UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2018

o 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

FREEDOM LEAF INC.

(Exact name of Registrant as specified in its charter)

Nevada	46-2093679
(State of incorporation)	(IRS Employer ID Number)

3571 E. Sunset Road, Suite 420

Las Vegas, Nevada 89120

877-442-0411

(Registrant’s telephone number)

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 x No o

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 x No o

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.

Large accelerated filer    o	Accelerated filer    o
Non-accelerated filer    o   (Do not check if a smaller reporting company)	Smaller reporting company    x
Emerging growth company    o

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As February 19, 2019, there were 223,162,238 shares of common stock, par value $0.001 per share issued, issuable, and outstanding.

FREEDOM LEAF INC.

FORM 10-Q

DECEMBER 31, 2018

INDEX

		Page No.
PART I – FINANCIAL INFORMATION		3
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II – OTHER INFORMATION		24
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
SIGNATURES		26

i

TABLE OF CONTENTS

Index to Financial Statements	Page
Condensed Consolidated Balance Sheets as of December 31, 2018 (unaudited) and June 30, 2018	3
Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended December 31, 2018 and 2017 (unaudited)	4
Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2018 and 2017 (unaudited)	6
Notes to Condensed Consolidated Financial Statements	7

2

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

FREEDOM LEAF INC.

And Subsidiaries

Condensed Consolidated Balance Sheets

	December 31,			June 30,
	2018			2018
	(Unaudited)
ASSETS
Current assets
Cash	$	855,386		$	54,380
Accounts receivable, Net		306,373			161,975
Inventory, Net		456,605			201,689
Prepaid expense		683,189			567,280
Due from related party		–			28,606
Total current assets		2,301,553			1,013,930
Property and Equipment, net		4,426,071			4,786,050
Intangible assets, net		1,552,445			1,522,574
Goodwill		332,566			70,000
Cost method investments		1,370,400			995,400
Other assets		36,536			11,584
Total assets	$	10,019,571		$	8,399,538
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	671,671		$	557,654
Current portion of long-term notes payable		282,037			95,000
Short-term notes payable		66,000			286,575
Deferred revenue		9,045			–
Total current liabilities		1,028,753			939,229
Non-current liabilities
Long-term notes payable, net of discount, net of current portion		4,327,087			4,441,911
Total non-current liabilities		4,327,087			4,441,911
Total liabilities		5,355,840			5,381,140
Commitments and contingencies		–			–
Stockholders' equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized Series A preferred stock, 1,000,000 shares authorized, 948,022 shares issued and outstanding at December 31, 2018 and June 30, 2018, respectively		948			948
Common stock, $0.001 par value, 500,000,000 shares authorized, 222,870,976 and 185,369,365 shares issued, issuable, and outstanding at December 31, 2018 and June 30, 2018, respectively		222,868			185,370
Additional paid-in capital		16,800,571			12,377,907
Accumulated comprehensive income		12,636			3,833
Accumulated deficit		(12,394,157	)		(9,540,976	)
Total Freedom Leaf Inc. stockholders' equity		4,642,866			3,027,082
Non-controlling interest		20,865			(8,684	)
Total stockholders' equity		4,663,731			3,018,398
Total liabilities and stockholders' equity	$	10,019,571		$	8,399,538

See accompanying notes to unaudited condensed consolidated financial statements.

3

FREEDOM LEAF INC.

And Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	For the Three Months Ending						For the Six Months Ending
	December 31,						December 31,
	2018			2017			2018			2017
Revenue, net	$	749,564		$	6,332		$	1,358,222		$	7,659
Operating expenses
Direct costs of revenue		537,893			36,680			807,018			69,826
General and administrative		1,515,925			331,859			2,630,257			799,045
Depreciation and amortization		342,936			6,391			705,820			23,312
Bad debt expense		(37,083	)		263,315			(17,328	)		426,848
Marketing and selling		135,336			1,734			173,760			4,317
Total operating expenses		2,495,007			639,979			4,299,527			1,323,348
Operating loss		(1,745,443	)		(633,647	)		(2,941,305	)		(1,315,689	)
Other income (expense)
Interest expense		(5,222	)		(7,571	)		(11,991	)		(12,780	)
Interest income		107			5,162			115			10,324
Miscellaneous income		–			–			100,000			–
Change in fair value of embedded conversion features		–			(54,364	)		–			(52,259	)
Beneficial conversion feature		–			(51,994	)		–			(79,594	)
Total other income (expense)		(5,115	)		(108,767	)		88,124			(134,309	)
Provision for income taxes		–			–			–			–
Net loss before non-controlling interest		(1,750,558	)		(742,414	)		(2,853,181	)		(1,449,998	)
Loss attributable to non-controlling interest		38,692			–			29,549			–
Net loss attributable to common stockholders	$	(1,711,866	)	$	(742,414	)	$	(2,823,632	)	$	(1,449,998	)
Net loss attributable to common stockholders per share - basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)
Weighted average number of shares outstanding - basic and diluted		221,396,199			140,179,411			207,790,316			129,643,006
Other Comprehensive Income (Loss)
Foreign currency translation adjustment	$	9,957		$	–		$	8,803		$	–
Total Comprehensive Loss	$	(1,701,909	)	$	(742,414	)	$	(2,814,829	)	$	(1,449,998	)

See accompanying notes to unaudited condensed consolidated financial statements.

4

FREEDOM LEAF, INC.

