UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number _________________

Registrant’s Telephone Number, Including Area Code: (800) 433-0127

Securities to be registered under Section 12(b) of the Act: None

Securities to be registered under Section 12(g) of the Exchange Act: Common stock; $0.00001 par value

(Title of Class)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) or a smaller reporting company.

Large accelerated filer	¨	Accelerated filer	¨
Non-Accelerated filer	¨	Smaller reporting company	x
		Emerging Growth Company	x

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

TABLE OF CONTENTS

ITEM 1.	DESCRIPTION OF BUSINESS			3
ITEM 1A.	RISK FACTORS			6
ITEM 2.	FINANCIAL INFORMATION			14
ITEM 3.	PROPERTIES			17
ITEM 4.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			17
ITEM 5.	DIRECTORS AND EXECUTIVE OFFICERS; KEY EMPLOYEES			18
ITEM 6.	EXECUTIVE COMPENSATION.			19
ITEM 7.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.			20
ITEM 8.	LEGAL PROCEEDINGS.			20
ITEM 9.	MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTER			21
ITEM 10.	RECENT SALES OF UNREGISTERED SECURITIES			23
ITEM 11.	DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED			23
ITEM 12.	INDEMNIFICATION OF DIRECTORS AND OFFICERS.			24
ITEM 13.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.			24
ITEM 14.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.			24
ITEM 15.	FINANCIAL STATEMENTS AND EXHIBITS.			24
	SIGNATURES			25

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

PotNetwork Holdings, Inc., (the “Company” or the “Registrant”) was originally incorporated in Nevada in 1996 as H P Capital Corp. The Company redomiciled in Wyoming in 2004 and changed its name to My Medical CD, Ltd. From May 2016 to March 2017, the Company was known as SND Auto Group, Inc. In 2017, the Company redomiciled in Colorado, and changed its name to PotNetwork Holdings, Inc.

On March 3, 2017 the Company acquired via reverse triangular merger 100% of the ownership interest of the privately-held First Capital Venture Co., a Florida corporation. First Capital Venture Co. is the owner of Diamond CBD, Inc. selling numerous CBD Oil products at both wholesale and retail. Pursuant to the Share Exchange and Reorganization Agreement, the First Capital Venture Co. shareholders exchanged their shares which they held in First Capital Venture Holdings Co. for an aggregate total of 50,000 Class A preferred shares in the Company, wherein the shareholders would own 100% of this class of stock of the Company (the “Class A Preferred Shareholders”), which in the aggregate conferred voting control of the Company. First Capital Venture Co. became a wholly-owned subsidiary of the Company as result of the transaction.

Pursuant to a Stock Purchase Agreement dated June 8, 2017, the Company acquired all the capital stock of PotNetwork Media Group, Inc., a Nevada corporation (“PMG”), in exchange for 3,000,000 shares of the Company's common stock issued to the shareholders of PMG, and the cancellation of a $50,000 promissory note between the Company and PMG. As a result, PMG became a wholly-owned subsidiary of the Company. PMG is the owner of the website www.potnetwork.com.

The Company has six (6) wholly-owned subsidiaries, two of which are inactive:

	·	First Capital Venture Co., a Florida corporation which has as its wholly-owned subsidiary, Diamond CBD, Inc., a Delaware corporation
	·	PotNetwork Media Group, Inc., a Nevada corporation
	·	Blockchain Crypto Technology Corp., a Colorado corporation
	·	Grinder Distribution, Inc., a Florida corporation
	·	PNH Holdings, Inc., an inactive Colorado corporation
	·	SND Auto Group, Inc., an inactive Colorado corporation

Existing Products

The Company’s primary operational business is conducted through its subsidiary, First Capital Venture Co., whose subsidiary, Diamond CBD, Inc. (“Diamond CBD”) is engaged in the development and sales of hemp-derived CBD oil containing products. Hemp-derived CBD products have a wide range of potential health and wellness supporting applications which have been increasingly validated by leading medical organizations.

Today, hemp-derived CBD oil containing products are increasingly being used to reduce pain, soothe anxiety, fight cancer, improve mood, eliminate depression, prevent inflammatory arthritis, protect the immune system, balancing the metabolism, aid sleep disorders, and balance the skin, among many other uses.

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Hemp-derived CBD is distinguishable from CBD derived from marijuana. Hemp-derived CBD does not contain THC, the active ingredient in marijuana. Marijuana is regulated under the Controlled Substances Act. We do not believe that our hemp-derived CBD products are regulated under the Controlled Substances Act, but under the Agricultural Act of 2014, known as the “Farm Bill”, which provides for the domestic cultivation of “industrial hemp”, and begins with the clause “Notwithstanding the [Controlled Substances Act] . . .”, thus indicating that “industrial hemp” is not to be treated as a controlled substance.

Diamond CBD’s products are marketed under 15 brand names, including “Diamond CBD”, ‘Chill”, “Relax”, “MediPets” and the premium “Meds BioTech” label, as well as many others. In total, Diamond CBD offers over 800 products in variations by flavor, concentration and size that are sold over a nationwide distribution network of over 550 distributors and resellers that sell to thousands of brick-and-mortar retailers and online merchants. The overall product line, because of its size, is constantly in flux as new products are added and products are culled based on several factors including, but not limited to, consumer acceptance, inventory levels, and replacement as the result of incremental improvement.

While most of Diamond CBD's products are geared to human health and wellness, its “MediPets” product line is a 100% natural and organic cannabinoid oil-based health and wellness solution for dogs and cats. Along with the company's Pet CBD Food for small, medium, large dogs and cats, these products offer pet owners a new way to support their pet's mood and wellness in a non-invasive, non-toxic way. The global pet care industry is expected to reach $110 billion in 2017, according to Euromonitor Research (The State Of Global Pet Care: Trends And Growth Opportunities, September 2017). Technavio, a leading market research firm, recently analyzed the global pet care industry and forecasted a CAGR of 5% between 2016-2020 (Global Pet Dietary Supplements Market 2018-2022, March 2018). According to that report, rising pet ownership combined with increased consumer spending on premium natural and organic pet care products are fundamental factors driving that growth.

Diamond CBD also offers for sale a majority of its products direct to consumers via its website, http://www.diamondcbd.com/.

Diamond DBD’s products are grouped in the following categories:

	·	Flavored and unflavored CBD oils in varying concentrations
	·	Vaping pens and additives
	·	Edibles such as chewable “gummies”, crumble “dabs”, and other edible forms
	·	Beverage energy/relaxation “shots”
	·	CBD topical application creams in varying concentrations (including the premium “Meds BioTech” brand)
	·	Pet (dog and cat) wellness products in various dosages and delivery formats (the “MediPets” brand)

 

Consumer markets served by Diamond CBD are extensive. In terms of geography, the products are sold wherever legal and the Company stipulates to its distribution channels that the products may only be sold to end-user persons eighteen years of age or older (See Item 1A “Risk Factors” for a further explanation of the laws regarding the sale of hemp-derived CBD products). Initially the Company focused distribution on market segments receptive to hemp-derived CBD products, such as vape shops and various countercultural focused retail outlets. Distribution was expanded greatly throughout 2017 as the result of investment in new products and channel marketing (e.g., product catalogues and sell sheets, trade show and conference attendance, channel specific sales force), resulting in a vast broadening of distribution footprint and accelerated market growth, market penetration and revenue generation. For example, with the addition of specialized product lines, such as Meds BioTech and MediPets, the Company has been able to enter into new market segments such as vitamin/supplement shops, fitness centers, wellness practitioners of various disciplines, pet supply stores, and veterinary channels.

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The strategic intent of the marketing plan in 2017 and 2018, has been to create a defendable “marketing wall” around distribution channels and retail outlets to keep competition out. The Company has spent in excess of $3,000,000 in marketing. In parallel with distribution strategies, the Company has embraced various cause-related marketing initiatives in association with non-profit entities in order to position itself as socially conscious and concerned with overall health and fitness and is engaged in select target market consumer awareness and brand preference campaigns.

New Product Pipeline and Scientific Advisory Board

In July 2017, Diamond CBD initiated the formation of its “Scientific Advisory Board” which as of the date of this report is comprised of over half a dozen physicians and research scientists representing a variety of practice disciplines, under the chairmanship of the Company’s CEO, Richard Goulding, M.D. The Scientific Advisory Board is charged with exploring the health and wellness benefits of hemp-derived CBD oil, its uses, and potential new applications.

