We have audited the accompanying balance sheets
of Agritek holdings, Inc. (the “Company”) as of December 31, 2016 and 2015 and related statements of operations, stockholders’
deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Agritek holdings, Inc. as of December 31, 2016 and
2015 and the results of its operations and its cash flows for year then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been
prepared assuming the Company will continue as a going concern. The Company has suffered recurring operating losses, has an accumulated
stockholders’ deficit, has negative working capital, has had minimal revenues from operations, and has yet to generate an
internal cash flow that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 11. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -
Organization
Business
Agritek Holdings, Inc. (the “Company”
or “Agritek”) and its wholly owned subsidiary, Agritek Venture Holdings, Inc. (“AVHI”), acquires and leases
real estate to licensed marijuana operators, including providing complete turnkey growing space and related facilities to
licensed marijuana growers and dispensary owners. Additionally, the Company offers a variety of services and product lines
to the medicinal marijuana sector including the distribution of hemp based nutritional products and a line of innovative solutions
for electronically processing merchant transactions.
The Company does not grow, harvest,
distribute or sell marijuana or any substances that violate the laws of the United States of America.
Note 2 –
Summary of Significant
Account Policies
Basis of Presentation and Principles
of Consolidation
The accompanying consolidated financial
statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP").
The consolidated financial statements of the Company
include the consolidated accounts of
Agritek and its’ wholly owned subsidiaries AVHI and Prohibition Products, Inc. (“PPI”). PPI, a Florida corporation,
was originally formed on July 1, 2013 as The American Hemp Trading Company, Inc. (“AHTC”) and on August 27, 2014, AHTC
changed its’ name to PPI. All intercompany accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with an original term of three months or less to be cash equivalents.
Accounts Receivable
The Company records accounts receivable
from amounts due from its customers upon the shipment of products. The allowance for losses is established through a provision
for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability
is unlikely. The allowance is an amount that management believes will be adequate to absorb estimated losses on existing receivables,
based on evaluation of the collectability of the account
s and prior loss
experience. While management uses the best information available to make its evaluations, this estimate is susceptible to significant
change in the near term. As of December 31, 2015, based on the above criteria, the Company has an allowance for doubtful accounts
of $43,408.
Inventory
Inventory
consists of finished goods and is valued at the lower of cost or market value. Cost is determined using the first in first out
(FIFO) method. Provision for potentially obsolete or slow moving inventory is made based on management analysis or inventory levels
and future sales forecasts.
Deferred
Financing Costs
The
costs related to the issuance of debt would be recorded to debt discount, reducing the face amount of the note and is amortized
to interest expense over the life of the debt.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the
fair value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Debt
Issue Costs and Debt Discount
The
Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt.
These
costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life
of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original Issue Discount
For certain convertible debt issued,
the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded
to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Marketable Securities
The Company classifies its marketable
securities as available-for-sale securities, which are carried at their fair value based on the quoted market prices of the securities
with unrealized gains and losses, net of deferred income taxes, reported as accumulated other comprehensive income (loss), a separate
component of stockholders’ equity. Realized gains and losses on available-for-sale securities are included in net earnings
in the period earned or incurred.
Investment of Non-Marketable Securities
The Company’s investment in non-marketable
securities consist of cash investments in a less than 10% interest in two privately held companies that provide merchant processing
services. Petrogress, Inc. (formerly 800 Commerce, Inc. and a subsidiary of the Company through its’ deconsolidation in May
2012) derived substantially all of its’ revenues, through April 2015, form these privately held companies.
Property and Equipment
Property and equipment are
stated at cost, and except for land, depreciation is provided by use of a straight-line method over the estimated useful lives
of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in circumstances
indicate that the carrying amounts of assets may not be recoverable. In November 2015, the Company was made aware that the land
transaction regarding 80 acres in Pueblo County, Colorado, may not have been properly deeded to the Company. The company
was a party to the land purchase, however, the second party to the land contract never filed the original quit claim deed on behalf
of the Company, even though a copy of the notarized quit claim deed was sent to the Company. To date, the Company has paid a total
of $47,438.00 ($36,000 at closing) and is on the deed of trust of the property with a remaining note balance of approximately $75,000
held by the original owner. Accordingly, in December 2015, the Company reduced the remaining balance of the note payable for the
acquisition of the land of $74,313 and recorded a reserve allowance for the remaining balance of the asset of $54,490. In February,
2017, the original owner of the 80 acres foreclosed on the property from the second party and the Company entered into a new land
purchase contract directly with the landowner on February 7, 2017. The estimated useful lives of property and equipment are as
follows:
Furniture and fixtures
|
5 years
|
Computer equipment
|
3 years
|
The Company's property and equipment consisted of the following
at December 31, 2016 and December 31, 2015:
|
|
2016
|
|
2015
|
Furniture and fixtures
|
|
$
|
34,588
|
|
|
$
|
13,829
|
|
Accumulated depreciation
|
|
|
(8,308
|
)
|
|
|
(4,742
|
)
|
Balance
|
|
$
|
26,280
|
|
|
$
|
9,087
|
|
Depreciation expense of $3,566 and $2,766
was recorded for the year ended December 31, 2016 and 2015, respectively. The Company will record the land purchase in the first
quarter of 2017.
Long-Lived Assets
Long-lived assets are reviewed for impairment
when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Based on events and
changes in circumstances on June 30, 2015, the Company reviewed the carrying amount of goodwill initially recorded from an acquisition
in September 2014, and determined that the carrying amount may not be recoverable and accordingly recognized an impairment loss
of $192,849 for the year ended December 31, 2015.
Revenue Recognition
The Company recognizes revenue in accordance
with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are met: (1) persuasive evidence of an arrangement
exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably
assured. The Company recognizes revenue during the month in which products are shipped or commissions are earned. No revenue has
been recognized from leasing arrangements to date.
Fair Value of Financial Instruments
Fair value measurements are determined
under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair
value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of
the reporting entity (“observable inputs”) and the reporting entity’s own assumptions about market participant
assumptions developed based on the best information available in the circumstances (“unobservable inputs”).
Fair value is the price that would be
received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”) in an orderly transaction
between market participants at the measurement date. In determining fair value, the Company primarily uses prices and other relevant
information generated by market transactions involving identical or comparable assets (“market approach”). The Company
also considers the impact of a significant decrease in volume and level of activity for an asset or liability when compared with
normal activity to identify transactions that are not orderly.
The highest priority is given to unadjusted
quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level
3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair
value measurement.
The three hierarchy levels are
defined as follows:
Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.
Credit risk adjustments are applied
to reflect the Company’s own credit risk when valuing all liabilities measured at fair value. The methodology is consistent
with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s own credit risk as observed
in the credit default swap market.
The Company's financial instruments
consist primarily of cash, accounts receivable, notes receivable, accounts payable and accrued expenses, note payable and convertible
debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term
maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative
of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.
Income Taxes
The Company accounts for income taxes
in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized to reflect the estimated future
tax effects, calculated at the tax rate expected to be in effect at the time of realization. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some portion of the deferred tax asset will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
ASC 740-10 prescribes a recognition
threshold that a tax position is required to meet before being recognized in the financial statements and provides guidance on
recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition issues.
Interest and penalties are classified as a component of interest and other expenses. To date, the Company has not been assessed,
nor paid, any interest or penalties.
Uncertain tax positions are measured
and recorded by establishing a threshold for the financial statement recognition and measurement of a tax position taken or expected
to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may
be recognized or continue to be recognized. The Company’s tax years subsequent to 2005 remain subject to examination by federal
and state tax jurisdictions.
Earnings (Loss) Per Share
Earnings (loss) per share are computed
in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income
(loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common
stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number
of shares of common stock, common stock equivalents and other potentially dilutive securities, if any, outstanding during the period.