And Subsidiaries

Consolidation Statement of Stockholders' Equity

December 31, 2018 

Preferred Stock		Common Stock Issuable		Common Stock		Additional Paid In	Non-Controlling	Accumulated Comprehensive	Accumulated
Shares	Amount	Shares	Amount	Shares	Amount	Capital	Interest	Income	Deficit	Total

Balance at June 30, 2018	948,022	$	948	660,752		$	663		184,708,613	$	184,707	$	12,377,907	$	(8,684	)	$	3,833	$	(9,540,976	)	$	3,018,398
Issuance of common stock and warrants for cash	–		–	895,522			895		29,702,424		29,702		3,297,903		–			–		–			3,328,500
Issuance of common stock for cost method investment	–		–	–			–		3,000,000		3,000		372,000		–			–		–			375,000
Issuance of common stock in business combinations	–		–	–			–		2,496,667		2,497		453,341		–			–		–			455,838
Issuance of common stock for services	–		–	(579,892	)		(582	)	1,986,890		1,986		299,420		–			–		–			300,824
Accumulated comprehensive income	–		–	–			–		–		–		–		–			8,803		–			8,803
Net loss for the period ended December 31, 2018	–		–	–			–		–		–		–		29,549			–		(2,853,181	)		-(2,823,632)
Balance at December 31, 2018	948,022	$	948	976,382		$	976		221,894,594	$	221,892	$	16,800,571	$	20,865		$	12,636	$	(12,394,157	)	$	4,663,731

See accompanying notes to unaudited condensed consolidated financial statements.

5

FREEDOM LEAF INC.

And Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Six Months Ending December 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(2,853,181	)	$	(1,449,997	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization		705,819			23,312
Gain on forgiveness of debt		(100,000	)		–
Amortization of debts discounts		6,000			–
Beneficial conversion feature		–			79,594
Issuance of common stock for services		300,824			416,077
Change in fair value of embedded conversion features		–			52,259
Bad debt expense		–			426,848
Changes in operating assets and liabilities:
Accounts receivable		(143,408	)		–
Inventory		(211,780	)		–
Prepaid expense		(124,368	)		1,300
Deposit		(24,952	)		–
Accounts payable and accrued expenses		62,715			211,355
Accounts payable and accrued expenses to related parties		28,606			66,000
Net cash used in operating activities		(2,353,725	)		(173,252	)
Cash flows from (used in) investing activities
Cash received in acquisition - Tierra		1,210			–
Cash paid in acquisition - AccuVape		(111,492	)		–
Purchases of property and equipment		(3,449	)		–
Net cash from (used in) investing activities		(113,731	)		–
Cash flows from financing activities:
Proceeds from related party		–			28,201
Proceeds from sale of common stock and warrants		3,328,500			98,246
Repayments on notes payable		(148,058	)		(95,299	)
Payments to related party		-			(426	)
Proceeds from notes payable		60,000			140,032
Net cash provided by financing activities		3,240,442			170,754
Effects of exchange rates on cash		27,927			–
Net change in cash		801,006			(2,498	)
Cash at beginning of period		54,380			–
Cash at end of period	$	855,386		$	(2,498	)
Supplemental disclosure of cash flow information:
Cash paid for interest	$	–		$	–
Cash paid for taxes	$	–		$	–
Non-cash investing and financing activities:				$	197,764
Issuance of common stock for acquisition	$	–		$	–
Conversion of debt into common stock	$	–		$	214,254
Issuance of common stock for inventory	$	–		$	(27,200	)
Issuance of notes payable for financing fees	$	–		$	(37,249	)
Initial debt discounts	$	6,000		$	–
Common stock issued for cost method investment	$	375,000		$	–
Common stock issued in business combination - Tierra	$	300,630		$	–
Common stock issued in business combination - Accuvape	$	308,708		$	–
Property and Equipment additions	$	–		$	(149,400)
Issuance of warrants	$	–		$	74,000
Derivatives liability	$	–		$	(95,168	)
Contingent liability	$	–		$	(123,000	)

See accompanying notes to unaudited condensed consolidated financial statements.

6

Freedom Leaf Inc.

And Subsidiaries

Notes to Condensed Consolidated Financial Statements

December 31, 2018

(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, under the name of Arkadia International, Inc. The Company originally was engaged in the business of the acquisition of in demand equipment, cars, and goods with the intent to resell these in the U.S. territories or export to overseas countries. On October 3, 2014, the Company experienced a change in control. Richard C. Cowan acquired approximately 93% of the issued and outstanding common stock of the Company at the time. On November 6, 2014, the Company merged with Freedom Leaf Inc., a private Nevada corporation, and the Company changed its name to Freedom Leaf Inc. In connection with the merger, the sole officer, director and stockholder of the private company, Clifford J. Perry, became an officer and director of the Company, and Mr. Perry received approximately 48.1% of the Company’s common stock post-merger. For financial reporting purposes, this merger was accounted for as a "reverse acquisition" rather than a business combination, and the private company was deemed to be the accounting acquirer in the transaction, with the Company deemed to be the acquired company for financial reporting purposes. Consequently, the assets and liabilities and the operations that were reflected in the historical financial statements of the Company prior to the merger are those of the private company, and they were recorded at the historical cost basis of the private company, and the financial statements after completion of the merger include the combined assets and liabilities of the Company and the private company, the historical operations of the private company only, and the operations of both companies from the closing date of the merger.

Freedom Leaf Inc. is a reporting public company traded under the symbol (OTCQB: FRLF) with corporate headquarters located at 3571 E. Sunset Road, Las Vegas, Nevada, 89120.