Product Formulation and Production

Under written purchase orders, Diamond CBD outsources most of its product formulation, quality testing, production and packaging to commercial suppliers, which, as the situation may require, hold the necessary regulatory and other licenses/permits specific to each one’s activity. For certain categories of products, Diamond CBD outsources fulfillment as well. Any and all raw materials constituting active ingredients in its products are routinely tested by a third-party laboratory for purity and consistency of active ingredient concentration. The Company owns its own propriety formulas to all its products which it regards as trade secrets, and continuously is engaged in both new product development and product incremental improvement with its suppliers.

Sales Channels

In addition to selling its products directly to consumers from its website, Diamond CBD, and indirectly the Company, depends upon its network of distributors and resellers to represent its product in various markets. During 2017, the Company signed 550 distributors across the U.S. which distribute to thousands of points of retail distribution. No single distributor represents more than 10% of the Company’s aggregate sales volume. The Company is continuously evaluating the performance of its distributors and sales channels and periodically restructures or updates its agreements and methods of distribution. For European sales, Diamond CBD has recently established a foreign distribution center in Watford, United Kingdom.

The Markets for Our Products

Market research firm, Brightfield Group, estimates that the CBD oil industry is growing at a rate of 55% year over year and projects that the U.S. domestic market for CBD oil products will total a minimum of $1 billion by 2020 (Forbes, August 23, 2017).

Hemp-derived CBD products are becoming “mainstream” as the health and wellness benefits of such products grow in consumer and medical and clinical practice acceptance.

Competition

Currently, in the United States, there are no businesses that can demonstrate or claim a dominant market share of the growing CBD products market. Competition, outside those companies that provide THC containing CBD in states where that is allowed under state law, is limited to numerous small and mid-size health supplement brands and related general health and fitness brands. Overall, there are no major pharmaceutical manufacturing companies marketing into this market at this time, although the Company is expecting such an entry in the future. Competition also includes many small regional marketers/packagers of CBD oil containing products that have limited distribution and economic resources.

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Employees and Independent Contractors

The Company has 13 full-time employees.

Patents and Trademarks

The Company holds trademark, “PotNetwork”, under U.S. registration number 5134812, granted January 31, 2017. It is used by the Company in its own branding and that of its website, PotNetwork.com.

The Company holds no patents, nor at this time, has any patent pending.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk. An investor should carefully consider the following risk factors and the other information in this registration statement before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks.

We may become subject to regulation by the Food and Drug Administration (FDA)

The FDA under the Federal Food, Drug, and Cosmetic Act regulates the formulation, manufacturing, packaging, labeling, distribution and sale of drugs, food, including dietary supplements, and over-the-counter drugs. We believe our hemp-derived CBD containing products are dietary supplements, not drugs. We have not obtained and do not plan to obtain FDA approval of our hemp-derived CBD containing products. As a result, we could be subject to enforcement proceedings by the FDA.

We have a limited operating history and operate in a new industry, and we may not succeed.

The consumer products business is a highly competitive and risky business, and such competition from companies much bigger than us could adversely affect our operating results.

We compete with many national, regional and local businesses. We could experience increased competition from existing or new companies in our channel, which could create increasing pressures to grow ours. If we are unable to maintain our competitive position, we could experience downward pressure on prices, lower demand for our products, reduced margins, the inability to take advantage of new business opportunities and the loss of channel share, which would have an adverse effect on our operating results. Other factors that could affect our business are:

	·	Consumer tastes
	·	National, regional or local economic conditions
	·	Disposable purchasing power
	·	Demographic trends; and
	·	The price of special ingredients that go into our products.

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Increases in the cost of ingredients, labor and other costs could adversely affect our operating results.

Our principal products contain hemp-derived CBD oil. Increases in the cost of ingredients in our products could have a material adverse effect on our operating results. Significant price increases, market conditions, weather, acts of God and other disasters could materially affect our operating results. An increase in our operating costs could adversely affect our profitability. Factors such as inflation, increased labor and employee benefit costs and increased energy costs may adversely affect our operating costs. Many of the factors affecting costs are beyond our control and we may not be able to pass along these increased costs to our customers.

We do not have long-term contracts with many of our suppliers, and as a result they could seek to increase prices or fail to deliver.

We typically do not rely on written contracts or long-term arrangements with our suppliers. Although we have not experienced significant problems with our suppliers, our suppliers may implement significant price increases or may not meet our requirements in a timely fashion, if at all. The occurrence of any of the foregoing could have a material adverse effect on our operating results.

Any prolonged disruption in the operations of any of our packaging facilities could harm our business.

Any prolonged disruption in the operations of any facilities that perform our packaging, whether due to technical or labor difficulties, destruction or damage to the facility, real estate issues or other reasons, could result in increased costs and reduced revenues and our profitability and business results could be harmed.

Loss of key personnel or our inability to attract and retain new qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.

Our ability to successfully grow our brand depends on our ability to attract and retain professionals with talent, integrity, enthusiasm and loyalty to our corporate team. If we are unable to attract or retain key personnel, our profitability and growth potential could be harmed.

We may not be able to adequately protect our intellectual property, which could harm the value of our brand and branded products and adversely affect our business.

We depend in large part on our brand and branded products as well as on our proprietary processes and believe that they are very important to our business. We rely on a combination of trademarks, copyrights, trade secrets and similar intellectual property rights to protect our brand and branded products. The success of our business depends on our continued ability to use our existing trademarks in order to increase brand awareness and further develop our branded products in both domestic and international markets. We have registered, or will register, certain trademarks in the United States and may elsewhere. We may not be able to adequately protect our trademarks and our use of these trademarks may result in liability for trademark infringement, trademark dilution or unfair competition. We may from time to time be required to institute litigation to enforce our trademarks or other intellectual property rights, or to protect our trade secrets. Such litigation could result in substantial costs and diversion of resources and could negatively affect our sales, profitability and business results regardless of whether we are able to successfully enforce our rights.

Our annual and quarterly financial results are subject to significant fluctuations depending on various factors, many of which are beyond our control, which could adversely affect our ability to satisfy our debt obligations as they become due.

Our sales and operating results can vary significantly from quarter to quarter and year to year depending on various factors, many of which are beyond our control. These factors include:

	·	Variations in the timing and volume of our sales
	·	The timing of expenditures in anticipation of future sales
	·	Sales promotions by us and our competitors
	·	Changes in competitive and economic conditions generally
	·	Foreign currency exposure

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Consequently, our results of operations may decline quickly and significantly in response to changes in order patterns or rapid decreases in demand for our products. We anticipate that fluctuations in operating results will continue in the future. The Company's operating results may vary. We may incur net losses. The Company expects to experience variability in its revenues and net profit. While we intend to implement our business plan to the fullest extent we can, we may experience net losses. Factors expected to contribute to this variability include, among other things:

	·	The general economy
	·	The regulatory environment pertaining to our products
	·	Climate, seasonality and environmental factors
	·	Consumer demand
	·	Transportation costs
	·	Competition in products

You should further consider, among other factors, our prospects for success in light of the risks and uncertainties encountered by companies that, like us, are in their early stages. For example, unanticipated expenses, problems, and technical difficulties may occur and they may result in material delays in the operation of our business, in particular with respect to our new products. We may not successfully address these risks and uncertainties or successfully implement our operating strategies. If we fail to do so, it could materially harm our business to the point of having to cease operations and could impair the value of our common stock to the point investors may lose their entire investment.

We may require additional capital to finance our operations in the future, but that capital may not be available when it is needed and could be dilutive to existing stockholders.

We may require additional capital for future operations. We plan to finance anticipated ongoing expenses and capital requirements with funds generated from the following sources:

	·	Cash provided by operating activities
	·	Available cash and cash investments
	·	Capital raised through debt and equity offerings

Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only on unfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control. Accordingly, we cannot assure you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our liquidity, financial condition, results of operations and prospects. Further, if we raise capital by issuing stock, the holdings of our existing stockholders will be diluted.

If we raise capital by issuing debt securities, such debt securities would rank senior to our common stock upon our bankruptcy or liquidation. In addition, we may raise capital by issuing equity securities that may be senior to our common stock for the purposes of dividend and liquidating distributions, which may adversely affect the market price of our common stock. Finally, upon bankruptcy or liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both.

