		8/27/19
		8/20/19
		8/8/19
		7/31/19		DEF 14C
		7/30/19
		7/25/19
		7/24/19
		7/17/19		DEF 14C
		7/1/19		PRE 14C
		6/30/19		10-K,  10-K/A,  NT 10-K
		6/27/19
		6/26/19
		6/20/19
		6/18/19
		5/31/19		8-K,  8-K/A
		5/21/19		10-Q/A,  8-K
		5/14/19
		4/15/19
		9/30/18		10-Q,  NT 10-Q
		7/1/18
		6/30/18		10-K,  NT 10-K,  NT 10-Q
		5/31/18
		4/20/18
		1/1/18
		10/23/17
		3/3/17
		6/27/16
		5/24/16
		2/21/13
				List all Filings

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14 Previous Filings that this Filing References

As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/26/19 GL Brands, Inc. 8-K:5,9 11/20/19 2:828K GlobalOne Filings Inc/FA 11/18/19 GL Brands, Inc. 8-K:1,2,3,511/18/19 8:715K GlobalOne Filings Inc/FA 9/26/19 GL Brands, Inc. 8-K:1,5,9 9/24/19 3:182K GlobalOne Filings Inc/FA 8/29/19 GL Brands, Inc. 8-K:1,3,5,9 8/28/19 4:277K GlobalOne Filings Inc/FA 6/04/19 GL Brands, Inc. 8-K:1,2,3,5 5/31/19 9:817K GlobalOne Filings Inc/FA 5/24/19 GL Brands, Inc. 8-K:1,7,9 5/21/19 2:422K GlobalOne Filings Inc/FA 10/03/18 GL Brands, Inc. 8-K:1,2,3,7 9/28/18 3:467K GlobalOne Filings Inc/FA 8/21/18 GL Brands, Inc. 8-K:1,2,3,9 7/26/18 2:172K GlobalOne Filings Inc/FA 3/08/18 GL Brands, Inc. 8-K:1,9 3/06/18 2:247K GlobalOne Filings Inc/FA 2/07/18 GL Brands, Inc. 8-K:1,2,3,9 1/05/18 3:113K GlobalOne Filings Inc/FA 5/31/17 GL Brands, Inc. 8-K:1,9 5/30/17 2:133K GlobalOne Filings Inc/FA 6/09/16 GL Brands, Inc. 8-K:3,5,9 5/25/16 2:142K Publicease Inc./FA 2/25/15 GL Brands, Inc. 8-K:5,9 2/24/15 2:1.1M Publicease Inc./FA 7/22/13 GL Brands, Inc. S-1 53:2.9M Sharello Corp./FA

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