Freedom Leaf Inc. (OTCQB: FRLF), dba Freedom Leaf Health, is a diversified, innovator in plant-based care providing premium Hemp CBD health products across advanced care, consumer and pet markets to promote greater health and wellness. FRLF is a clean-health company, establishing a new direction in carewith plant-based products designed to naturally restore and revitalize. FRLF’s consumer promise of “your health first” underscores its universal commitment to produce premium-quality HEMP-derived CBD health products.

FRLF is a diverse enterprise of branded business lines dedicated to meeting the needs of people who face health challenges and those who are healthy. Freedom Leaf’s “Leafceuticals” brand is the company’s most advanced product line for health care practitioners, caregivers and patients. “IrieCBD” and “Hempology” are the company’s flagship lines of premium full-spectrum, Hemp-derived CBD products rich in CBD’s, terpenes and flavonoids and integrated with potent health botanicals. The Company is soon to launch a THC-free line of Hemp CBD health products under the “NatureBorn” brand, and developing performance CBD beverage and CBD beauty product lines.

For over 30 years, the founders of FRLF fought for citizen rights to access plant-based care, and pioneered premium hemp health products as a first step to clean health. Today, FRLF produces premium hemp products from seed to shelf using proprietary science-backed formulations and rigorous product testing FRLF is a socially conscious, vertically-integrated company maintaining all of the highest standards in quality and safety, with a focus on continual innovation to deliver ever-better plant-based care products.

Subsidiary Entities:

☐ Cannabis Business Solutions Inc. (“Cannabis Business Solutions”), a Nevada corporation, was formed on February 5, 2014, and is a wholly-owned subsidiary of the Company. This subsidiary had no activity until the agreement with Valencia Web Technology S.L., B-97183354 (see Note 2).

☐ Leafceuticals Inc. (“Leafceuticals”), formerly known as Cannabiz U, Inc., a Nevada corporation, was formed on February 13, 2014, and is a wholly-owned subsidiary of the Company.  It operates the Company’s Hempology and IRIE brands.

7

☐ Freedom Leaf International Inc. (“Freedom Leaf International”), a Nevada corporation, was formed on November 27, 2015, and is a wholly-owned subsidiary of the Company. This subsidiary has had no activity to date.

☐ Leafceuticals Europe, SL, formed on June 28, 2018, is a wholly-owned subsidiary of the Company.  It owns our Valencia greenhouse operations.

☐ Freedom Leaf Cares Inc. (“Freedom Leaf Cares”), a Nevada corporation, was formed on October 1, 2014, and is a wholly-owned subsidiary of the Company. Freedom Leaf Cares was dissolved in 2016. Until dissolution, this subsidiary had no activity.

☐	Tierra Science Global, LLC. (“Tierra”), a Nevada corporation, was formed on August 23, 2017, and, as of its acquisition by Freedom Leaf on July 26, 2018 with an effective date of August 1, 2018, is a wholly-owned subsidiary of the Company.
☐	FL – Accuvape, LLC (“Accuvape”) a Nevada corporation, was formed on November 26, 2017, is a wholly-owned subsidiary the Company and operates the Accuvape business acquired by the Company effective November 16, 2018.

Nature of Operations

Freedom Leaf Inc. (OTCQB: FRLF), dba Freedom Leaf Health, is a diversified, innovator in plant-based care providing premium Hemp CBD health products across advanced care, consumer and pet marketsto promote greater health and wellness. FRLF is a clean-health company, establishing a new direction in carewith plant-based products designed to naturally restore and revitalize.  FRLF’s consumer promise of “your health first” underscores its universal commitment to produce premium-quality HEMP-derived CBD health products.

FRLF is a diverse enterprise of branded business lines dedicated to meeting the needs of people who face health challenges and those who are healthy. Freedom Leaf’s “Leafceuticals” brand is the company’s most advanced product line for health care practitioners, caregivers and patients. “IrieCBD” and “Hempology” are the company’s flagship lines of premium full-spectrum, Hemp-derived CBD products rich in CBD’s, terpenes and flavonoids and integrated with potent health botanicals. The Company is soon to launch a THC-free line of Hemp CBD health products under the “NatureBorn” brand, and developing performance CBD beverage and CBD beauty product lines.

For over 30 years, the founders of FRLF fought for citizen rights to access plant-based care, and pioneered premium hemp health products as a first step to clean health. Today, FRLF produces premium hemp products from seed to shelf using proprietary science-backed formulations and rigorous product testing FRLF is a socially conscious, vertically-integrated company maintaining all of the highest standards in quality and safety, with a focus on continual innovation to deliver ever-better plant-based care products.

The Company’s major business lines are:

☐ Legal Industrial Hemp Cultivation

☐ Cannabidiol Extraction, Distillation, and Processing

☐ Expert Product Formulation

☐ Nutraceutical Brand Marketing

☐ Ancillary Products & Niche Markets

☐ Affiliate Marketing Programs

☐ E-Commerce Solutions

☐ Global Media & Advertising Networks

8

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 six months ended December 31, 2018 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, 2018 included in the Company’s 2018 Annual Report on Form 10-K, filed with the SEC on October 15, 2018.

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.

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.

9

Revenue Recognition

The Company recognizes revenue for our services in accordance with ASC 606, "Revenue from Contracts with Customers." Under these guidelines, revenue is recognized on transactions when all of the following exist: persuasive evidence of an arrangement did exist, delivery of service has occurred, the sales price to the buyer is fixed or determinable and collectability is reasonably assured. The Company has five primary revenue streams as follows:

· Advertising Services – Revenue from advertising is recognized over the contracted period in which advertising services are performed. Advertising services are considered performed when an ad is displayed to users.