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Our stock price has been extremely volatile, and our common stock is not listed on a national stock exchange; as a result, stockholders may not be able to resell their shares at or above the price paid for them.

The market price of our common stock as has been historically volatile and could be subject to significant fluctuations due to changes in sentiment in the market regarding our operations or business prospects, among other factors. Further, our common stock is not listed on a national stock exchange; we intend to list the common stock on a national stock exchange once we meet the entry criteria. An active public market for our common stock currently exists on the OTC Markets (www.otcmarkets.com) but may not be sustained. Therefore, stockholders may not be able to sell their shares at or above the price they paid for them.

Among the factors that could affect our stock price are:

	·	Industry trends and the business situation of our suppliers
	·	Actual or anticipated fluctuations in our quarterly financial and operating results and operating results that vary from the expectations of our management or of securities analysts and investors
	·	our failure to meet the expectations of the investment community and changes in investment community recommendations or estimates of our future operating results
	·	Announcements of strategic developments, acquisitions, dispositions, financings, product developments and other materials events by us or our competitors
	·	Regulatory and legislative developments
	·	Litigation
	·	General market conditions
	·	Other domestic and international macroeconomic factors unrelated to our performance
	·	Changes in key personnel

Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of our common stock.

A substantial portion of our total outstanding shares of common stock may be sold into the market at any time, or a substantial portion of our total outstanding shares of preferred stock may be converted to common stock and sold into the market at any time. Some of these shares are owned by the management of the Company, and we believe that such holders have no current intention to either convert their preferred stock into common stock or to sell a significant number of shares of their common stock into the market. If all of the major stockholders were to decide to sell large amounts of stock over a short period of time such sales could cause the market price of our common stock to drop significantly, even if our business is performing well.

Our financial statements may not be comparable to those of other companies.

Pursuant to Section 107(b) of the JOBS Act, we have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of The JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates, and our stockholders and potential investors may have difficulty in analyzing our operating results if comparing us to such companies.

The success of our new and existing products and services is uncertain.

We have committed, and expect to continue to commit, significant resources and capital to develop and market existing product enhancements and new products. We cannot assure you that we will achieve market acceptance for all of our products, or of new products that we may offer in the future. Moreover, these new products may be subject to significant competition with offerings by new and existing competitors. In addition, new products and enhancements may pose a variety of challenges and require us to attract additional qualified employees. The failure to successfully develop and market these new products or enhancements could seriously harm our business, financial condition and results of operations.

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Our business is dependent upon continued market acceptance by consumers.

We are substantially dependent on continued market acceptance of our products by consumers. Although we believe that our products in the United States are gaining increasing consumer acceptance, we cannot predict that this trend will continue in the future.

As we expand our operations, we may be unable to successfully manage our future growth.

Since inception, our business has grown. This growth has placed substantial strain on our management, operational, financial and other resources. If we are able to continue expanding our operations in the United States and in other countries where we believe our products will be successful, as planned, we may experience periods of rapid growth, which will require additional resources. Any such growth could place increased strain on our management, operational, financial and other resources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting, international, technical, and other professionals. In addition, we will need to expand the scope of our infrastructure and our physical resources. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner and at a pace consistent with our business objectives could have a material adverse effect on our business and results of operations.

Any future litigation could have a material adverse impact on our results of operations, financial condition and liquidity, particularly since we do not currently have director and officer (“D&O”) insurance. Our lack of insurance may also make it difficult for us to retain and attract talented and skilled directors and officers. While we intend to apply for D&O insurance, we cannot guarantee that such application will be accepted.

Despite our significant efforts in product quality control, we face risks of litigation from customers and others in the ordinary course of business, which may divert our financial and management resources. Any adverse litigation or publicity may negatively impact our financial condition and results of operations.

Claims of illness or injury relating to product quality or handling are common in the consumer products industry. While we believe our processes and high standards of quality control will minimize these instances, there is always a risk of occurrence, and so despite our best efforts to regulate quality control, litigation may occur. In that event, our financial condition, operating results and cash flows could be harmed.

From time to time we may be subject to litigation, including potential stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. To date we have no directors and officers liability ("D&O") insurance to cover such risk exposure for our directors and officers. Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expenses including attorneys' fees) of officers and directors who are the subject of a lawsuit as a result of their service to the Company. While we intend to attempt to obtain such insurance, there can be no assurance that we will be able to do so at reasonable rates or at all, or in amounts adequate to cover such expenses should such a lawsuit occur. While neither Colorado law nor our articles of incorporation or bylaws require us to indemnify or advance expenses to our officers and directors involved in such a legal action, we expect that we would do so to the extent permitted by Colorado law. Without D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Further, our lack of D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which could adversely affect our business.

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Our prior operating results may not be indicative of our future results.

You should not consider prior operating results with respect to revenues, net income or any other measure to be indicative of our future operating results. The timing and amount of future revenues will depend almost entirely on our ability to sell our products to new customers. Our future operating results will depend upon many other factors, including:

	·	The level of product and price competition,
	·	Our success in expanding our distribution network and managing our growth,
	·	Our ability to develop and market product enhancements and new products,
	·	The timing of product enhancements, activities of and acquisitions by competitors,
	·	The ability to hire additional qualified employees, and
	·	The timing of such hiring and our ability to control costs.

Our current Board of Directors consists of only one person

Gary Blum is our sole officer and director.

We do not have any outside Board Directors which could create a conflict of interests and pose a risk from a corporate governance perspective.

Our Board of Directors consists of only one director, which means that we have no outside or independent directors. The lack of independent directors may prevent the Board from being independent from management in its judgments and decisions and its ability to pursue the Board responsibilities without undue influence. For example, an independent Board can serve as a check on management, which can limit management taking unnecessary risks. Furthermore, the lack of independent directors creates the potential for conflicts between management and the diligent independent decision-making process of the Board. Furthermore, our lack of outside directors deprives our company of the benefits of various viewpoints and experience when confronting the challenges we face. With no independent director sitting on the Board of Directors, it will be difficult for the Board to fulfill its traditional role as overseeing management.

Requirements associated with being a reporting public company will require significant company resources and management attention.

We have filed a Form 10 registration statement with the U.S. Securities and Exchange Commission ("SEC"). Once the Form 10 becomes effective, we will be subject to the reporting requirements of the Exchange Act and the other rules and regulations of the SEC relating to public companies. We are working with independent legal, accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as an SEC reporting company. These areas include corporate governance, internal control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal control over financial reporting. However, we cannot provide assurances that these and other measures we may take will be sufficient to allow us to satisfy our obligations as an SEC reporting company on a timely basis.

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In addition, compliance with reporting and other requirements applicable to SEC reporting companies will create additional costs for the Company and will require the time and attention of management and may require the hiring of additional personnel and legal, audit and other professionals. We cannot predict or estimate the amount of the additional costs we may incur, the timing of such costs or the impact that our management's attention to these matters will have on our business.

Our preferred shareholders have voting control.

As of March 3, 2017, the holders of our Series A Preferred Stock have voting control over the Company. As a result, they have the ability to control substantially all matters submitted to our stockholders for approval including:

	·	Election of our board of directors;
	·	Removal of any of our directors;
	·	Amendment of our articles of incorporation or bylaws; and
	·	Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.

Our preferred stock may have rights senior to those of our common stock which could adversely affect holders of common stock.

Our articles of incorporation give our Board of Directors the authority to issue additional series of preferred stock without a vote or action by our stockholders. The Board also has the authority to determine the terms of preferred stock, including price, preferences and voting rights. The rights granted to holders of preferred stock in the future may adversely affect the rights of holders of our common stock. Any such authorized class of preferred stock may have a liquidation preference - a pre-set distribution in the event of a liquidation - that would reduce the amount available for distribution to holders of common stock or superior dividend rights that would reduce the amount of dividends that could be distributed to common stockholders. In addition, an authorized class of preferred stock may have voting rights that are superior to the voting right of the holders of our common stock.

We are an emerging growth company and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies, but not to emerging growth companies, including, but not limited to, a requirement to present only two years of audited financial statements, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduced disclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companies and no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements, although some of these exemptions are available to us as a smaller reporting company (i.e. a company with less than $75 million of its voting equity held by affiliates). We have elected to adopt these reduced disclosure requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.