As of December 31, 2016 there were warrants to purchase 6,059,524
shares of common stock and the
Company’s outstanding convertible debt is convertible into 55,052,718 shares of common stock. These amounts are not included
in the computation of dilutive loss per share because their impact is antidilutive.
Accounting for Stock-based Compensation
The Company accounts for stock awards
issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. The measurement date is the earlier
of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the
date at which the counterparty's performance is complete. Stock awards granted to non-employees are valued at their respective
measurement dates based on the trading price of the Company’s common stock and recognized as expense during the period in
which services are provided.
For the years ended December 31, 2016
and December 31, 2015, the Company recorded stock and warrant based compensation of $2,371 and $163,436, respectively. (See Notes
7 and 8).
Use of Estimates
The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amount of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Advertising
The Company records advertising costs
as incurred. For the years ended December 31, 2016 and 2015, advertising expense was $8,321 and $37,685, respectively.
Note 3 –
Recent Accounting Pronouncements
Accounting standards that have been
issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected
to have a material impact on the consolidated financial statements upon adoption.
Note 4 –
Impairment of Goodwill
On September
12, 2014, the Company completed the asset acquisition of the entire line of products, technology and customers of Dry Vapes
Holdings, Inc.
The Company recorded the acquisition
using the acquisition method, which requires the Company to record the acquired assets and assumed liabilities (if any) at their
acquisition date fair values and record any excess of the consideration given, including liabilities assumed (if any) over the
fair value of the assets acquired as goodwill. The acquired assets consisted solely of inventory. The transaction resulted in the
Company recording goodwill of $192,849. Based on events and changes in circumstances on June 30, 2015, the Company reviewed the
carrying amount of the goodwill, and determined that the carrying amount may not be recoverable and accordingly recognized an impairment
loss of $192,849 for the year ended December 31, 2015.
Note 5 –
Sales Concentration
and Concentration of Credit Risk
Cash
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash. The Company maintains cash balances at one financial institution,
which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insured institution insures
up to $250,000 on account balances. The company maintains its’ cash balance at a large financial institution and has not
experienced any losses in such accounts.
Sales and Accounts Receivable
Following is a summary of customers
who accounted for more than ten percent (10%) of the Company’s revenues for the years ended December 31, 2016 and 2015 and
the accounts receivable balance as of December 31, 2016:
|
Customer
|
|
Sales % Year Ended
December 31, 2016
|
|
Sales % Year Ended
December 31, 2015
|
|
Accounts Receivable Balance as of
December 31, 2016
|
|
A
|
|
|
|
—
|
|
|
|
24.7
|
%
|
|
$
|
—
|
|
|
B
|
|
|
|
—
|
|
|
|
21.5
|
%
|
|
$
|
—
|
|
|
C
|
|
|
|
—
|
|
|
|
18.2
|
%
|
|
$
|
—
|
|
Note 6 –
Convertible Debt
and Note Payable
2014 Convertible Note
In January 2014, the Company entered into a
Secured Promissory Note for $1,660,000 (the “2014 Company Note”) to Tonaquint, Inc. (“Tonaquint”) which
includes a purchase price of $1,500,000 and transaction costs of $160,000. On January 31, 2014, the Company received $300,000 of
the purchase price. Tonaquint also issued to the Company 6 secured promissory notes, each in the amount of $200,000 (the 2014 “Investor
Notes”). All or any portion of the outstanding balance of the 2014 Investor Notes may be prepaid, without penalty, along
with accrued but unpaid interest at any time prior to maturity. The Company has no obligation to pay Tonaquint any amounts on the
unfunded portion of the 2014 Company Note. The 2014 Company Note bears interest at 8% per annum (increases to 22% per annum upon
an event of default) and is convertible into shares of the Company’s common stock at Tonaquint’s option at a price
of $0.55 per share, exercisable in seven tranches, consisting of a first tranche of $340,000 of principal and any interest, fees
costs or charges, and six additional tranches of $220,000 each, plus any interest, costs, fees or charges.
Beginning on the date that is six (6) months
after the later of (i) the Issuance Date, and (ii) the date the Initial Cash Purchase Price is paid to the Company (the “Initial
Installment Date”), and on each applicable Installment Date thereafter, the Company is to pay the Holder, the applicable
Installment Amount due on such date. Ten Installment Amounts of $166,000 plus the sum of any accrued and unpaid interest, fees,
costs or charges may be made (a) in cash (a “Company Redemption”), (b) by converting such Installment Amount into shares
of Common Stock (a “Company Conversion”), or (c) by any combination of a Company Conversion and a Company Redemption
so long as the entire amount of such Installment Amount due shall be converted and/or redeemed by the Company on the applicable
Installment Date. The 2014 Company Note matured fifteen months after the Issuance Date.
During the year ended December 31, 2014,
the Company received an additional $800,000 of the purchase price and an additional $200,000 (including $21,188 of interest) during
the year ended December 31, 2015. On December 16, 2015, the Company and AVHI, the Company’s wholly owned subsidiary entered
into a Deed in Lieu of Foreclosure Agreement (the “DLF Agreement”) with Tonaquint, pursuant to which in exchange for
the Company conveying its’ interest in the Company’s Nevada owned real estate (the “Property”), Tonaquint
agreed to refrain and forbear from exercising and enforcing its remedies under their 2014 Convertible Note. Additionally, the Company
received $25,000 and a reduction of the Note balance of $500,000. AVHI had a cost of approximately $224,466 for the Property.
During the year ended December 31, 2015,
the Company recorded interest expense of $281,607, and increased accrued interest expense by $281,607 for amounts due Tonaquint,
pursuant to the 2014 Company Note. Additionally, as of the date of the DLF Agreement, the Company and Tonaquint agreed to offset
the remaining unpaid principal balance of the Investor Notes of $176,642 to the Note. The parties further agreed that accrued and
unpaid interest of $316,723 would be added to the Note and further agree that the Note balance as the DLF Agreement the Note balance
was $311,815, resulting in a net gain of debt forgiveness of $292,372. As of December 31, 2015, $311,815 of principal and accrued
interest of $1,041 is outstanding on the 2014 Company Note.
On January 19, 2016, the Company accepted
and agreed to a Debt Purchase Agreement (the “DPA”), whereby LG Capital Funding, LLC (“LG”) acquired $157,500
of the Tonaquint 2014 Convertible Note in exchange for $75,000. The Company issued an 8% Replacement Note to LG for $157,500 (the
“Second Replacement Note”). The Second Replacement Note is due January 19, 2017 and is convertible into shares of the
Company’s common stock at any time at the discretion of LG at a variable conversion price (“VCP”). The VCP is
calculated as the lowest trading price during the eighteen (18) trading days immediately prior to the conversion date multiplied
by fifty eight percent (58%), representing a forty two percent (42%) discount. The principal balance of the Second Replacement
Note as of December 31, 2016 is $157,500.
On January 19, 2016, the Company accepted
and agreed to a DPA, whereby Cerberus Finance Group, LTD (“Cerberus”) acquired $154,315 of principal and $2,434 of
accrued and unpaid interest of the Tonaquint 2014 Convertible Note in exchange for $75,000. The Company issued an 8% Replacement
Note to Cerberus for $156,749 (the “Third Replacement Note”). The Third Replacement Note is due January 19, 2017 and
is convertible into shares of the Company’s common stock at any time at the discretion of LG at a VCP. The VCP is calculated
as the lowest trading price during the eighteen (18) trading days immediately prior to the conversion date multiplied by fifty
eight percent (58%), representing a forty two percent (42%) discount. For the year ended December 31, 2016, the Company issued
13,129,683 shares of common stock upon the conversion of $9,500 of principal and $400 accrued and unpaid interest on the Third
Replacement Note. The shares were issued at approximately $0.000754 per share. As of December 31, 2016, the principal balance of
the Third Replacement Note is $147,249.