· Product Sales – Revenue from the sale of the Company’s branded products is recognized in the period in which product is shipped. Sales billed or cash received in advance of actual shipment are deferred and recorded as income in the period in which shipment is made. Shipping and handling fees billed to customers is included in net sales. Shipping and handling costs are expensed as incurred and included in cost of sales. All sales are presented net of sales taxes, which are excluded from revenue.

· Licensing Revenue – Revenue from licensing arrangements is recognized when earned, estimable and realizable. The timing of revenue recognition is dependent on the terms of each license agreement and on the timing of sales of licensed products. The Company generally recognizes royalty revenue when it is reported to the Company by its licensees, which is generally one quarter in arrears from the licensees’ sales of licensed products. For licensing fees that are not determined by the licensees’ sales, the Company generally recognizes license fee revenue on a straight-line basis over the life of the license.

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 Series A convertible preferred stock and warrants to purchase common stock. As of December 31, 2018, there were 222,870,976 such common stock equivalents. Equivalent shares are not utilized when the effect is anti-dilutive.

Going Concern

The Company has a net loss attributable to common stockholders for the six months ended December 31, 2018 of $2,823,632 and has used cash in operations of $2,353,725 for the six months ended December 31, 2018. In addition, as of December 31, 2018, the Company had an accumulated deficit of $12,394,157. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date of the issuance of these financial statements.

The accompanying consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The ability of the Company to continue its operations is dependent on the execution of management’s plans, which include the raising of capital through the debt and/or equity markets, until such time that funds provided by operations are sufficient to fund working capital requirements. If the Company were not to continue as a going concern, it would likely not be able to realize its assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements.

10

There can be no assurances that the Company will be successful in generating additional cash from the equity/debt markets or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary. Based on the Company’s current resources, the Company will not be able to continue to operate without additional immediate funding. Should the Company not be successful in obtaining the necessary financing to fund its operations, the Company would need to curtail certain or all operational activities and/or contemplate the sale of its assets, if necessary.

NOTE 2 – INVENTORY

Inventories at December 31, 2018 and June 30, 2018 consisted of the following:

	December 31,			June 30,
	2018			2018
Raw materials	$	–		$	–
Work-in-process		182,327			126,047
Finished goods		310,317			111,681
Inventory reserve		(36,039	)		(36,039	)
Inventory, net	$	456,605		$	201,689

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2018 and June 30, 2018 consisted of the following:

	December 31, 2018			June 30, 2018
Machinery and equipment	$	1,986,674		$	2,022,980
Furniture and fixtures		28,205			25,000
Land		474,563			630,805
Buildings		2,268,906			2,170,963
Total property and equipment		4,758,348			4,849,478
Less: Accumulated depreciation		(332,276	)		(63,698	)
Property and equipment, net	$	4,426,072		$	4,786,050

The depreciation expense for the six months ended December 31, 2018 and 2017, was $272,390 and $6,187, respectively.

NOTE 4 – INTANGIBLE ASSETS

Intangible assets at December 31, 2018 and June 30, 2018 consisted of the following:

	December 31, 2018			June 30, 2018
Websites and other intangible assets	$	880,355		$	519,923
Trademarks and trade names		446,000			342,682
Customer relationships		712,000			712,000
Patents and intellectual property		264,160			264,160
Total intangible assets		2,302,515			1,838,765
Less: Accumulated amortization		(750,070	)		(316,191	)
Intangible assets, net	$	1,552,445		$	1,522,574

11

The amortization expense for the six months ended December 31, 2018 and 2017, was $433,431 and $9,699 respectively.

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

2019		379,467
2020		544,755
2021		173,301
2022		171,965
2023 and thereafter		282,957
Total	$	1,552,445

NOTE 5 – INVESTMENTS

On July 26, 2018, the Company issued 3,000,000 Shares of the common stock to Messers. Michael Woloshin and Joseph Abrams (existing stockholders and owners of the Company’s 25%-owned Cicero Transact Group, LLC), in return of a 25% ownership interest in Cicero Platform Group LLC, a crypto-currency company. The closing stock price on that date was $0.125 per share, valuing the shares issued at $375,000. The Company has recorded the investment under the cost method given that the Company does not control or have the ability to exercise significant influence over operating and financial policies. The cost method investments for the at December 31, 2018 and June 30, 2018, was $1,370,400 and $995,400, respectively.

NOTE 6 – BUSINESS COMBINATIONS

Tierra Science Global, LLC

On July 26, 2018, the Company acquired 100% of the membership interests of Tierra Science Global, LLC (“Tierra”), a nutraceutical business, for which it: (i) issued to that Company’s owners 2,000,000 shares of the Company’s common stock, valued at $246,000 based on the closing price of the common stock on that day and (ii) entered into employment agreements with the Company’s principal executives. Pursuant to those employment agreements, each of the Tierra’s two sellers was contacted to receive: (i) the greater of $2,000 per month or 2.5% of the prior month’s gross margin from sales and (ii) $25,000 of Company common stock for each $500,000 in cumulative net profits. The Company intends to expand Tierra’s product offering to include various cannabidiol products branded as “powered by Freedom Leaf. 