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We do not expect to pay any cash dividends in the foreseeable future.

We intend to retain our future earnings, if any, in order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, and such other factors as our board of directors deems relevant. Accordingly, investors may need to sell their shares of our common stock to realize a return on their investment, and they may not be able to sell such shares at or above the price paid for them.

We can sell additional shares of common stock without consulting stockholders and without offering shares to existing stockholders, which would result in dilution of existing stockholders' interests in the Company and could depress our stock price.

Our Articles of Incorporation authorize 1,000,000,000 shares of common stock, of which 448,921,254 are outstanding as of June 30, 2018; 50,000 shares of series A preferred stock, of which 45,151 shares are outstanding as of June 30, 2018. Moreover, our Board of Directors is authorized to issue additional shares of our common stock and preferred stock. Although our Board of Directors intends to utilize its reasonable business judgment to fulfill its fiduciary obligations to our then existing stockholders in connection with any future issuance of our capital stock, the future issuance of additional shares of our common stock or preferred stock convertible into common stock would cause immediate, and potentially substantial, dilution to our existing stockholders, which could also have a material effect on the market value of the shares.

Because we will be subject to “penny stock” rules, the level of trading activity in our stock may be reduced.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges). The penny stock rules require a broker-dealer to deliver to its customers a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market prior to carrying out a transaction in a penny stock not otherwise exempt from the rules. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules.

Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit your ability to buy and sell our stock, which could depress our share price.

FINRA rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares, depressing our share price.

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ITEM 2. FINANCIAL INFORMATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND PLAN OF OPERATION

The following Management’s Discussion and Analysis of Financial Condition and Plan of Operations (“MD&A”) is intended to help you understand our historical results of operations during the periods presented and our financial condition. This MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes to consolidated financial statements and contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.

PotNetwork Holdings, Inc., (the “Company” or the “Registrant”) was originally incorporated in Nevada in 1996 as H P Capital Corp. The Company redomiciled in Wyoming in 2004 and changed its name to My Medical CD, Ltd. In 2017, the Company redomiciled in Colorado, and changed its name to PotNetwork Holdings, Inc. The Company’s primary operational business is conducted through its subsidiary, First Capital Venture Co., whose subsidiary, Diamond CBD, Inc. (“Diamond CBD”) is engaged in the development and sales of hemp-derived CBD oil containing products. Hemp-derived CBD products have a wide range of potential health and wellness supporting applications which have been increasingly validated by leading medical organizations.

Results of Operations during the three months ended March 31, 2018 as compared to the three months ended March 31, 2017

During the three months ended March 31, 2018 and March 31, 2017, we generated revenues of $6,284,000 and $1,858,000, respectively, a 238% increase year over year. The increase is attributable to increased marketing expenditures and an increase in sales personnel. Sales and marketing expenses increased from $309,000 for the three months ended March 31, 2017 to $2,084,000 for the three months ended March 31, 2018, an increase of 574%. General and administrative expenses rose from $157,000 to $231,000 during the same period for an increase of 47%.

Our Net Profit for the three months ended March 31, 2018 and March 31, 2017 increased from $154,000 to $193,000, an increase of 25%, as a substantial portion of gross profit was reinvested into sales and marketing.

Results of Operations during the year ended December 31, 2017 as compared to the year ended December 31, 2016

For the fiscal years ended December 31, 2017 and 2016 the Company had revenues of $14,499,000 and $1,029,000, an increase of 1,309%. The increase is attributable to increased marketing expenditures and an increase in sales personnel.

Selling, general and administrative expense increased to $4,974,000 from $349,000 for the years ended December 31, 2017 and 2016, respectively, an increase of 1,325%.

Net income increased to $179,000 for the year ended December 31, 2017 from a loss of ($408,000) for the year ended December 31, 2016.

Liquidity and Capital Resources

As of March 31, 2018, we had $3,220,000 in total assets including cash and cash equivalents of $209,000 and $1,584,000 in accounts receivable. As of December 31, 2017, we had $2,033,000 in total assets including of cash and cash equivalents of $240,000 and $330,000 in accounts receivable.

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As of March 31, 2018, we had total current liabilities of $311,000 consisting of accounts payable and long-term liabilities of $1,831,000 consisting of notes payable. As of December 31, 2017, we had total current liabilities of $271,000 consisting of accounts payable and long-term liabilities of $2,124,000 consisting of notes payable. 

As of December 31, 2017 we had $2,033,000 in total assets including of cash and cash equivalents of $240,000 and $330,000 in accounts receivable compared to total assets of $90,000 consisting of $1,000 in accounts receivable and $86,000 in deposits as at December 31, 2016.

Cash Flow from Operating Activities

Net cash from operations for the 3 months ended March 31, 2018 was $822,000 as compared to ($14,000) for the 3 months ended March 31, 2017.

Net cash from operations for the year ended December 31, 2017 was $240,000 as compared to ($1,000) for the year ended 2016.

Cash Flow from Investing Activities

Net cash provided by investing activities for the 3 months ended March 31, 2018 was $197,000 as compared to $0 for the 3 months ended March 31, 2017.

Net cash provided by investing activities for the years ended December 31, 2017 and December 31, 2016 was $0 and $0.

Cash Flow from Financing Activities

Net cash provided by financing activities for the 3 months ended March 31, 2018 was ($1,050,000) as compared to $0 for the 3 months ended March 31, 2017.

Net cash provided by financing activities for the years ended December 31, 2017 and December 31, 2016 was $0 and $0.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

A summary of significant accounting policies is included in Note 2 to the consolidated financial statements included in this Registration Statement. Of these policies, we believe that the following items are the most critical in preparing our financial statements.

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USE OF ESTIMATES: Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.

REVENUE RECOGNITION – DIAMOND CBD BUSINESS

	·	Sales are recognized when the sale proceeds are credited to the bank account during the year.
	·	At each year end, the sales invoices are reviewed and based on the subsequent receipt of payments and are accounted as sales to comply with the matching principle of considering the expenses and revenues of the same year. Such book entries are reversed in the following year.
	·	For online sales, merchandise is not shipped unless and until the customer pays for it.
	·	For orders received over the phone, the merchandise will not ship unless and until the customer pays for it.
	·	Sales on credit terms are exceptional and requires the customer to establish the credit.
	·	Revenue transactions represent the actual merchandise shipped to the customers as drop shipments.
	·	The revenue recorded in the books are net of sales and other taxes collected on behalf of governmental authorities.
	·	The revenue includes shipping and handling costs which are generally included in the sale invoices.
	·	Revenue is recognized when the title, ownership and risk of loss transfers, which is usually on the date of shipment.
	·	Provision for discounts, when applicable, are stated in the sales invoice and used to determine the net of sales for each such invoice.
	·	Returns are accounted as a reduction of sales when the returns are authorized.

	·	Trade promotions such as sale prices, coupons, etc. are offered to the customers on various occasions as part of marketing and sales promotion. In all such cases, sales are recorded net of trade promotions, which is generally incurred at the time of sale. Most of the arrangements are for a year or less. Expected payouts are not estimated and hence accounted as and when incurred.
	·	Most of the sales are charged to the customers’ credit cards. Though there is a delay of 10 business days to receive the credit to the Company’s bank account, the sales are accounted as revenue based on the charge to the customers’ credit card but recorded as receivable. Also, the Company is subjected to 10% reserve for 90 days.

CASH AND CASH EQUIVALENTS: Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.

PROPERTY AND EQUIPMENT: Property and equipment are stated at the written-down value [that is, after deducting depreciation from the cost]. The Company adapted the depreciation rates as provided in the IRS publications, using the Modified Accelerated Cost Recovery System (MACRS). Computers and office equipment are considered as 5-year property. Office furniture and fixtures are 7-year property in MACRS and apply the 200% declining balance method over a GDS recovery period. Wherever possible, section 179 depreciation is also applied.

Most Recent accounting pronouncements

Refer to Note 3 in the accompanying consolidated financial statements.

Impact of Most Recent Accounting Pronouncements

There were no recent accounting pronouncements that have had a material effect on the Company’s financial position or results of operations.