2015 Convertible Notes
On March 2, 2015, the Company issued
a Convertible Promissory Note for $79,000 to Vis Vires Group (“Vis Vires”). The Company received net proceeds of $75,000
after debt issuance costs of $4,000 paid for lender legal fees. The Note matured on November 25, 2015 and can be converted at a
39% discount to the market price as defined in the Note. As of December 31, 2015, the principal balance of the Vis Vires note was
$49,200. On January 6, 2016, the Company accepted and agreed to a DPA, whereby LG acquired the 2015 convertible promissory note
from Vis Vires. The Company issued an 8% Replacement Note to LG for $53,613 (the “First Replacement Note”). The First
Replacement Note is due January 5, 2017 and is convertible into shares of the Company’s common stock at any time at the discretion
of LG at a VCP. The VCP is calculated as the lowest trading price during the eighteen (18) trading days immediately prior to the
conversion date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount. For the year ended December
31, 2016, the Company issued 10,804,749 shares of common stock upon the conversion of $53,613 of principal and $4,139 accrued and
unpaid interest on the Vis Vires Note (assigned to LG). The shares were issued at approximately $0.0053 per share. As of December
31, 2016 and December 31, 2015, the principal balance of the LG Note was $0 and $53,613, respectively.
On March 27, 2015, the Company issued
a Convertible Promissory Note for $27,000 to GW Holding Group, LLC (“GW”). On March 31, 2015, the Company received
net proceeds of $25,000 after debt issuance costs of $2,000 paid for lender legal fees. The Note matured on March 27, 2016 and
converted at a 42% discount to the market price as defined in the Note. For the year ended December 31, 2016, the Company issued
17,844,348 shares of common stock upon the conversion of $23,500 of principal and $4,002 accrued and unpaid interest on the 2015
GW Note. The shares were issued at approximately $0.00161 per share. As of December 31, 2016 and December 31, 2015, the principal
balance of the GW note is $0 and $23,500, respectively.
March 27, 2015, the Company issued a
Convertible Promissory Note for $78,750 to LG. The Company received net proceeds of $75,000 after debt issuance costs of $3,750
paid for lender legal fees. The Note matured on March 27, 2016 and converted at a 42% discount to the market price as defined in
the Note. For the year ended December 31, 2016, the Company issued 56,354,949 shares of common stock upon the conversion of $65,500
of principal and $6,241 accrued and unpaid interest on the 2015 LG Note. The shares were issued at approximately $0.0013 per share.
As of December 31, 2016 and December 31, 2015, the principal balance of the LG Note was $0 and $65,500, respectively.
On
March 30, 2015,
the Company issued a Convertible Promissory Note for $27,000 to Service Trading Company, LLC (“Service”).
On April 6, 2015, the Company received net proceeds of $25,000 after debt issuance costs of $2,000 paid for lender legal fees.
The Note matured on March 30, 2016 and converted at a 42% discount to the market price as defined in the Note. For the year ended
December 31, 2016, the Company issued 16,993,388 shares of common stock upon the conversion of $22,500 of principal and $1,990
accrued and unpaid interest on the 2015 Service Note. The shares were issued at approximately $0.001441 per share. As of December
31, 2016 and December 31, 2015, the principal balance of the Service Note was $0 and $22,500, respectively.
The debt issuance costs included in
the 2015 Convertible Notes were amortized over the earlier of the terms of the Note or any redemptions and have been expensed as
debt issuance costs (included in interest expense).
Among other terms the 2015 Notes are
due nine to twelve months from their issuance date, bearing interest at 8% per annum, payable in cash or shares at a conversion
price (the “Conversion Price”) for each share of common stock equal to 39% - 42% of the average of the lowest three
trading prices (as defined in the note agreements) per share of the Company’s common stock for the ten to eighteen trading
days immediately preceding the date of conversion. Upon the occurrence of an event of default, as defined in the 2015 Convertible
Notes, the Company was required to pay interest at 22% per annum and the holders could at their option declare a Note, together
with accrued and unpaid interest, to be immediately due and payable. In addition, the 2015 Convertible Notes provide for adjustments
for dividends payable other than in shares of common stock, for reclassification, exchange or substitution of the common stock
for another security or securities of the Company or pursuant to a reorganization, merger, consolidation, or sale of assets, where
there is a change in control of the Company.
The Company determined that the conversion
feature of the 2015 Convertible Notes represent an embedded derivative since the Notes conventional debt are convertible into a
variable number of shares upon conversion. Accordingly, the 2015 Convertible Notes were not considered to be under ASC 815-40 (formerly
EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock)
and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly,
the fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding
amount recorded as a discount to each Note. Such discount is being amortized from the date of issuance to the maturity dates of
the Notes. The change in the fair value of the liability for derivative contracts are recorded in other income or expenses in the
consolidated statements of operations at the end of each quarter, with the offset to the derivative liability on the balance sheet.
The embedded feature included in the 2015 Convertible Notes resulted in an initial debt discount of $211,750, an initial derivative
liability expense of $71,761 and an initial derivative liability of $283,511.
2016 Convertible Notes
On January 19, 2016, the Company completed
the closing of a private placement financing transaction with LG, pursuant to a Securities Purchase Agreement (the “LG Purchase
Agreement”). Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible Debenture (the “LG Debenture”)
in the aggregate principal amount of $76,080, and delivered on January 31, 2016, gross proceeds of $62,500 excluding transaction
costs, fees, and expenses.
On January 19, 2016, the Company completed
the closing of a private placement financing transaction with Cerberus, pursuant to a Securities Purchase Agreement (the “Cerberus
Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus purchased an 8% Convertible Debenture (the “Cerberus
Debenture”) in the aggregate principal amount of $34,775, and delivered on January 25, 2016, gross proceeds of $25,000 excluding
transaction costs, fees, and expenses.
On March 23, 2016, the Company completed
the closing of a private placement financing transaction with Cerberus, pursuant to a Securities Purchase Agreement (the “Cerberus
Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus purchased an 8% Convertible Debenture (the “Cerberus
Debenture”) in the aggregate principal amount of $22,000, and delivered on March 31, 2016, gross proceeds of $20,000 excluding
transaction costs, fees, and expenses.
On April 15, 2016, the Company completed
the closing of a private placement financing transaction with LG, pursuant to a Securities Purchase Agreement (the “LG Purchase
Agreement”). Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible Debenture (the “LG Debenture”)
in the aggregate principal amount of $65,625, and delivered on April 15, 2016, gross proceeds of $62,500 excluding transaction
costs, fees, and expenses.
On July 14, 2016, the Company completed
the closing of a private placement financing transaction with LG, pursuant to a Securities Purchase Agreement (the “LG Purchase
Agreement”). Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible Debenture (the “LG Debenture”)
in the aggregate principal amount of $65,625, and delivered on April 15, 2016, gross proceeds of $62,500 excluding transaction
costs, fees, and expenses.
On August 1, 2016, the Company completed
the closing of a private placement financing transaction with Cerberus, pursuant to a Securities Purchase Agreement (the “Cerberus
Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus purchased an 8% Convertible Debenture (the “Cerberus
Debenture”) in the aggregate principal amount of $22,000, and delivered on August 1, 2016, gross proceeds of $20,000 excluding
transaction costs, fees, and expenses.
On October 14, 2016, the Company completed
the closing of a private placement financing transaction with LG, pursuant to a Securities Purchase Agreement (the “LG Purchase
Agreement”). Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible Debenture (the “LG Debenture”)
in the aggregate principal amount of $30,812.50, and delivered on October 14, 2016, gross proceeds of $20,000 excluding transaction
costs, fees, and expenses.
