Here is a repeat well worth reading:
January 4,2016
To the Shareholders of Rocky Mountain High Brands, Inc:
On December 24, 2015, we posted our much-awaited 2015 Financial Statements and
Accompanying Notes for the Years Ended June 30, 2015 [FY 2015) and June 30, 2014, (FY
2014) along the Report of Independent Registered Public Accounting Firm (commonly
referred to as the "Audit"
. Paritz & Company, P.A., a Public Accounting Oversight Board
registered firm, conducted the audits for the two-year period.
In FY 2015 Rocky Mountain High Brands, Inc. (RMHB or the "Company" launched a new
consumer products brand, generated significant consumer and investor interest, and
completed 4 months of operations. The income statement reflects significant losses as is
often the case with any quickly scaled startup. These losses are magnified by a number of
mark to market equity transactions for services and other early equity driven tactical work
arounds. It is important to note that most of the $16.6M loss is driven by non-cash, non
recurring expenses.
• $11.7M of total expenses is driven by a non-operating, non-cash, non-recurring
expense related to a theoretical value of the convertible note that financed the cashbased
start-up activity of the Company. This value, known as a derivative liability,
does not represent debt principal which has to be repaid. It is a theoretical value,
calculated using the Black Sholes model, assigned to the equity conversion feature of
t h e n o t e .
• $2.3M of total expenses is driven by FY 2015 operating expenses that were non-cash
expenditures created by stock compensation. They are a calculation of the trading
v a l u e o f s h a r e s d i s t r i b u t e d f o r b u s i n e s s s e r v i c e s a t t h e t i m e t h a t t h e s e r v i c e s w e r e
performed. Stock compensation is a commonly used tool in acquiring business
resources when start-up companies are faced with limited cash resources.
Equity dilution on the balance sheet was driven by speculative convertible debt financing.
Ear i y stage star t -up OTC Pink publ i c companies, such as RMHB, are speculat ive
investments; therefore venture investors that finance these companies often require sizable
opportunities for equity ownership in the firm. With the initial convertible debt funding,
RMHB executed inventory production across two labeling strategies to cover all target
channels. The Company generated enough revenue to pay off some of the initial debt
1
financing and restructure the rest of the debt. This capital restructuring is benefiting the
Company in discussions with its next round of investment partners. The early and
aggressive attention to pay down the convertible debt is also reflective of our stewardship
to all long-term investors in RMHB.
The primary takeaways from audited financial statements and notes for FY 2015 are not the
temporary and arcane derivative liabilities and mark to market losses. As the Statement of
Cash Flows show, RMHB deployed the capital raised, launched a superior consumer goods
brand, and left cash reserved in the bank at the end of the fiscal year. The Company acted
creatively to attract and retain talent, execute operational momentum, and generally 'just
get the job done.' The Company is continuing to address challenges a day at a time, as we
manufacture, market and distribute the Brand.
On January 1, 2016 Michael Welch joined RMHB as Chief Financial Officer of Rocky
Mountain High Brands, Inc. Michael is a CPA who started his career as an Auditor with
Deloitte and most recently served as CFO Managing Partner of Aventine Hill Partners, a
Texas-based professional services firm.
O v e r t h e n e x t f e w w e e k s Mi c h a e l w i l l :
• Prepare a restatement of RMHB's FY 2016 l^t Quarter Financials based on the
audited beginning balances and post to OTC Markets.
• Complete RMHB's FY 2016 2"'^ Quarter Financials and post to OTC Markets.
• Draft RMHB's Form 10 for filing with the Securities and Exchange Commission.
• Implement operational and internal controls for the Company that aligns with
Sarbanes-Oxley requirements.
All of these milestones are part of the process of moving the Company toward fully
reporting SEC compliance.
T o m S h i i m a n
C h i e f E x e c u t i v e O f fi c e
Rocky Mountain High Brands, Inc.
January 4,2016
To the Shareholders of Rocky Mountain High Brands, Inc:
On December 24, 2015, we posted our much-awaited 2015 Financial Statements and
Accompanying Notes for the Years Ended June 30, 2015 [FY 2015) and June 30, 2014, (FY
2014) along the Report of Independent Registered Public Accounting Firm (commonly
referred to as the "Audit"
. Paritz & Company, P.A., a Public Accounting Oversight Board registered firm, conducted the audits for the two-year period.
In FY 2015 Rocky Mountain High Brands, Inc. (RMHB or the "Company"
launched a new consumer products brand, generated significant consumer and investor interest, and
completed 4 months of operations. The income statement reflects significant losses as is
often the case with any quickly scaled startup. These losses are magnified by a number of
mark to market equity transactions for services and other early equity driven tactical work
arounds. It is important to note that most of the $16.6M loss is driven by non-cash, non
recurring expenses.
• $11.7M of total expenses is driven by a non-operating, non-cash, non-recurring
expense related to a theoretical value of the convertible note that financed the cashbased
start-up activity of the Company. This value, known as a derivative liability,
does not represent debt principal which has to be repaid. It is a theoretical value,
calculated using the Black Sholes model, assigned to the equity conversion feature of
t h e n o t e .
• $2.3M of total expenses is driven by FY 2015 operating expenses that were non-cash
expenditures created by stock compensation. They are a calculation of the trading
v a l u e o f s h a r e s d i s t r i b u t e d f o r b u s i n e s s s e r v i c e s a t t h e t i m e t h a t t h e s e r v i c e s w e r e
performed. Stock compensation is a commonly used tool in acquiring business
resources when start-up companies are faced with limited cash resources.
Equity dilution on the balance sheet was driven by speculative convertible debt financing.
Ear i y stage star t -up OTC Pink publ i c companies, such as RMHB, are speculat ive
investments; therefore venture investors that finance these companies often require sizable
opportunities for equity ownership in the firm. With the initial convertible debt funding,
RMHB executed inventory production across two labeling strategies to cover all target
channels. The Company generated enough revenue to pay off some of the initial debt
1
financing and restructure the rest of the debt. This capital restructuring is benefiting the
Company in discussions with its next round of investment partners. The early and
aggressive attention to pay down the convertible debt is also reflective of our stewardship
to all long-term investors in RMHB.
The primary takeaways from audited financial statements and notes for FY 2015 are not the
temporary and arcane derivative liabilities and mark to market losses. As the Statement of
Cash Flows show, RMHB deployed the capital raised, launched a superior consumer goods
brand, and left cash reserved in the bank at the end of the fiscal year. The Company acted
creatively to attract and retain talent, execute operational momentum, and generally 'just
get the job done.' The Company is continuing to address challenges a day at a time, as we
manufacture, market and distribute the Brand.
On January 1, 2016 Michael Welch joined RMHB as Chief Financial Officer of Rocky
Mountain High Brands, Inc. Michael is a CPA who started his career as an Auditor with
Deloitte and most recently served as CFO Managing Partner of Aventine Hill Partners, a
Texas-based professional services firm.
O v e r t h e n e x t f e w w e e k s Mi c h a e l w i l l :
• Prepare a restatement of RMHB's FY 2016 l^t Quarter Financials based on the
audited beginning balances and post to OTC Markets.
• Complete RMHB's FY 2016 2"'^ Quarter Financials and post to OTC Markets.
• Draft RMHB's Form 10 for filing with the Securities and Exchange Commission.
• Implement operational and internal controls for the Company that aligns with
Sarbanes-Oxley requirements.
All of these milestones are part of the process of moving the Company toward fully
reporting SEC compliance.
T o m S h i i m a n
C h i e f E x e c u t i v e O f fi c e
Rocky Mountain High Brands, Inc.