ITEM 3. PROPERTIES

We maintain our offices at 3531 Griffin Road, Fort Lauderdale, FL 33312. The space is provided to the Company at no cost by Kevin Hagen, the president of our wholly owned subsidiary First Capital Venture Co.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of July 9, 2018, we had 464,921,254 common shares outstanding. The following table sets forth certain information regarding our shares of common stock beneficially owned as of July 9, 2018, for (i) each stockholder known to be the beneficial owner of five percent (5%) or more of our outstanding shares of common stock, (ii) each named executive officer and director, and (iii) all executive officers and directors as a group. A person is considered to beneficially own any shares: (i) over which such person, directly or indirectly, exercises sole or shared voting or investment power, or (ii) of which such person has the right to acquire beneficial ownership at any time within sixty (60) days through an exercise of stock options or warrants or otherwise. Unless otherwise indicated, voting and investment power relating to the shares shown in the table for our directors and executive officers is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children.

For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within sixty (60) days of the date of this Registration Statement. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within sixty (60) days of the Closing Date is deemed to be outstanding but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
Common Stock		Direct				Indirect				Total				Percentage of Class, Rounded
Name and Address of Beneficial Owner (1)
Executive Officers and Directors
Richard Goulding			1,000,000				-0-				1,000,000				>1	%
Gary Blum			-0-				-0-				-0-				-0-
Kevin Hagen			27,750,000				-0-				27,750,000				5.97
Officers and Directors as a Group			28,750,000				-0-				28,750,000				6.18
Other 5% Holders
Elinor Taieb			27,750,000				-0-				27,750,000				5.97
Zipora Urieli			28,500,000				-0-				28,500,000				6.13

(1)	The address of each officer is 3531 Griffin Road, Fort Lauderdale, FL 33312
(2)	Each share of Class A preferred stock is convertible into 0.0018% of the total number of outstanding shares of common stock at the time of conversion. Class A Preferred Stock shall be entitled to a number of votes equal to the sum obtained by using the following quotient:   (x) the sum of all outstanding shares of common stock, plus the sum of the number of votes of all other outstanding shares of stock, including any preferred stock that may be outstanding, plus the sum of the votes of all other financial instruments outstanding which may be entitled to vote on any such matter, divided by (y) 0.9.

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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS; KEY EMPLOYEES 

Our directors hold office until the next annual general meeting of the stockholders or until their successors are elected and qualified. Our officers are appointed by our Board of Directors and hold office until the earlier of their death, retirement, resignation, or removal.

The following table sets forth the names and ages of the members of our Board of Directors and our executive officers and the positions held by each.

Gary L. Blum, 77, has been the Chairman of PotNetwork Holdings, Inc. since November 2015 and was its Chief Executive Officer from November 2015 until September 2017. Mr. Blum is also a practicing attorney since 1979 with the Law Offices of Gary L. Blum where his focus is advising a variety of closely held private companies as well as public companies in business, corporate, securities and entertainment law. Mr. Blum has served as a director of Rennova Health, Inc. since October 2017, and, from September 2009 until July 2017, served as the Chairman and CEO of Thunderclap Entertainment, Inc. (now TraqIQ, Inc.). Mr. Blum received his B.S., Magna Cum Laude, in Mathematics from Loras College in 1962; M.A. in Philosophy from the University of Notre Dame in 1966; and his J.D. and M.B.A. degrees from the University of Southern California Gould School of Law and Marshall School of Business, respectively, in 1978. He has been a member of the California State Bar since 1979.

Richard E. Goulding, M.D. 64, has been the Chief Executive Officer of PotNetwork Holding, Inc. since October 4, 2017. Dr. Goulding serves as Chairman of the Board, Chief Executive Officer and President of Real American Capital Corp. Dr. Goulding has been a Corporate Director of Physicians Healthcare Management Group Inc. since April 2005. Dr. Goulding has more than 20 years of experience in private medical practice as a Board-Certified Otolaryngologist. Dr. Goulding served as Medical Director for Potnetwork420 at PotNetwork Holding, Inc. since March 26, 2014 until October 4, 2017, prior to becoming the Company’s CEO. Dr. Goulding is a member of: American Academy of Otolaryngology, American Academy of Facial Plastics & Reconstructive Surgery, Florida Society of Otolaryngology, American Medical Association and American Academy of Otolaryngic Allergy.

Significant Employees

Kevin Hagen is the president of First Capital Venture Co., a subsidiary of the Company that is responsible for the majority of the Company’s sales. Mr. Hagen graduated with honors from the University of Florida and attended law school at Nova Southeastern University. After admission to the Florida Bar, Mr. Hagen served on several bar committees including Law School Liaison and Consumer Protection Law. Among his legal certifications, Mr. Hagen is admitted to practice in the United States Supreme Court, United States District Court for the Southern and Middle Districts of Florida and the United States Court of Appeals for the Eleventh Circuit.

Family Relationships

There are no familial relationships among any of our officers or directors. None of our directors or officers is a director in any other reporting companies except as disclosed. The Company is not aware of any proceedings to which any of the Company‚ officers or directors, or any associate of any such officer or director, is a party adverse to the Company or any of the Company subsidiaries or has a material interest adverse to it or any of its subsidiaries.

Involvement in Legal Proceedings

None.

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ITEM 6. EXECUTIVE COMPENSATION.

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our chief executive officer for services rendered in all capacities for the periods set forth below. 

Summary Compensation Table

_____________

(1) Represents accrued salary posted after signing of employment agreement after 3/31/2018. 

Employment Agreements

The Company entered into an employment agreement with Richard Goulding, CEO, on July 9, 2018 retroactive to September 5, 2017, for a period of one year. He was not engaged by the Company prior to that date. The agreement is renewable for additional one-year periods. Under the terms of the agreement, Dr. Goulding receives a base salary, receives a initial common stock grant and common stock options. The Company does not have any other employment agreements with any of our officers and directors, some of whom have performed services on our behalf for no compensation.

Compensation of Directors

Our board of directors has not received any compensation to date.

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ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Related Party Transactions

We maintain our offices at 3531 Griffin Road, Fort Lauderdale, FL 33312. The space is provided to the Company at no cost by Kevin Hagen, the president of our wholly owned subsidiary First Capital Venture Co.

ITEM 8. LEGAL PROCEEDINGS.

Mammoth West Corporation v PotNetwork Holdings Inc., Case No. 17 CH 778, 19th Circuit Court of Lake County, IL. Mammoth West is suing the Company based upon a promissory note entered into between Mammoth and SND Auto Group, Inc.

Southridge Partners II Limited Partnership vs. SND Auto Group, Inc., Case No. 3:17-cv-01925 US District Court for the District of Connecticut. Southridge is suing the Company based upon a promissory note entered into between Southridge and SND Auto Group, Inc.

J. P. Carey Limited Partners, L.P. v. PotNetwork Holdings, Inc., Case No.3:18-CV-00873-WWE, US District Court for the District of Connecticut. J.P. Carey is suing the Company based upon a promissory note entered into between J.P. Carey and SND Auto Group, Inc.

The Company is vigorously defending each of these actions.

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ITEM 9. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTER

Market Information

Our common stock is quoted on the OTC Pink Sheets Market, an alternative trading system, under the symbol POTN. For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.

Dividends. We have never declared or paid any cash dividends on our common stock nor do we anticipate paying any in the foreseeable future. We expect to retain any future earnings to finance our operations and expansion. The payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.

Equity Compensation Plans. We do not have any equity compensation plans.

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Penny Stock Considerations

Our shares will be "penny stocks", as that term is generally defined in the Securities Exchange Act of 1934 to mean equity securities with a price of less than $5.00. Thus, our shares will be subject to rules that impose sales practice and disclosure requirements on broker-dealers who engage in certain transactions involving a penny stock.

Under the penny stock regulations, a broker-dealer selling a penny stock to anyone other than an established customer must make a special suitability determination regarding the purchaser and must receive the purchaser's written consent to the transaction prior to the sale, unless the broker-dealer is otherwise exempt.

In addition, under the penny stock regulations, the broker-dealer is required to:

	·	Deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt;
	·	Disclose commissions payable to the broker-dealer and our registered representatives and current bid and offer quotations for the securities;
	·	Send monthly statements disclosing recent price information pertaining to the penny stock held in a customer's account, the account's value, and information regarding the limited market in penny stocks; and
	·	Make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction, prior to conducting any penny stock transaction in the customer's account.