Purchase Consideration:

The provisional fair value of the purchase consideration issued to the sellers of Tierra was allocated to the net tangible assets acquired. We accounted for the acquisition of Tierra 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 fair value of the net assets acquired, net of liabilities assumed, and was approximately $300,630. The excess of the aggregate fair value of the net tangible and intangible assets has been treated as goodwill. The purchase price allocation was based, in part, on management’s knowledge of Tierra’s business and is preliminary. Once the Company completes its 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.

Provisional consideration given:

Cash Consideration
Common stock shares given		300,630
Notes payable assumed		129,800
Total consideration given	$	430,430

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Assets acquired and liabilities assumed at preliminary fair value:

Current assets	$	1,210
Current liabilities		33,780
Net Working Capital		(32,570	)
Property and equipment		15,000
Trade names and trademarks		55,000
Non-Compete Agreements		120,000
Customer contracts and relationships		209,000
Assembled Workforce		64,000
Total Consideration	$	430,430

The following presents the pro forma combined results of operations of the Company with Tierra as if the entities were combined on July 1, 2017.

	For the Six Months Ended
	Dec 31, 2018,
Revenues, net	$	1,393,603
Net loss allocable to common stockholders		(2,833,066	)
Net loss per common share	$	(0.01	)
Weighted-average number of share outstanding		221,396,199

Revenue recognized by Tierra from acquisition through December 31, 2018 was $475,400. The pro-forma results of operations are presented for information purposes only. The pro forma results of operations are not intended to present actual results that would have been attained had the acquisitions been completed as of July 1, 2018 or to project potential operating results as of any future date or for any future periods.

AccuVape, Inc.

On November 15, 2018, the Company consummated the acquisition of the assets of AccuVape, Inc. (www.accuvape.net), which produce and sell various vape-related products. AccuVape was founded in 2013 as a vaporizer company to fill the growing needs of the emerging vape market. Today, AccuVape: distributes to all 50 states, Canada, the UK and EU and has Midwest and West Coast distribution centers and over 550 authorized retailers that carry AccuVape products.

In consideration of the transaction the Company issued to that Company’s owners: (i) $126,000 in cash plus (ii) 496,667 shares of the Company’s common stock, valued at $155,208 based on the closing price of the common stock on that day. Additionally, the Company entered into a two-year employment agreement with the Company’s principal executive, pursuant to which she is contacted to receive: (i) $2,000 per month in cash plus (ii) annual incentive compensation equal to 22% of any “Gross Margin” increase over the prior 12 months, all of which incentive compensation shall be paid in Company common stock. Apart from the purchase price, the company agrees to reimburse the seller the sum of $27,500 in full satisfaction of itemized expenses.

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Purchase Consideration:

The provisional fair value of the purchase consideration issued to the sellers of AccuVape was allocated to the net tangible assets acquired. We accounted for the acquisition of AccuVape 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 fair value of the net assets acquired, net of liabilities assumed, and was approximately $18,642. The excess of the aggregate fair value of the net tangible and intangible assets has been treated as goodwill. The purchase price allocation was based, in part, on management’s knowledge of AccuVape business and is preliminary. Once the Company completes its 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.

Provisional consideration given:

Cash consideration	$	126,000
Fair value of common stock		155,208
Liabilities assumed		27,500
Total consideration given	$	308,708

Assets acquired and liabilities assumed at provisional fair value:

Current assets	$	44,271
Property and equipment		1,871
Goodwill *		262,566
Total Consideration	$	308,708

* We are reviewing for potential intangible assets, which potentially may change the intangible assets.

The following presents the pro forma combined results of operations of the Company with AccuVape as if the entities were combined on July 1, 2018.

	For the Six months ended
	December 31,
	2018
Revenues, net	$	1,397,225
Net loss allocable to common stockholders		(2,856,615	)
Net loss per common share	$	(0.01	)
Weighted-average number of share outstanding		221,396,199

Revenue recognized by AccuVape from acquisition through December 31, 2018 was $17,136. The pro-forma results of operations are presented for information purposes only. The pro forma results of operations are not intended to present actual results that would have been attained had the acquisitions been completed as of July 1, 2018 or to project potential operating results as of any future date or for any future periods.

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NOTE 7 – 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. As of December 31, 2018, there were no pending or threatened lawsuits.

NOTE 8 – RELATED PARTIES

Cowan, a former director and officer of the Company, has payables and accruals due to him of $0 and $15,485 as of December 31, 2018 and June 30, 2018, respectively, which amounts were recorded in Payable to related party. The payable, as agreed upon verbally, has a maturity date greater than one year, without any other set terms for repayment. Imputed interest is immaterial.

Clifford J. Perry (“Perry”), Chief Executive officer and a director of the Company, has accruals due to him of $45,660 (all of which was recorded as Accounts payable and accrued expenses) and $32,813 as of December 31, 2018 and June 30, 2018, respectively. Imputed interest is immaterial.

Raymond P. Medeiros (“Medeiros”), a director of the Company, has payables and accruals due to him of $43,694 (all of which was recorded as Accounts payable and accrued expenses) and $63,000 as of December 31, 2018 and June 30, 2018, respectively. Imputed interest is immaterial.