On October 31, 2016, the Company entered
into a Convertible Promissory Note ("St. George 2016 Notes") for $555,000 to St. George Investments, LLC. (“St.
George”) which includes a purchase price of $500,000 and transaction costs of $5,000 and OID interest of $50,000. On October
31, 2016, the Company received $100,000 and recorded $115,000 as convertible note payable, including $5,000 of transaction costs
and $10,000 OID interest. St. George also issued to the Company eight secured promissory notes, each in the amount of $50,000.
All or any portion of the outstanding balance of the St. George 2016 Notes may be prepaid, without penalty, along with accrued
but unpaid interest at any time prior to maturity. The Company has no obligation to pay St. George any amounts on the unfunded
portion of the St. George 2016 Notes. The St. George 2016 Note bears interest at 10% per annum (increases to 22% per annum upon
an event of default) and is convertible into shares of the Company’s common stock at St. George’s option at a price
of $0.05 per share. On December 14, 2016, St. George funded one of the secured promissory notes issued to the Company.
Beginning on the date that is six (6)
months after the later of (i) the Issuance Date, and (ii) the date the Initial Cash Purchase Price is paid to the Company (the
“Initial Installment Date”), and on each applicable Installment Date thereafter, the Company is to pay the Holder,
the applicable Installment Amount due on such date. Five Installment Amounts of $111,000 plus the sum of any accrued and unpaid
interest, fees, costs or charges may be made (a) in cash (a “Company Redemption”), (b) by converting such Installment
Amount into shares of Common Stock (a “Company Conversion”), or (c) by any combination of a Company Conversion and
a Company Redemption so long as the entire amount of such Installment Amount due shall be converted and/or redeemed by the Company
on the applicable Installment Date. The St. George 2016 Note matures fifteen months after the Issuance Date.
On December 15, 2016, the Company completed
the closing of a private placement financing transaction with LG, pursuant to a Securities Purchase Agreement (the “LG Purchase
Agreement”). Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible Debenture (the “LG Debenture”)
in the aggregate principal amount of $32,812.50, and delivered on December 15, 2016, gross proceeds of $30,812.5 excluding transaction
costs, fees, and expenses.
Principal and interest on the above
LG and Cerberus convertible debentures is due and payable one year from their respective funding date, and the LG and Cerberus
Debentures are convertible into shares of the Company’s common stock at any time at the discretion of LG and Cerberus, respectively,
at a VCP. The VCP is calculated as the lowest trading price during the eighteen (18) trading days immediately prior to the conversion
date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount.
The Company may prepay the LG and/or
the Cerberus Debentures, subject to prior notice to the holder within an initial 30 day period after issuance, by paying an amount
equal to 118% multiplied by the amount that the Company is prepaying. For each additional 30 day period the amount being prepaid
is multiplied by an additional 6%, up to a maximum of 148% on the 180
th
day from issuance. Beginning on the 180
th
day
after the issuance of the Debentures, the Company is not permitted to prepay the Debenture, so long as the Debenture is still outstanding,
unless the Company and the holder agree otherwise in writing.
The Company determined that the conversion
feature of the 2016 Convertible Notes represent an embedded derivative since the Notes are convertible into a variable number of
shares upon conversion. Accordingly, the 2016 Convertible Notes were not considered to be conventional debt under ASC 815-40 (formerly
EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock)
and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. Accordingly,
the fair value of these derivative instruments being recorded as a liability on the consolidated balance sheet with the corresponding
amount recorded as a discount to each Note. Such discount is being amortized from the date of issuance to the maturity dates of
the Notes. The change in the fair value of the liability for derivative contracts are recorded in other income or expenses in the
consolidated statements of operations at the end of each quarter, with the offset to the derivative liability on the balance sheet.
The embedded feature included in the 2016 Convertible Notes resulted in an initial debt discount of $865,593, an initial derivative
liability expense of $2,317,830 and an initial derivative liability of $3,183,423.
As of December 31, 2016, the Company
revalued the embedded conversion feature of the 2015 and 2016 Convertible Notes. The fair value of the 2015 and 2016 Convertible
Notes was calculated at December 31, 2016 based on the Black Scholes method consistent with the terms of the related debt.
A summary of the derivative liability
balance as of December 31, 2016 is as follows:
Beginning Balance
|
|
$
|
167,014
|
|
Initial Derivative Liability
|
|
|
4,114,649
|
|
Fair Value Change
|
|
|
(1,791,988
|
)
|
Debt extinguishment
|
|
|
(84,057
|
)
|
Reduction for conversions
|
|
|
(791,851
|
)
|
Ending Balance
|
|
$
|
1,613,767
|
|
The fair value at the commitment date
for the 2016 Convertible Notes and the re-measurement dates for the Company’s derivative liabilities were based upon the
following management assumptions as of December 31, 2016:
|
|
Commitment date
|
|
Remeasurement date
|
Expected
dividends
|
|
|
-0-
|
|
|
|
-0-
|
|
Expected
volatility
|
|
|
243%-268
|
%
|
|
|
246
|
%
|
Expected
term
|
|
|
0.85 -
5 years
|
|
|
|
0.25 - 4.84 years
|
|
Risk
free interest
|
|
|
.44%-.68
|
%
|
|
|
.48%-.85%
|
|
A summary of the convertible notes payable
balance as of December 31, 2016 is as follows:
|
|
2016
|
Beginning Principal Balance
|
|
$
|
472,515
|
|
Convertible notes-newly issued
|
|
|
521,731
|
|
Accrued interest added to Note
|
|
|
6,848
|
|
Conversion of convertible notes (principal)
|
|
|
(174,613
|
)
|
Unamortized discount
|
|
|
(257,033
|
)
|
Ending Principal Balance
|
|
$
|
569,448
|
|
Activity of discount on
convertible notes payable as of December 31, 2016 is as follows:
Debt discount, December 31, 2015
|
|
$
|
27,220
|
|
Debt discount generated during 2016
|
|
|
890,949
|
|
Amortization of debt discount
|
|
|
(661,136
|
)
|
Debt discount, December 31, 2016
|
|
$
|
257,033
|
|
During the year ended December 31, 2016,
the Company issued the following shares of common stock upon the conversion of portions of the 2015 Convertible Notes and
accrued interest thereon:
Date
|
|
Principal Conversion