Because of these regulations, broker-dealers may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of holders to sell their shares in the secondary market and have the effect of reducing the level of trading activity in the secondary market. These additional sales practice and disclosure requirements could impede the sale of our securities, if our securities become publicly traded. In addition, the liquidity for our securities may be decreased, with a corresponding decrease in the price of our securities.

Our shares are subject to such penny stock rules and our shareholders will, in all likelihood, find it difficult to sell their securities.

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ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

On March 3, 2017 the Company acquired via reverse triangular merger 100% of the ownership interest of the privately-held First Capital Venture Co., a Florida corporation. First Capital Venture Co. is the owner of Diamond CBD, Inc., which sells numerous CBD oil products at both wholesale and retail. Pursuant to a Share Exchange and Reorganization Agreement, the First Capital shareholders exchanged their shares which they held in First Capital Venture Co. for an aggregate total of 50,000 Class A Preferred shares in the Company, wherein the shareholders would own 100% of this class of stock of the Company (the “Class A Preferred Shareholders”), which in the aggregate conferred voting control of the Company. First Capital Venture Co. became a wholly-owned subsidiary of the Company as result of the transaction. The Class A Preferred shares were issued pursuant to the exemption for registration contained in Section 4(a)(2) of the Securities Act of 1933.

Pursuant to a Stock Purchase Agreement dated June 8, 2017, the Company acquired all the capital stock of PotNetwork Media Group, Inc., a Nevada corporation (“PMG”), in exchange for 3,000,000 shares of the Company's common stock issued to the shareholders of PMG, and the cancellation of a $50,000 promissory note between the Company and PMG. As a result, PMG became a wholly-owned subsidiary of the Company. PMG was the owner of the website www.potnetwork.com. The common stock issued in the transaction were issued pursuant to the exemption for registration contained in Section 4(a)(2) of the Securities Act of 1933.

ITEM 11. DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED

The Company is authorized to issue up to 1,000,000,000 shares of common stock, $0.00001 par value. As of July 9, 2018, we had outstanding 464,921,254 shares of common stock. The holders of our Common Stock are entitled to one vote per share held and have the sole right and power to vote on all matters on which a vote of stockholders is taken. Voting rights are non-cumulative. Common stockholders are entitled to receive dividends when, as, and if declared by the Board of Directors, out of funds legally available therefore and to share pro rata in any distribution to stockholders. Upon liquidation, dissolution, or the winding up of our Company, common stockholders are entitled to receive the net assets of our Company in proportion to the respective number of shares held by them after payment of liabilities which may be outstanding. The holders of common stock do not have any preemptive right to subscribe for or purchase any shares of any class of stock of the Company. The outstanding shares of common stock will not be subject to further call or redemption and are fully paid and non-assessable. To the extent that additional common shares are issued, the relative interest of existing stockholders will likely be diluted.

Our Articles of Incorporation authorize the issuance by resolution of our Board of Directors of up to 50,000 shares of Class A preferred stock. As of July 9, 2018 we had 44,227 shares of Class A Preferred Stock issued and outstanding. Each share of Class A preferred stock is convertible into 0.0018% of the total number of outstanding shares of common stock at the time of conversion. Class A Preferred Stock shall be entitled to a number of votes equal to the sum obtained by using the following quotient: (x) the sum of all outstanding shares of common stock, plus the sum of the number of votes of all other outstanding shares of stock, including any preferred stock that may be outstanding, plus the sum of the votes of all other financial instruments outstanding which may be entitled to vote on any such matter, divided by (y) 0.9. Class A shareholders are not entitled to dividends paid to common shareholders and are not entitled to any assets of the Company upon liquidation.

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ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Colorado Business Corporation Act (the “CBCA”) generally provides that a corporation may indemnify a person made party to a proceeding because the person is or was a director against liability incurred in the proceeding if: the person’s conduct was in good faith; the person reasonably believed, in the case of conduct in an official capacity with the corporation, that such conduct was in the corporation’s best interests, and, in all other cases, that such conduct was at least not opposed to the corporation’s best interests; and, in the case of any criminal proceeding, the person had no reasonable cause to believe that the person’s conduct was unlawful. The CBCA prohibits such indemnification in a proceeding by or in the right of the corporation in which the person was adjudged liable to the corporation or in connection with any other proceeding in which the person was adjudged liable for having derived an improper personal benefit. The CBCA further provides that, unless limited by its articles of incorporation, a corporation shall indemnify a person who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the person was a party because the person is or was a director or officer of the corporation, against reasonable expenses incurred by the person in connection with the proceeding. In addition, a director or officer, who is or was a party to a proceeding, may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. The CBCA allows a corporation to indemnify and advance expenses to an officer, employee, fiduciary or agent of the corporation to the same extent as a director.

As permitted by the CBCA, the Company’s articles of incorporation and bylaws generally provide that the Company shall indemnify its directors and officers to the fullest extent permitted by the CBCA. In addition, the Company may also indemnify and advance expenses to an officer who is not a director to a greater extent, not inconsistent with public policy, and if provided for by its bylaws, general or specific action of the Company’s board of director or shareholders.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements required by this Item begin on page F-1.

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements and Schedules

The consolidated financial statements required to be filed as part of this Registration Statement are included in Item 13 hereof.

(b) Exhibits

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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

	POTNETWORK HOLDINGS, INC.
Date: July 13, 2018	By:	/s/ Richard Goulding
		Richard Goulding
		Chief Executive Officer

25

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of PotNetwork Holdings Inc

Opinion: We have audited the accompanying balance sheets of PotNetwork Holdings Inc (the “Company”) as of December 31, 2017 and 2016, and the related statements of income, stockholders’ equity and cash flows for each of these years in the period then ended, and the related notes (collectively referred as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the company as of the years then ended, and the results of its operations and its cash flows for these years in the period then ended, in conformity with U.S. generally accepted accounting principles.

We have also audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the company’s internal control over financial reporting as of the year then ended, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report of even dated, express an unqualified opinion on the Company’s Internal Control over financial reporting.

Basis of Opinion: These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. Federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with standards of PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters: The management listed the critical audit matters as note 16 in the notes on accounts. They are the matters arising from the current period audit of the financial statements and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements. These critical audit matters do not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by referring the critical audit matters, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

East West Accounting Services LLC

11583 SW 253 Street, Princeton, FL 33032

31st March 2018

F-1

Potnetwork Holdings Inc
Consolidated Balance Sheet
		Current				Previous				Previous
		Dec 31, 2017				Dec 31. 2016				Dec 31. 2015
		<-----------in thousands------------->
Assets
Current Assets
Cash/Bank Balances			241				0				1
Accounts Receivable			330				1				71
Drop Shipments in Transit to Customers			640				-				-
Total Current assets			1,210				1				72
Fixed Assets [NET]			-				3				5
Investments in Diamond CBD [wholly owned] at cost (IAS 27)			170				-				-
Other Assets			-				-				-
Deposits			30				86				1,948
Prepaid Expenses			623				-				-
Total other assets			823				89				1,953
TOTAL ASSETS			2,033				90				2,025
Liabilities
Current Liabilities
Payables			271				25				530
Total Current Liabilities			271				25				530
Other Liabilities
Loan from 3rd Party with interest			245				266				125
Note Payable			3,078				2,019				1,984
Total other liabilities			3,324				2,284				2,109
Total Liabilities			3,595				2,309				2,639
Stockholders' Equity
Common: Authorized 1,000,000,000 shares, $ .00001 par value; and 569,920,485 Issued and outstanding at December 31, 2017 and 89,571,121 Issued and outstanding at December 31, 2016 respectively.			451				88				88
Preferred Stock Class A Authorized - 50,000 shares, $ .00001 Par value; and 32,682 Issued and outstanding at December 31,, 2017 and None Issued and outstanding at December 31, 2016 respectively.			0				0				0
Additional paid in capital			263				263				1,462
Retained Earnings			(2,276	)			(2,570	)			(2,164	)
Total Stockholders' Equity			(1,562	)			(2,219	)			(614	)
Total Liabilities & Equity			2,033				90				2,025

The accompanying notes are an integral part of these financial statements.