NOTE 9 – NOTES PAYABLE

	December 31,			June 30,
	2018			2018
Note payable bearing interest at 0.0%, originated March 3, 2017, due on March 3, 2020	$	96,000		$	99,000
Note payable bearing interest at 5.0%, originated May 17, 2018, due on December 31, 2022		4,511,824			4,629,486
Note payable bearing interest at 0.0%, originated June 5, 2018, due on September 5, 2018		–			95,000
Note payable bearing interest at 8.0%, originated July 3, 2018, due on January 3, 2019, net of original issuance discounts of $3,098 and $-0- respectively		66,000			–
Note payable, assumed in acquisition of Tierra Sciences, bearing interested at 0.0% originated on October 23, 2017, due on demand		–			–
Note payable, assumed in acquisition of Tierra Sciences, bearing interested at 0.0% originated on February 21, 2018, due on demand		–			–
Note payable, assumed in acquisition of Tierra Sciences, bearing interested at 0.0% originated on July 26, 2018, due on demand		1,300			–
Total notes payable	$	4,675,124		$	4,823,486
Less: current portion		(348,037	)		(381,575	)
Long-term notes payable	$	4,327,087		$	4,441,911

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NOTE 10 – 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 December 31, 2018, 684,012 shares of Series A preferred stock were held by Mr. Perry and 264,010 shares of Series A preferred stock were held by Mr. Cowan.

Common Stock

The Company was authorized to issue up to 75,000,000 shares of common stock, par value $0.001 per share. On January 21, 2015, the Company increased its authorized capital to 500,000,000 shares of common stock. 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 December 31, 2018, 222,870,976 shares of common stock were issued, issuable and outstanding. During the quarter ended December 31, 2018, the Company agreed to issue 37,501,611 shares of common stock, as detailed below, resulting in there being 222,870,976 shares outstanding as of December 31, 2018:

	Shares		Fair Value		Average Price Per Share
Common stock issued for:
Business combinations		2,496,667	$	455,838	$	0.18
Cost method investments		3,000,000	$	375,000	$	0.13
Cash and warrants		30,597,946	$	3,328,500	$	0.11
Services		1,406,998	$	300,824	$	0.21
Total		37,501,611	$	4,460,162

Warrants

As of September 30, 2018, warrants to acquire 50,794,444 shares of common stock were outstanding.

No additional Warrants were issued during the quarter:

As of December 31, 2018, warrants to acquire 49,794,444 shares of common stock were outstanding.

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A summary of the status of the options and warrants granted as at December 31, 2018 and June 30, 2018, and changes during the years then ended is presented below:  

				Weighted-
				Average
				Exercise
	Number of			Price per
	Warrants			Share
Outstanding at September 30, 2018		50,794,444		$	0.21
Granted		–
Exercised		–
Cancelled		(1,200,000	)	$	0.05
Outstanding at December 31, 2018		49,594,444		$	0.20
Exercisable at December 31, 2018		49,594,444		$	0.20

A summary of the status of the warrants outstanding at December 31, 2018 is presented below:

Range of Exercise Prices	Number Outstanding		Weighted-Average Remaining Contractual Life		Number Exercisable		Weighted-Average Exercise Price
$0.01 - $0.09		1,000,000		3.05 years		1,000,000	$	0.05
$0.10 - $0.19		30,594,444		2.47 years		30,594,444	$	0.17
$0.20 - $0.29		18,000,000		2.71 years		18,000,000	$	0.25
		49,594,444		2.56 years		49,594,444	$	0.20

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 December 31, 2018.

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 such events that warrant disclosure or recognition in the financial statements, except as stated herein.

On January 3, 2019, the Company issued 291,262 shares of common stock, valued at $75,000, to David Vautrin in connection with his appointment as a Director of the Company.

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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, 2017 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

Freedom Leaf Inc. (“Freedom Leaf,” “FRLF,” and the “Company”) began as a media company in 2013 and has since steadily evolved into a multinational, vertically-integrated corporation primarily focused on the development and sale of premium hemp-based nutraceutical health, wellness and longevity products to a rapidly growing international market. The Company cultivates, researches, and manufactures hemp products with operations Leafceuticals Europe S.L.U. and Leafceuticals Inc. The Company then markets and sells plant-based wellness products under the Freedom Leaf, IRIE, and Hempology brands. Market awareness, customer relationships and distribution channels are reinforced in carefully-targeted demographic niches through the Company’s multiple global media properties, including Marijuana News, LaMarihuana.com, Marihuana-Medicinal.com, and Freedom Leaf Magazine. The Company also cross-markets via B2B and B2C entities such as Cicero Transact LLC, through international affiliate marketing programs under the Tierra Sciences Global brand, and through a soon-to-be introduced, nationwide, online nationwide marketing initiative with KSW Marketing Group.

The Company was incorporated in the State of Nevada on February 21, 2013, under the name of Arkadia International, Inc. The Company was originally engaged in the business of the acquisition of in demand equipment, cars, and goods with the intent to resell these in the U.S. territories or export to overseas countries. On October 3, 2014, the Company experienced a change in control. Richard C. Cowan acquired approximately 93% of the issued and outstanding common stock of the Company at the time. On November 6, 2014, the Company merged with Freedom Leaf Inc., a private Nevada corporation, and the Company changed its name to Freedom Leaf Inc. In connection with the merger, the sole officer, director and stockholder of the private company, Clifford J. Perry, became an officer and director of the Company, and Mr. Perry received approximately 48.1% of the Company’s common stock post-merger. For financial reporting purposes, this merger was accounted for as a "reverse acquisition" rather than a business combination, and the private company was deemed to be the accounting acquirer in the transaction, with the Company deemed to be the acquired company for financial reporting purposes. Consequently, the assets and liabilities and the operations that were reflected in the historical financial statements of the Company prior to the merger are those of the private company, and they were recorded at the historical cost basis of the private company, and the financial statements after completion of the merger include the combined assets and liabilities of the Company and the private company, the historical operations of the private company only, and the operations of both companies from the closing date of the merger.