|
|
Interest Conversion
|
|
Total
Conversion
|
|
Conversion
Price
|
|
Shares
Issued
|
|
Issued to
|
|
12/28/16
|
|
$
|
45,000
|
|
|
$
|
3,511
|
|
|
$
|
48,511
|
|
|
$
|
0.015080
|
|
|
|
3,216,925
|
|
|
LG
|
|
12//13/16
|
|
$
|
9,500
|
|
|
$
|
400
|
|
|
$
|
9,900
|
|
|
$
|
0.000754
|
|
|
|
13,129,683
|
|
|
Cerberus
|
|
9/26/16
|
|
$
|
8,613
|
|
|
$
|
629
|
|
|
$
|
9,242
|
|
|
$
|
0.001218
|
|
|
|
7,587,824
|
|
|
LG
|
|
7/29/16
|
|
$
|
7,500
|
|
|
$
|
801
|
|
|
$
|
8,301
|
|
|
$
|
0.000081
|
|
|
|
10,222,352
|
|
|
LG
|
|
7/20/16
|
|
$
|
9,500
|
|
|
$
|
995
|
|
|
$
|
10,495
|
|
|
$
|
0.000098
|
|
|
|
10,644,310
|
|
|
LG
|
|
7/12/16
|
|
$
|
9,000
|
|
|
$
|
927
|
|
|
$
|
9,927
|
|
|
$
|
0.000986
|
|
|
|
10,068,073
|
|
|
LG
|
|
7/1/16
|
|
$
|
8,000
|
|
|
$
|
805
|
|
|
$
|
8,805
|
|
|
$
|
0.001160
|
|
|
|
7,590,362
|
|
|
LG
|
|
6/22/16
|
|
$
|
5,000
|
|
|
$
|
973
|
|
|
$
|
5,973
|
|
|
$
|
0.001450
|
|
|
|
4,119,414
|
|
|
GW
|
|
6/20/16
|
|
$
|
10,500
|
|
|
$
|
1,003
|
|
|
$
|
11,503
|
|
|
$
|
0.001450
|
|
|
|
7,933,377
|
|
|
Cerberus
|
|
6/20/16
|
|
$
|
5,000
|
|
|
$
|
967
|
|
|
$
|
5,967
|
|
|
$
|
0.001450
|
|
|
|
4,114,879
|
|
|
GW
|
|
6/20/16
|
|
$
|
6,000
|
|
|
$
|
589
|
|
|
$
|
6,589
|
|
|
$
|
0.001450
|
|
|
|
4,544,241
|
|
|
LG
|
|
6/10/16
|
|
$
|
6,075
|
|
|
$
|
1,134
|
|
|
$
|
7,209
|
|
|
$
|
0.001798
|
|
|
|
4,009,701
|
|
|
GW
|
|
6/9/16
|
|
$
|
5,000
|
|
|
$
|
479
|
|
|
$
|
5,479
|
|
|
$
|
0.001798
|
|
|
|
3,047,219
|
|
|
LG
|
|
6/2/16
|
|
$
|
9,000
|
|
|
$
|
848
|
|
|
$
|
9,848
|
|
|
$
|
0.002378
|
|
|
|
4,141,387
|
|
|
Cerberus
|
|
5/23/16
|
|
$
|
5,000
|
|
|
$
|
460
|
|
|
$
|
5,460
|
|
|
$
|
0.002436
|
|
|
|
2,241,490
|
|
|
LG
|
|
3/17/16
|
|
$
|
9,000
|
|
|
$
|
696
|
|
|
$
|
9,696
|
|
|
$
|
0.002436
|
|
|
|
3,980,431
|
|
|
LG
|
|
3/17/16
|
|
$
|
3,000
|
|
|
$
|
138
|
|
|
$
|
3,138
|
|
|
$
|
0.000638
|
|
|
|
4,918,624
|
|
|
Service
|
|
3/8/16
|
|
$
|
7,425
|
|
|
$
|
928
|
|
|
$
|
8,353
|
|
|
$
|
0.00174
|
|
|
|
4,800,354
|
|
|
GW
|
|
3/7/16
|
|
$
|
6,500
|
|
|
$
|
489
|
|
|
$
|
6,989
|
|
|
$
|
0.00174
|
|
|
|
4,016,471
|
|
|
LG
|
|
|
|
|
$
|
174,613
|
|
|
$
|
16,772
|
|
|
$
|
191,385
|
|
|
|
|
|
|
|
114,327,117
|
|
|
|
Note Payable Land
On March 18, 2014, in conjunction with
the land purchase of 80 acres in Pueblo County, Colorado, the Company paid $36,000 cash and entered into a promissory note in the
amount of $85,750. The promissory note is being amortized on the basis of five (5) years, with principal payments of $17,150 plus
interest at 3.5% due annually on December 1 of each year. Payments begin December 1, 2014, and shall be due on the first day of
each succeeding December, with any balance of principal and accrued interest due December 1, 2020. On March 4, 2015, and May 4,
2015, the Company paid $9,000 and $2,437, respectively, of the December 1, 2014 amount, resulting in the balance of note being
$74,313. In November 2015, the Company was made aware that the land transaction regarding 80 acres in Pueblo County, Colorado,
may not have been properly deeded to the Company. The company was a party to the land purchase, however, the second party
to the land contract never filed the original quit claim deed on behalf of the Company, even though a copy of the notarized quit
claim deed was sent to the Company. To date, the Company has paid a total of $47,438 ($36,000 at closing) and is on the deed of
trust of the property. Accordingly, in December 2015, the Company reduced the remaining balance of the note payable for the acquisition
of the land of $74,313 and recorded a reserve allowance for the remaining balance of the asset of $54,490. In February, 2017, the
original owner of the 80 acres foreclosed on the property from the second party and the Company entered into a new land purchase
contract directly with the landowner on February 7, 2017.
Future principle payments due on the
Company’s convertible debt as of December 31, 2016, are as follows
Twelve months ending December 31,
|
|
Amount
|
|
2017
|
|
|
$
|
826,480
|
|
Note 7 –
Related Party Transactions
Effective January 1, 2013, the Company
agreed to an annual compensation of $150,000 for its CEO, Mr. Michael Friedman (resigned March 20, 2015, re-appointed November
4, 2015), and $96,000 for the CFO, Mr. Barry Hollander (resigned September 15, 2015). Effective March 20, 2015, Mr. Justin Braune
was named CEO and President. Mr. Braune also was appointed to the Board of Directors. The Company agreed to an annual compensation
of $100,000 for Mr. Braune in his role of CEO and Director of the Company and to issue Mr. Braune 15,000,000 shares of restricted
common stock. Mr. Braune resigned from the board of directors and as CEO on November 4, 2015, and agreed to cancel the 15,000,000
shares in his letter of resignation. The Company also initially issued Mr. Braune 12,500,000 shares of common stock on October
13, 2015. On October 16, 2015, Mr. Braune advised the Company’s transfer agent at the time to cancel the shares.
For the years ended December 31, 2016
and 2015, the Company recorded expenses to its officers the following amounts included in Administrative and Management Fees in
the consolidated statements of operations, included herein:
|
|
Year ended December 31,
|
|
|
2016
|
|
2015
|
Mr. Braune, former CEO
|
|
$
|
—
|
|
|
$
|
62,821
|
|
Mr. Friedman, CEO
|
|
|
150,000
|
|
|
|
62,500
|
|
Mr. Hollander, former CFO
|
|
|
—
|
|
|
|
68,000
|
|
Total
|
|
$
|
150,000
|
|
|
$
|
151,654
|
|
As of December 31, 2016 and 2015, the
Company owed the following amounts, included in due to related party on the Company’s consolidated balance sheet:
|
|
December 31,
|
|
December 31,
|
|
|
2016
|
|
2015
|
Mr. Friedman, CEO
|
|
$
|
54,246
|
|
|
$
|
8,580
|
|
Mr. Braune, former CEO
|
|
|
16,667
|
|
|
|
16,667
|
|
Mr. Hollander, former CFO
|
|
|
—
|
|
|
|
12,731
|
|
Total
|
|
$
|
70,913
|
|
|
$
|
37,798
|
|
On April 14, 2015, the Company appointed
Dr. Stephen Holt to the Advisory Board of the Board of Directors of the Company. The Company issued 5,000,000 shares of restricted
common stock to Dr. Holt for his appointment. The Company valued the 5,000,000 shares of common stock at $100,000 ($0.02 per share,
the market price of the common stock on the grant date) as stock compensation expense for the year ended December 31, 2015. Additionally,
the Company agreed the advisor shall receive a non-qualified stock option to purchase 1,000,000 shares (“Option Shares”)
of the Company’s common stock at an exercise price equal to $0.05 per share. 400,000 Option Shares vested immediately and
the remaining 600,000 Option Shares vested over 12 months. Accordingly, the Company has recorded $2,371 for the year ended December
31, 2016 in stock compensation expense and all of the options have vested.
Amounts Due from 800 Commerce, Inc.