Re-grouped the previous year figures

F-2

Potnetwork Holdings Inc
Consolidated Income Statement for the year ended 31st Dec., 2017
		<-----------in thousands------------->
		2017				2016				2015
Net Operating Revenues			14,499				1,029				5,504
Cost of Goods Sold			9,318				581				2,650
Gross Profit (Loss)			5,181				448				2,854
Gross Profit Margin			0				0				1
Selling, general and administrative expenses			4,974				349				1,413
Operating Income			207				99				1,442
Operating Margin			0				0				0
Income BEFORE INCOME TAXES			207				99				1,442
Income taxes from continuing operations			207				99				1,442
NET INCOME FROM CONTINUING OPERATIONS			207				99				1,442
CONSOLIDATED NET INCOME			207				99				1,442
NET INCOME ATTRIBUTABLE TO SHAREOWNERS			207				99				1,442
Prior period adjustments			(28	)			(507	)			(716	)
NET INCOME transferred to retained earnings			179				(408	)			726
BASIC NET INCOME PER SHARE (*)			0.00036				0.00033				0.00019
DILUTED NET INCOME PER SHARE (**)			0.00036				0.00033				0.00019

'(*) Calculation is not meaningful.

'(**) Calculated based on net income attributable to shareowners

The accompanying notes are an integral part of these financial statements.

Re-grouped the previous year figures

F-3

Potnetwork Holdings Inc
Stockholders' Equity
														Amount in thousands
										Additional				Surplus
Description		Shares				Amount				Paid-in Capital				(Deficit)
Common Stock as on Dec. 31, 2015			7,621,650,326				87.57				1461.53				(2162.30	)
1 for 1000 split reduction			(7,614,025,192	)
After the split			7,625,134
Shares Issued - Free			82,773,847								(1198.00	)
Shares Issued - Reserve			206,990,307
Net Profit (Loss)															(408.16	)
Common Stock as on Dec. 31, 2016			297,389,288				87.57				263.13				(2570.46	)
Triangular Merger															(53.93	)
Shares Issued - Legend			309,322,614
Shares Issued - Free			121,000,000				363.00
Shares Issued - Reserve			(157,791,417	)
Net Profit (Loss)															178.92
Common Stock as on Dec. 31, 2017			569,920,485				450.57				263.13				(2275.85	)

Number of shares as of Dec. 31, 2017 is agreement with the statement received from the Share Transfer Agent

The accompanying notes are an integral part of these financial statements.

F-4

Potnetwork Holdings Inc
Statement of Cash Flows for the year ended 31st Dec., 2017
		<-----------in thousands------------->
		2017				2016				2015
Operating Activities
Net Income (Loss)			179				(408	)			726
Add: Depreciation			-				2				5
Adjustments to reconcile net income (loss) to calculate the net cash provided by/used by the operations
Accounts Receivable			(329	)			70				(71	)
Deposits			59				1,864				(1,944	)
Drop Shipments in Transit to Customers			(640	)			-				-
Prepaid Exp			(623	)			-				-
Payable			246				-				-
Loan			202				-				-
3rd Party Loan			-				141				(85	)
Loan [Sign]			(363	)			35				1,664
Convertible Note			1,200				-				-
Other payables			-				(506	)			519
Additional Capital			-				(1,198	)			(813	)
Triangular Merger			(54	)			-				-
Equity			363				-				-
Total Adjustments to reconcile net income (loss) to calculate the net cash provided by/used by the operations			240				(1	)			1
Net cash from the current year operations			240				(1	)			1
Investing Activities
			-				-				-
Net cash provided by investing activities			-				-				-
Financing Activities
			-				-				-
Net cash provided by financing activities			-				-				-
NET CASH INCREASE (DECREASE) For PERIOD			240				(1	)			1
Cash, Beginning			0				1				0
Cash, Ending			241				0				1

The accompanying notes are an integral part of these financial statements.

Re-grouped the previous year figures

F-5

Potnetwork Holdings Inc.

NOTES ON ACCOUNTS

Year ended 31^st December 2017

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

On 3rd March 2017, Potnetwork Holding Inc was reincorporated following its acquisition of First Capital Venture Co. which was a Florida Profit Corporation, incorporated on 27^th Feb. 2015. Coinciding with that event, the Company entered a triangular merger pursuant Colorado law, which is the financial and substantive equivalent to that set forth in “Section 251(g) of the Delaware General Corporation Law”.

Potnetwork Holdings Inc was previously known as below:

	·	Formerly=SND Auto Group, Inc. until 3-2017
	·	Formerly=Potnetwork Holdings, Inc. until 5-2016
	·	Formerly=United Treatment Centers, Inc. until 7-2015
	·	Formerly=Element Trading Holdings, Inc. until 3-2014
	·	Formerly=United Treatment Centers, Inc. until 10-2013
	·	Formerly=MyMedicalCD, Ltd. until 6-2008
	·	Note=11-04 State of Incorporation Nevada changed to Wyoming
	·	Formerly=Interactive Solutions Corp. until 11-2004
	·	Formerly=Araldica Wineries Ltd. until 2-2000
	·	Formerly=H P Capital Corp. until 9-1996

The company website is www.potnetworkholding.com

Potnetwork Holdings Inc is a publicly traded Company trading under the symbol “POTN”

On 31st January 2017, Potnetwork Holding Inc acquired First Capital Venture Co D/B/A Diamond CBD, www.diamondcbd.com the makers of Diamond CBD Oils, as a wholly owned subsidiary.

SND Auto Group Inc, formed on 14^th March 2017 as a pre-owned vehicle auto dealership, as a successor to the Sunrise Auto Mall Inc, a Florida Profit Corporation established in April 2014, is an another wholly owned subsidiary.

Potnetwork Media Group Inc, a Nevada corporation, the owner and operator of www.Potnetwork.com as a digital business magazine focusing on the cannabis industry, was acquired under a stock purchase agreement and is an another wholly owned subsidiary.

Grinder Distribution Inc, a distributor of herbal grinders, is an another wholly-owned subsidiary.

From the 31st January 2017 the focus is the development of the Diamond CBD business.

Diamond CBD focuses on the research, development, and multi-national marketing of premium hemp extracts that contain a broad range of cannabinoids and natural hemp derivatives.

Diamond CBD’s 94-page catalog can be found in http://catalog.diamondcbd.com

F-6

In 2017, Diamond CBD business was the sole business activity of this company. SND Auto Group Inc. having become dormant at the end of 2016. All other subsidiaries are in the early development stage. Hence, the financial statements reflect principally the business results of Diamond CBD business.

In February 2018, the company amended the terms and conditions of the January 2017 merger such that certain effects specific to its similarity with a reorganization under Section 251(g) of the Delaware General Corporation law were reversed. As a result, the company reassumed its prior name, Potnetwork Holdings, Inc. (with an “s” on Holding), while remaining a Colorado corporation. For all practical purposes the merger of the entities involved was not affected and maintained the share capital structure from the merger.

Since January 2016, Gary Blum serves as sole director and CEO. In October 2017, Richard Goulding MD joined as the Chief Executive Officer.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	BASIS OF PRESENTATIONS: The statements were prepared following generally accepted accounting principles of the United States of America consistently applied.
	USE OF ESTIMATES: Management uses estimates and assumptions in preparing these financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.
	REVENUE RECOGNITION – DIAMOND CBD BUSINESS

	·	Sales are recognized when the sale proceeds are credited to the bank account during the year.
	·	At the year end, the sales invoices are reviewed and based on the subsequent receipt of payments and are accounted as sales to comply with the matching principle of considering the expenses and revenues of the same year. Such book entries are reversed in the following year.
	·	For online sales, merchandise is not shipped unless and until the customer pays for it.
	·	For orders received over the phone, the merchandise will not ship unless and until the customer pays for it.
	·	Sales on credit terms are exceptional and requires the customer to establish the credit.
	·	Revenue transactions represent the actual merchandise shipped to the customers as drop shipments.
	·	The revenue recorded in the books are net of sales and other taxes collected on behalf of governmental authorities.
	·	The revenue includes shipping and handling costs which are generally included in the sale invoices.
	·	Revenue is recognized when the title, ownership and risk of loss transfers, which is usually on the date of shipment.
	·	Provision for discounts, when applicable, are stated in the sales invoice and used to determine the net of sales for each such invoice.
	·	Returns are accounted as a reduction of sales when the returns are authorized

	·	The customers enjoy free returns of unopened items within 15 days of purchase.
	·	Free return labels are provided, meaning that the company pays for the shipping cost for the returns by the customers.
	·	The customers can easily initiate the returns online in the company website.
	·	Experienced professional staff reviews the selling price on an ongoing basis.
	·	Exceptions are reviewed and approved by the manager.
	·	Sales return are insignificant and hence no reserves are provided.