Freedom Leaf Inc. is an audited and reporting public company traded under the symbol (OTCQB: FRLF) with corporate headquarters located at 3571 E. Sunset Road, Las Vegas, Nevada 89120.

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Results of Operations

For the three months ended December 31, 2018 and December 31, 2017

Revenues

Our revenue was $749,564 for the three months ended December 31, 2018, compared to $6,332 for the three months ended December 31, 2017. Revenue, by class, is as follows:

	For the three months ended
Revenues:	December 31,
	2018		2017
Magazine related	$	638	$	5,826
Sale of products		748,973		506
Total	$	749,564	$	6,332

Comparative results for the quarter reflect the consummation of our IRIE and Tierra acquisitions and recent launch of various CBD products through our Leafceuticals subsidiary. Note that, the Company has been shifting its focus away from licensing revenues, its primary source of revenue in fiscal 2017, and toward the sale of products.

Operating Expenses

Direct costs of revenues were $537,893 and $36,680 for the three months ended December 31, 2018 and 2017, respectively. Direct costs of revenues, by class, is as follows:

	For the three months ended
Direct costs of revenue:	December 31,
	2018		2017
Magazine related	$	13,362	$	36,680
Sale of products		524,531		–
Total	$	537,893	$	36,680

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

For the three months ended December 31, 2018 our general and administrative expenses and marketing and selling expenses were $1,957,114 compared to $603,299 for the three months ended December 31, 2017, resulting in an increase of $1,353,815. The increases were largely attributable to: (1) increased overhead associated with IRIE’s and Tierra’s operations; (2) one-time and recurring expenses related to the Company greenhouse operations in Spain; (3) one-time expenses relate to the launch of CBD and Hempology sales (such as pre-production research and development costs); (4) development expenses related to various projects that the Company believes, when implemented, will expand web sales, and (5) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities.

Other income (expenses)

Other income (expense) was expense of $5,115 for the three months ended December 31, 2018, compared to an expense of $108,767 for the three months ended December 31, 2017.

Net loss attributable to common shareholders was $1,711,866 for the three months ended December 31, 2018, compared to net loss of $742,414 for the three months ended December 31, 2017. The higher net loss for the three months ended December 31, 2018 as compared to the same period in 2017 is largely attributable to: (1) increased overhead associated with IRIE’s and Tierra’s operations; (2) one-time and recurring expenses related to the Company greenhouse operations in Spain; (3) one-time expenses relate to the launch of CBD and Hempology sales (such as pre-production research and development costs); (4) development expenses related to various projects that the Company believes, when implemented, will expand web sales, and (5) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities.

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For the Six months ended December 31, 2018 and December 31, 2017

Revenues

Our revenue was $1,358,222 for the six months ended December 31, 2018, compared to $7,659 for the six months ended December 31, 2017. Revenue, by class, is as follows:

	For the six months ended
Revenues:	December 31,
	2018		2017
Magazine related	$	1,110	$	5,825
CBD oil		4,875		–
Sale of products		1,353,237		1,833
Total	$	1,358,222	$	7,659

Comparative results for the six months reflect the consummation of our IRIE and Tierra acquisitions and recent launch of various CBD products through our Leafceuticals subsidiary. Note that, the Company has been shifting its focus away from licensing revenues, its primary source of revenue in fiscal 2017, and toward the sale of products.

Operating Expenses

Direct costs of revenues were $807,018 and $69,826 for the six months ended December 31, 2018 and 2017, respectively. The increase in direct costs reflects that the Company’s revenues now predominately derive from the sale of products.

Direct costs of revenues, by class, is as follows:

	For the six months ended
Direct costs of revenue:	December 31,
	2018		2017
Magazine related	$	27,415	$	68,850
Sale of products		779,603		976
Total	$	807,018	$	69,826

The increases were largely attributable to: : (1) increased overhead associated with IRIE’s and Tierra’s operations; (2) one-time and recurring expenses related to the Company greenhouse operations in Spain; (3) one-time expenses relate to the launch of CBD and Hempology sales (such as pre-production research and development costs); (4) development expenses related to various projects that the Company believes, when implemented, will expand web sales, and (5) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities.

For the six months ended December 31, 2018 our general and administrative expenses and marketing and selling expenses were $3,492,509 compared to $1,253,522 for the six months ended December 31, 2017, resulting in an increase of $2,238,987. The increases were largely attributable to: (1) increased overhead associated with IRIE’s and Tierra’s operations; (2) one-time and recurring expenses related to the Company greenhouse operations in Spain; (3) one-time expenses relate to the launch of CBD and Hempology sales (such as pre-production research and development costs); (4) development expenses related to various projects that the Company believes, when implemented, will expand web sales, and (5) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities.

Other income (expenses)

Other income (expense) was income of $88,124 for the six months ended December 31, 2018, compared to an expense of $134,309 for the six months ended December 31, 2017.

Net loss attributable to common shareholders was $2,823,632 for the six months ended December 31, 2018, compared to net loss of $1,449,998 for the six months ended December 31, 2017. The higher net loss for the six months ended December 31, 2018 as compared to the same period in 2017 is largely attributable to: (were largely attributable to: (1) increased overhead associated with IRIE’s and Tierra’s operations; (2) one-time expenses relate to the launch of CBD and Hempology sales (such as pre-production research and development costs); (3) development expenses related to various projects that the Company believes, when implemented, will expand web sales, and (4) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities.