800 Commerce, Inc. (now known as Petrogress,
Inc.), a commonly controlled entity until February 29, 2016, owed Agritek $282,947 and $236,759 as of February 29, 2016 and December
31, 2015, respectively, as a result of advances received from or payments made by Agritek on behalf of 800 Commerce. In February
2016, the Company entered into a Debt Settlement Agreement (the “Settlement Agreement”) with Petrogress, Inc. whereby
the Company accepted 1,101,642 shares of common stock of Petrogress in settlement of the amount due. Based on the market value
of the Petrogress common stock on the date of the Settlement Agreement, the Company recognized a loss of $266,422 for the year
ended December 31, 2015. Based on the market price of the Petrogress common stock as of December 31, 2016, the Company recorded
an unrealized gain on marketable securities of $23,244 for the year ended December 31, 2016.
Note 8 –
Common and Preferred
Stock
Common Stock
On May 23, 2016, the Company
filed a certificate of amendment, increasing the authorized capital of the Company to 1,001,000,000 shares of capital stock;
consisting of 1,000,000,000 shares of common stock, par value $0.0001 and 1,000,000 shares of preferred stock, par value $0.01.
2016 Issuances
During the year ended December 31, 2016,
the Company issued the following shares of common stock upon the conversions of portions of the 2014 Company Note and portions
of the 2015 Convertible Notes:
Date
|
|
Principal Conversion
|
|
Interest Conversion
|
|
Total
Conversion
|
|
Conversion
Price
|
|
Shares
Issued
|
|
Issued to
|
|
12/28/16
|
|
$
|
45,000
|
|
|
$
|
3,511
|
|
|
$
|
48,511
|
|
|
$
|
0.015080
|
|
|
|
3,216,925
|
|
|
LG
|
|
12//13/16
|
|
$
|
9,500
|
|
|
$
|
400
|
|
|
$
|
9,900
|
|
|
$
|
0.000754
|
|
|
|
13,129,683
|
|
|
Cerberus
|
|
9/26/16
|
|
$
|
8,613
|
|
|
$
|
629
|
|
|
$
|
9,242
|
|
|
$
|
0.001218
|
|
|
|
7,587,824
|
|
|
LG
|
|
7/29/16
|
|
$
|
7,500
|
|
|
$
|
801
|
|
|
$
|
8,301
|
|
|
$
|
0.000081
|
|
|
|
10,222,352
|
|
|
LG
|
|
7/20/16
|
|
$
|
9,500
|
|
|
$
|
995
|
|
|
$
|
10,495
|
|
|
$
|
0.000098
|
|
|
|
10,644,310
|
|
|
LG
|
|
7/12/16
|
|
$
|
9,000
|
|
|
$
|
927
|
|
|
$
|
9,927
|
|
|
$
|
0.000986
|
|
|
|
10,068,073
|
|
|
LG
|
|
7/1/16
|
|
$
|
8,000
|
|
|
$
|
805
|
|
|
$
|
8,805
|
|
|
$
|
0.001160
|
|
|
|
7,590,362
|
|
|
LG
|
|
6/22/16
|
|
$
|
5,000
|
|
|
$
|
973
|
|
|
$
|
5,973
|
|
|
$
|
0.001450
|
|
|
|
4,119,414
|
|
|
GW
|
|
6/20/16
|
|
$
|
10,500
|
|
|
$
|
1,003
|
|
|
$
|
11,503
|
|
|
$
|
0.001450
|
|
|
|
7,933,377
|
|
|
Cerberus
|
|
6/20/16
|
|
$
|
5,000
|
|
|
$
|
967
|
|
|
$
|
5,967
|
|
|
$
|
0.001450
|
|
|
|
4,114,879
|
|
|
GW
|
|
6/20/16
|
|
$
|
6,000
|
|
|
$
|
589
|
|
|
$
|
6,589
|
|
|
$
|
0.001450
|
|
|
|
4,544,241
|
|
|
LG
|
|
6/10/16
|
|
$
|
6,075
|
|
|
$
|
1,134
|
|
|
$
|
7,209
|
|
|
$
|
0.001798
|
|
|
|
4,009,701
|
|
|
GW
|
|
6/9/16
|
|
$
|
5,000
|
|
|
$
|
479
|
|
|
$
|
5,479
|
|
|
$
|
0.001798
|
|
|
|
3,047,219
|
|
|
LG
|
|
6/2/16
|
|
$
|
9,000
|
|
|
$
|
848
|
|
|
$
|
9,848
|
|
|
$
|
0.002378
|
|
|
|
4,141,387
|
|
|
Cerberus
|
|
5/23/16
|
|
$
|
5,000
|
|
|
$
|
460
|
|
|
$
|
5,460
|
|
|
$
|
0.002436
|
|
|
|
2,241,490
|
|
|
LG
|
|
3/17/16
|
|
$
|
9,000
|
|
|
$
|
696
|
|
|
$
|
9,696
|
|
|
$
|
0.002436
|
|
|
|
3,980,431
|
|
|
LG
|
|
3/17/16
|
|
$
|
3,000
|
|
|
$
|
138
|
|
|
$
|
3,138
|
|
|
$
|
0.000638
|
|
|
|
4,918,624
|
|
|
Service
|
|
3/8/16
|
|
$
|
7,425
|
|
|
$
|
928
|
|
|
$
|
8,353
|
|
|
$
|
0.00174
|
|
|
|
4,800,354
|
|
|
GW
|
|
3/7/16
|
|
$
|
6,500
|
|
|
$
|
489
|
|
|
$
|
6,989
|
|
|
$
|
0.00174
|
|
|
|
4,016,471
|
|
|
LG
|
|
|
|
|
$
|
174,613
|
|
|
$
|
16,772
|
|
|
$
|
191,385
|
|
|
|
|
|
|
|
114,327,117
|
|
|
|
In addition to the above, on November
7, 2016, the Company issued 5,000,000 shares of common stock to acquire 100% of Sterling Classic Compassion, LLC.