F-7

·

Trade promotions such as sale prices, coupons, etc. are offered to the customers on various occasions as part of marketing and sales promotion. In all such cases, sales are recorded net of trade promotions, which is generally incurred at the time of sale. Most of the arrangements are for a year or less. Expected payouts are not estimated and hence accounted as and when incurred.

	CASH AND CASH EQUIVALENTS: Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.
	PROPERTY AND EQUIPMENT: Property and equipment are stated at the written-down value [after deducting the depreciation from the cost]. This company adapted the depreciation rates as provided in the IRS publications, using the Modified Accelerated Cost Recovery System (MACRS). Computers and office equipment are considered as 5-year property Office furniture and fixtures are 7-year property in MACRS and apply the 200% declining balance method over a GDS recovery period. Where possible, section 179 depreciation is also applied.
	INTANGIBLE ASSETS

	o	Initial Measurement: Intangible asset acquisitions in which the consideration given is cash are measured by the amount of cash paid, which generally includes the transaction costs of the asset acquisition. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on either the cost which shall be measured based on the fair value of the consideration given or the fair value of the assets (or net assets) acquired, whichever is clearer and, thus, more reliably measurable.
	o	Subsequent Measurement: The company accounts for its intangible assets under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Subtopic (“ASC”) 350-30-35 “Intangibles-- Goodwill and Other--General Intangibles Other than Goodwill-Subsequent Measurement”. Under this method the company is required to test an indefinite-lived intangible asset for impairment on at least an annual basis. This is done by comparing the asset’s fair value with its carrying amount. If the carrying amount exceeds the asset’s fair value, the difference in those amounts is recognized as an impairment loss. The company impaired the trade-mark as of December 31, 2015.

	INCOME TAXES: The company accounts for its income taxes in accordance with the Financial Accounting Standards (“SFAS”) No.109, Accounting for Income Taxes. Under this standard, deferred tax assets and liabilities represent the estimated tax effects of future deductible or taxable amounts attributed to differences between the financial statements carrying amounts and the tax bases of existing assets and liabilities. The standard also allows recognition of income tax benefits for loss carryforwards, credit carryforwards and certain temporary differences for which tax benefits have not previously been recorded. Valuation allowances are provided for uncertainties associated with deferred tax assets.
	FINANCIAL INSTRUMENTS: Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. ASC 820-10 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. FASB ASC 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

Level 1:

Quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.

F-8

	Level 2:	Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
	Level 3:	Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.
	The carrying amounts reported in the balance sheet for cash, accounts payable and notes payable approximate their estimated fair market value based on the short-term maturity of this instrument. In addition, FASB ASC 825-10-25 “Fair Value Option” was effective for January 1, 2008. ASC 825-10-25 expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value.

	Investments in subsidiaries: The triangular merger in Jan 2017 is a holding company reorganization. The company did not make any payment in cash or check for this acquisition. In other words, there is no cost for company in acquiring the shares of the wholly owned subsidiary in this triangular merger. Hence, the company has recorded the value of the investments in this wholly owned subsidiary as provided in ASC 323
	Redemption Right: The terms and conditions of the Note has a clause for redemption right, which reads as, “Notwithstanding any provision contained herein to the contrary including the conversion rights as set forth in this section, the company shall be entitled, at any time prior to the expiration of five days from any notice of conversion, to repay this Note in full, plus interest, minus the credit accorded from prior payments, including from prior conversions, and avoid any further Note conversion and thus avoid the issuance of any additional shares of the Potnetwork Holdings Inc .” By this clause, no derivative liability exists.

NOTE 3 - GOING CONCERN

The financial statements are prepared assuming that the company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.

Receivables from our customers as on the balance sheet date, are less than 30 days old.

As the company has no uncertainties as on the balance sheet date, the financial statements need no adjustments.

Since the DiamondCBD business is from 2015, it is considered as a business with limited operating history. Hence, this business is subject to all risks inherent in a developing business enterprise. Continued success depends on the problems, difficulties, complications, and delays frequently encountered in the competitive and regulatory environment in which it operates.

As a new industry, there are no established entities whose business model Diamond CBD can follow or build on the success of.

Regulatory risk: Hemp-based CBD are often confused with marijuana-based CBD which remains illegal under federal Law.

Although Diamond CBD does not sell any marijuana-based CBD products, its products could be confused as being illegal by federal/state authorities and by consumers.

F-9

The company is involved in a highly competitive industry where it may compete with numerous other companies who offer alternative methods or approaches, who may have far greater resources, more experience, and personnel perhaps more qualified than the company does. Such resources, experience and personnel may provide a substantial competitive advantage to the competition.

NOTE 4 - PROVISION FOR INCOME TAXES

With the accumulated losses carried forward, no provision for tax liability has been made in the financial statements. Net operating loss carry-forward, expires twenty years from the date the loss was incurred.

Deferred Tax Computation: The company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense is recognized for: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

There was no income tax expense for the years ended December 31, 2017 and 2016.

The tax rates were as follows:

The components of the deferred tax assets and liabilities are as follows:

F-10

As of the current balance sheet date, the company has a net operating loss carryforward of $2,275,848.

However, the availability of a net operating loss carryforward and the associated deduction, is subject to complex and restrictive federal income tax provisions as codified by Internal Revenue Code section 172 and related Treasury Regulations, all of which are subject to change in the availability of which can never be free from doubt.

NOTE 5 - INVENTORY – DIAMOND CBD

This company has arranged to buy the exact quantity from the suppliers, based on the customer orders and thereby has eliminated the need for holding inventory on hand at any point of time.

Otherwise, this company values the inventory at the lower of cost or market.

This company has been successfully handling the shipping as expeditiously as possible, despite the high quantity of its order volume. In effect, the marketing plan drawn by the company’s team requires adequate arrangements, requiring advance bookings for the expositions, etc. including the travel arrangements. This eats up more and more working capital by way of prepayments for marketing arrangements with merchants.

In addition, this company pays for the drop shipments, based on the sales orders. However, the drop shipments to the customers are in transit for a week or more until the tracking numbers are obtained and sent to the customers to obtain the payment from the customer.  

NOTE 6 - COMMITMENTS AND CONTINGENCIES: There are no commitments and contingencies that exist at present.

NOTE 7 – SALES DISCOUNT & RETURN POLICY – DIAMOND CBD

	·	The customers enjoy free returns of unopened items within 15 days of purchase.
	·	Free return labels are provided, meaning that the company pays for the shipping cost for the returns by the customers.
	·	The customers can easily initiate the returns online in the company website.
	·	Experienced professional staff reviews the selling price on an ongoing basis.
	·	Exceptions are reviewed and approved by the manager.
	·	Sales return are insignificant and hence no reserves are provided.

NOTE 8 – BUDGET & INTERNAL CONTROL PROCEDURES

	·	Internal control procedures for inventory and cash control are being developed and implemented on an ongoing basis to ensure higher levels of performances.
	·	Annual financial budget is reviewed by the Board of Directors
	·	Quarterly variance reports are considered by the Board of Directors.

NOTE 9 – PAYROLL PROCEDURE

Based on the time punched in and out by the employees, payroll is processed by an independent payroll Company to determine the taxes to be withheld and paid.

F-11

NOTE 10 – Depreciation

The depreciation method is the Modified Accelerated Cost Recovery System (MACRS) of the tax code. http://www.irs.gov/pub/irs-pdf/i4562.pdf 3-, 5-, 7-, and 10-year property class is adapted. 200% declining balance method is followed. Sec 179 deduction is also recorded in the books, where applicable.

NOTE 11 - CAPITAL STOCK 

	·	Common Stock: Authorized 1,000,000,000 shares, $ .00001 par value; and 569,920,485 Issued and outstanding as on the balance sheet date. As of the date of this report, 300,000,000 shares are in the process of being cancelled.
	·	Class A preferred stock: Authorized 60,000 shares, $ .00001 par value; and 50,000 Issued and outstanding as on the balance sheet date. Designation details are in Document # 20171182699 filed with the Secretary of State, Wyoming on 3rd March 2017

NOTE 12 – LOAN FROM THIRD PARTIES

The loan accrues interest @ the annual rate of eight percent (8%)