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Liquidity and Capital Resources

Overview

As of December 31, 2018, the Company had $855,386 in cash. We expect to incur a minimum of approximately $10,000,000 in expenses during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including operating expenses associated with our businesses, corporate overhead, legal and accounting fees.

Liquidity and Capital Resources during the six months ended December 31, 2018 compared to the six months ended December 31, 2017

We used cash in operations of $2,353,725 for the six months ended December 31, 2018, compared to cash used in operations of $173,252 for the six months ended December 31, 2017. The negative cash flow from operating activities for the six months ended December 31, 2018 is attributable to the Company's net loss attributable to common shareholders of primarily due to: (1) increased overhead associated with IRIE’s and Tierra’s operations; (2) one-time and recurring expenses related to the Company greenhouse operations in Spain; (3) one-time expenses relate to the launch of CBD and Hempology sales (such as pre-production research and development costs); (4) development expenses related to various projects that the Company believes, when implemented, will expand web sales, and (5) increasing general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities.

We used cash in investing or financing activities of $113,730 and $0 for the six months ended December 31, 2018 and 2017.

We had cash provided by financing activities of $3,240,442 for the six months ended December 31, 2018, of which $3,328,500 was from the proceeds of the sale of common stock and warrants compared to $98,246 for the same period in 2017.

We will have to raise funds to pay for our expenses. We may have to 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. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.

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 $2,823,632 and cash used in operating activities of $2,353,725 for the six months ended December 31, 2018. 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. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern for a period of one year from the date of issuance of these financial statements.

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.

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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, 2018, included in our Annual Report on Form 10-K as filed on October 15, 2018, for a discussion of our critical accounting policies and estimates.

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 interim 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, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer and Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:

1.	The Company intends to appoint additional independent directors;
2.	Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions;
3.	Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting;
4.	Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes.

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To remediate our internal control weaknesses, management intends to implement the following measures:

· The Company will add sufficient number of independent directors to the board and appoint additional member(s) to the Audit Committee.

· The Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements.

· The Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting.

· Upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures.

The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management expects to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.

Changes in Internal Control over Financial Reporting

There are no changes in our internal controls over financial reporting other than as described elsewhere herein.

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.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There are no pending legal proceedings in which we are a party or in which any of our directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us. Our property is not the subject of any pending legal proceedings.

Item 1A. Risk Factors

Not required.

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

During the quarter ending December 31, 2018, the Company issued the following unregistered securities. These securities were issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, Regulation D promulgated thereunder 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.

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Item 6. Exhibits

Number	Description
3.1	Articles of Incorporation (incorporated by reference to our Registration Statement on Form S-1, filed on July 22, 2013)
3.2	Bylaws (incorporated by reference to our Registration Statement on Form S-1, filed on July 22, 2013)
3.3	Articles of Merger (incorporated by reference to our Current Report on Form 8-K, filed on February 25, 2015)
3.4	Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K, filed on June 9, 2016)
10.1	Merger Agreement dated November 6, 2014 (incorporated by reference to our Form 10-Q/A for the period ended December 31, 2014, filed on September 11, 2015)
10.2	Audit for the Period Ended November 6, 2014 of Freedom Leaf Inc., the private company (incorporated by reference to our Form 10-Q/A for the period ended December 31, 2014, filed on September 11, 2015)
10.3	License Agreement with Freedom Leaf Iberia, B.V. (incorporated by reference to our Form 8-K filed on February 28, 2017)
10.4	License Agreement with Freedom Leaf Netherlands, B.V. (incorporated by reference to our Form 8-K filed on February 28, 2017)
10.5	Distribution Agreement with NuAxon Bioscience, Inc. (incorporated by reference to our Form 8-K filed on March 17, 2017)
10.6	License Agreement with BBD Healthcare Strategies, LLC (incorporated by reference to our Form 8-K filed on April 3, 2017)
10.7	LaMarihuana.com Asset Purchase Agreement (incorporated by reference to our Form 8-K filed on May 31, 2017)
10.8	LaMarihuana.com Asset Purchase Agreement Partial Waiver (incorporated by reference to our Form 10-Q filed on February 21, 2018)
10.9	Green Market Europe Purchase Agreement (incorporated by reference to our Form 8-K filed on February 7, 2018)
10.10	Green Market Europe Purchase Agreement Amendment (incorporated by reference to our Form 8-K filed on February 7, 2018)
10.11	Irie CBD Asset Purchase Agreement dated March 3, 2018 (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on March 8, 2018)
10.12	Cicero Exchange Agreement dated May 11, 2018 incorporated by reference to our Form 10-Q filed on June 29, 2018
31.1 (1)	Certification of Principal Executive Officer of Freedom Leaf Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 (1)	Certification of Principal Accounting Officer of Freedom Leaf Inc. required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 (1)	Certification of Principal Executive Officer of Freedom Leaf Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
32.2 (1)	Certification of Principal Accounting Officer of Freedom Leaf Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 Of 18 U.S.C. 63
101.INS	XBRL Taxonomy Extension Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

__________

(1) Filed herewith

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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.

	Freedom Leaf Inc.
Dated: February 19, 2019	By: /s/ Clifford J. Perry
	Clifford J. Perry
	Chief Executive Officer

Dated: February 19, 2019	By: /s/ Laurence Ruhe
	Laurence Ruhe
	Chief Financial Officer

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