2015 Issuances
During the year ended December 31, 2015,
the Company issued the following shares of common stock upon the conversions of portions of the 2014 Company Note and portions
of the 2015 Convertible Notes:
Date
|
|
Principal Conversion
|
|
Interest Conversion
|
|
Total Conversion
|
|
Conversion Price
|
|
Shares Issued
|
|
Issued to
|
|
1/3/15
|
|
$
|
65,460
|
|
|
$
|
9,540
|
|
|
$
|
75,000
|
|
|
$
|
.045
|
|
|
|
1,665,445
|
|
|
Tonaquint
|
|
1/28/15
|
|
$
|
54,123
|
|
|
$
|
8,377
|
|
|
$
|
62,500
|
|
|
$
|
.0334
|
|
|
|
1,869,187
|
|
|
Tonaquint
|
|
2/20/15
|
|
$
|
55,901
|
|
|
$
|
9,099
|
|
|
$
|
65,000
|
|
|
$
|
.0244
|
|
|
|
2,668,309
|
|
|
Tonaquint
|
|
3/13/15
|
|
$
|
60,000
|
|
|
$
|
—
|
|
|
$
|
60,000
|
|
|
$
|
.0244
|
|
|
|
2,463,045
|
|
|
Tonaquint
|
|
3/31/15
|
|
$
|
66,555
|
|
|
$
|
8,445
|
|
|
$
|
75,000
|
|
|
$
|
.0125
|
|
|
|
5,985,634
|
|
|
Tonaquint
|
|
5/5/15
|
|
$
|
66,731
|
|
|
$
|
8,269
|
|
|
$
|
75,000
|
|
|
$
|
.0125
|
|
|
|
6,008,171
|
|
|
Tonaquint
|
|
6/2/15
|
|
$
|
67,277
|
|
|
$
|
7,723
|
|
|
$
|
75,000
|
|
|
$
|
.0095
|
|
|
|
7,917,238
|
|
|
Tonaquint
|
|
6/29/15
|
|
$
|
67,483
|
|
|
$
|
7,517
|
|
|
$
|
75,000
|
|
|
$
|
.0055
|
|
|
|
13,678,643
|
|
|
Tonaquint
|
|
7/29/15
|
|
$
|
29,368
|
|
|
$
|
7,262
|
|
|
$
|
36,630
|
|
|
$
|
.003663
|
|
|
|
10,000,000
|
|
|
Tonaquint
|
|
8/13/15
|
|
$
|
27,473
|
|
|
$
|
—
|
|
|
$
|
27,473
|
|
|
$
|
.003663
|
|
|
|
7,500,000
|
|
|
Tonaquint
|
|
9/3/15
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
10,000
|
|
|
$
|
.0019
|
|
|
|
5,263,158
|
|
|
Vis Vires
|
|
9/10/15
|
|
$
|
19,800
|
|
|
$
|
—
|
|
|
$
|
19,800
|
|
|
$
|
.00083
|
|
|
|
16,500,000
|
|
|
Vis Vires
|
|
10/1/15
|
|
$
|
2,750
|
|
|
$
|
112
|
|
|
$
|
2,862
|
|
|
$
|
.000812
|
|
|
|
3,524,027
|
|
|
LG
|
|
10/9/15
|
|
$
|
4,500
|
|
|
$
|
183
|
|
|
$
|
4,683
|
|
|
$
|
.000638
|
|
|
|
7,340,834
|
|
|
Service
|
|
10/12/15
|
|
$
|
3,500
|
|
|
$
|
150
|
|
|
$
|
3,650
|
|
|
$
|
.000812
|
|
|
|
4,494,567
|
|
|
GW
|
|
10/13/15
|
|
$
|
5,000
|
|
|
$
|
216
|
|
|
$
|
5,216
|
|
|
$
|
.00087
|
|
|
|
5,995,275
|
|
|
LG
|
|
10/16/15
|
|
$
|
10,549
|
|
|
$
|
13,924
|
|
|
$
|
24,473
|
|
|
$
|
.001003
|
|
|
|
24,400,000
|
|
|
Tonaquint
|
|
11/6/15
|
|
$
|
5,500
|
|
|
$
|
265
|
|
|
$
|
5,765
|
|
|
$
|
.000638
|
|
|
|
9,036,379
|
|
|
LG
|
|
11/16/15
|
|
$
|
14,005
|
|
|
$
|
6,792
|
|
|
$
|
20,797
|
|
|
$
|
.001
|
|
|
|
21,730,000
|
|
|
Tonaquint
|
|
|
|
|
$
|
635,975
|
|
|
$
|
87,873
|
|
|
$
|
723,848
|
|
|
|
|
|
|
|
158,039,912
|
|
|
|
In addition to the above during the
year ended December 31, 2015, the Company:
On October 13, 2015, the Company issued
12,500,000 shares of common stock to Mr. Friedman for services. The Company valued the shares of common stock at $25,000 ($0.002
per share, the market price of the common stock on the grant date) as stock compensation expense for the year ended December 31,
2015.
On October 13, 2015, the Company issued
12,500,000 shares of common stock to Mr. Braune for services. The Company valued the shares of common stock at $25,000 ($0.002
per share, the market price of the common stock on the grant date) as stock compensation expense for the year ended December 31,
2015. On October 16, 2015, Mr. Braune advised the Company and the transfer agent at the time to cancel the shares. Since then,
Mr. Braune is claiming ownership of the shares, which the Company disputes.
On April 14, 2015, the Company appointed
Dr. Stephen Holt to the Advisory Board of the Board of Directors of the Company. The Company issued 5,000,000 shares of restricted
common stock to Dr. Holt for his appointment.
On March 20, 2015, the Company issued
15,000,000 shares of common stock to the Company’s CEO in connection with an employment and board of director’s agreement
naming Mr. Braune as CEO, President and a member of our Board of Directors. The shares of common stock were to vest as follows:
5,000,000, shares on the six month anniversary of the Agreement and 10,000,000 shares on the one year anniversary of the Agreement.
Mr. Braune resigned from the board of directors and as CEO on November 4, 2015, and agreed to cancel the 15,000,000 shares in his
letter of resignation.
P
referred
Stock
On June 26, 2015, the Company filed
with the Delaware Secretary of State the Amended and Restated Designation Preferences and Rights (the “Certificate of Designation”)
of Class B Preferred Stock (the “Series B Preferred Stock”). Pursuant to the Certificate of Designation, 1,000 shares
constitute the Series B Preferred Stock. The Series B Preferred Stock and any accrued and unpaid dividends thereon shall, with
respect to rights on liquidation, winding up and dissolution, rank senior to the Company’s issued and outstanding common
stock and Series A preferred stock.
The Series
B
P
ref
e
r
red
S
tock
has
the right to vote in aggregate, on all shareholder matters equal
to 51% of the total vote, no matter how many shares of common stock or other voting stock of the Company are issued or outstanding
in the future.
The Series B Preferred Stock has a right to vote on all matters presented or
submitted to the Company’s stockholders for approval in pari passu with the common stockholders, and not as a separate class.
The holders of Series B Preferred Stock have the right to cast votes for each share of Series B Preferred Stock held of record
on all matters submitted to a vote of common stockholders, including the election of directors. There is no right to cumulative
voting in the election of directors. The holders of Series B Preferred Stock vote together with all other classes and series of
common stock of the Company as a single class on all actions to be taken by the common stockholders except to the extent that voting
as a separate class or series is required by law.
On June 26, 2015, the Company issued
1,000 shares of Class B Preferred Stock. The Company estimated the fair value of the shares of the Series B Preferred Stock (super
voting rights, non-convertible securities) at $276,300 for purposes of solely determining the proper accounting treatment and valuation
in accordance with ASC 820, Fair Value in Financial Instruments. The Company recorded $40,000 as payment towards accrued and unpaid
fees owed Mr. Friedman and $236,300 as a loss on settlement of debt extinguishment.
As of December 31, 2016 and 2015, there
were 1,000 shares of Class B Preferred Stock outstanding, respectively.
Warrants
On April 14, 2015, in connection with
the appointment of Dr. Stephen Holt to the advisory board, the Company agreed the advisor shall receive a non-qualified stock option
to purchase 1,000,000 shares (“Option Shares”) of the Company’s common stock at an exercise price equal to $0.05
per share and expiring April 14, 2018. Option Shares of 400,000 vested immediately and 50,000 Option Shares vest each month from
April 2015 through March 2016. Accordingly, as of December 31, 2016 and 2015, 1,000,000 and 850,000 Option Shares have vested,
respectively, and the Company recorded $2,317 and $13,436 as stock compensation expense for the years ended December 31, 2016 and
2015, respectively, based on Black-Scholes.
On April 26, 2013 and in connection
with the appointment of Mr. James Canton to the Company’s advisory board, the Company issued a warrant to Mr. Canton to purchase
300,000 shares of common stock. The warrants expired on April 26, 2016.
On October 31, 2016, the Company granted
(Warrant #1) to St. George the right to purchase at any time on or after November 10, 2016 (the “Issue Date”) until
the date which is the last calendar day of the month in which the fifth anniversary of the Issue Date occurs (the “Expiration
Date”), a number of fully paid and non-assessable shares (the “Warrant Shares”) of Company’s common stock,
equal to $57,500 divided by the Market Price (defined below) as of the Issue Date, as such number may be adjusted from time to
time pursuant to the terms and conditions of Warrant #1 to Purchase Shares of Common Stock. The exercise price is $0.05 and is
subject to price adjustments pursuant to the agreement and includes a cashless exercise provision. The Company also issued Warrant
#’s 2-9, with each warrant only effective upon St. George funding of the secured notes they issued to the Company. Warrant
#’s 2-9 give St. George the right to purchase Warrant Shares equal to $27,500 divided by the Market Price on the funded date.
On December 14, 2016, the Company received a payment of $50,000, and accordingly, Warrant #2 is effective.
The Company evaluated all outstanding
warrants to determine whether these instruments may be tainted. All warrants outstanding were considered tainted. The Company
valued the embedded derivatives within the warrants using the Black-Scholes valuation model. As of December 31, 2016, the
Company estimated the fair value of the derivative using the Black-Scholes valuation method with assumptions including: (1) term
of 1.25 to 4.8 years; (2) a computed volatility rate of 246%; (3) a discount rate of .85% to 1.33%; and (4) zero dividends. The
valuation of this embedded derivative was recorded with an offsetting gain/loss on derivative liability.
Note 9 –
Income Taxes
Deferred income taxes reflect the net
tax effects of operating loss and tax credit carry forwards and temporary differences between carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in
which temporary differences representing net future deductible amounts become deductible. Due to the uncertainty of the Company’s
ability to realize the benefit of the deferred tax assets, the deferred tax assets are fully offset by a valuation allowance at
December 31, 2016 and 2015.
Income tax expense for 2016 and 2015
is as follows:
|
|
2016
|
|
2015
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
State
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(924,670
|
)
|
|
$
|
(657,937
|
)
|
State
|
|
|
(98,722
|
)
|
|
|
(70,244
|
)
|
Change
in Valuation allowance
|
|
|
1,023,392
|
|
|
|
728,181
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The following is a summary of the Company’s
deferred tax assets at December 31, 2016 and 2015:
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Deferred Tax Assets:
|
|
|
|
|
|
|
|
|
Net operating losses
|
|
$
|
2,196,021
|
|
|
$
|
1,414,628
|
|
Stock compensation
|
|
|
1,633,840
|
|
|
|
1,632,947
|
|
Debt discounts and derivatives
|
|
|
518,183
|
|
|
|
277,597
|
|
Other
|
|
|
132,279
|
|
|
|
120,990
|
|
Net deferred tax assets
|
|
|
4,480,323
|
|
|
|
3,446,162
|
|
Valuation allowance
|
|
|
(4,480,323
|
)
|
|
|
(3,446,162
|
)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
A reconciliation between the expected
tax expense (benefit) and the effective tax rate for the years ended December 31, 2016 and 2015 are as follows:
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
(34.00
|
%)
|
|
|
(34.00
|
%)
|
State taxes, net of federal income tax
|
|
|
(3.63
|
%)
|
|
|
(3.63
|
%)
|
Effect of change in valuation allowance
|
|
|
—
|
|
|
|
—
|
|
Non-deductible expenses
|
|
|
37.63
|
%
|
|
|
37.63
|
%
|
|
|
|
0
|
%
|
|
|
0
|
%
|
As of December 31, 2016, the Company
had a tax net operating loss carry forward of approximately $5,836,000. Any unused portion of this carry forward expires in 2031.
Utilization of this loss may be limited in the event of an ownership change pursuant to IRS Section 382.
Note 10 –
Commitments and Contingencies
Office Space
Effective April 1, 2014, the Company
entered into a rent sharing agreement for the use of 1,300 square feet with a company controlled by the Company’s CFO. The
Company agreed to pay $1,350 per month for the space. The Company terminated the agreement in September 2015.
In April 2014, the Company entered into
a two year sublease agreement for the use of up to 7,500 square feet with a
Colorado based
oncology clinical trial and drug testing company and facility presently doing cancer research and testing for established pharmaceutical
companies seeking FDA approval for new drugs
. Pursuant to the lease, as amended, the Company agreed to pay $3,500 per month
for the space. The lease expired in April 2016, and the Company owes the landlord $48,750.
Effective April 10, 2015, the Company
entered into a four month lease agreement for the use of 170 square feet in California, for office space for our CEO. The Company
agreed to pay $1,300 for the use of the space. The agreement expired in August 2015.
In
December 2016, the Company signed a one year lease for office space in San Juan, Puerto Rico. The lease requires monthly base rent
of $800 for the months of December 2016 through February 2017, and $900 per month for the months of March 2017 through November
2017.
In
January 2017, the Company signed a five (5) year lease, beginning February 1, 2107, for approximately 6,000 square feet of office
space, comprised of two floors, in San Juan, Puerto Rico. Pursuant to the lease, the Company will pay $3,000 per month for one
floor for the first year of the lease. The rent will increase 3% per year on February beginning in 2018 and an additional 3% per
year on each successive February 1, during the term of the lease. The landlord has agreed that for the month of February 2017,
the rent will be $1,500. The rent for the other floor will be $2,000 per month during the term of the lease and the Company does
not have any rent payments for the first three months of the lease (February 2017 through April 2017).
For the years ended December 31, 2016
and 2015, the Company recorded rent expense of $64,190 and $72,936, respectively.
Leased Properties
On April 28, 2014,
the Company executed and closed a 10 year lease agreement for 20 acres of an agricultural farming facility located in South Florida
following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing low grade marijuana
specifically for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement, the Company maintains
a first right of refusal to purchase the property for three years. The Company prepaid the first year lease amount of $24,000 and
based on the straight line expense over the term of the lease, the Company has recorded $38,244 of expense (included in leased
property expenses) for each of the years ended December 31, 2016 and 2015.
The Company is
currently in default of the lease agreement, as rents have not been for the second year of the lease beginning May 2015.
On July 11, 2014,
the Company signed a ten year
lease agreement for an additional 40 acres in Pueblo, Colorado.
The lease requires monthly rent payments of $10,000 during the first year and is subject to a 2% annual increase over the life
of the lease. The lease also provides rights to 50 acres of certain tenant water rights for $50,000 annually plus cost of approximately
$2,400 annually. The Company paid the $50,000 in July 2014. The Company has not used the land and effective July 31, 2016, stopped
recording leased property expense for this property. Based on the straight line expense through July 31, 2016, the Company has
recorded $76,650 and $158,485 of expense for the years ended December 31, 2016 and 2015, respectively, (included in leased property
expenses) related to the land and water rights. The Company is currently in default of the lease agreement, as rents have not been
paid since February 2015.
Future
rent payments for the next five years and thereafter are as follows:
Twelve months ending December 31,
|
|
Amount
|
|
2017
|
|
|
$
|
88,244
|
|
|
2018
|
|
|
|
96,128
|
|
|
2019
|
|
|
|
100,752
|
|
|
2020
|
|
|
|
105,761
|
|
|
2021
|
|
|
|
114,565
|
|
|
Thereafter
|
|
|
|
113,413
|
|
|
|
|
|
$
|
618,863
|
|
Legal
& Other
On March 2, 2015, the Company, the Company’s
CEO and the Company’s CFO at the time were named in a civil complaint filed by Erick Rodriguez in the District Court in Clark
County, Nevada (the “DCCC”). The complaint alleges that Mr. Rodriguez never received 250,000 shares of Series B preferred
stock that were initially approved by the Board of Directors in 2012, subject to the completion of a merger of a company controlled
by Mr. Rodriguez. Since the merger was never completed, the shares were never certificated to Mr. Rodriguez. On March 21, 2017,
the DCC agreed to Set Aside the Entry of Default against the Defendants. Mr. Rodriguez resigned in June 2013.
On May 6, 2016, the Company, B. Michael
Freidman and Barry Hollander (former CFO) were named as defendants in a Summons/Complaint filed by Justin Braune (the “Plaintiff”)
in Palm Beach County Civil Court, Florida (the “PBCCC”). The complaint alleges that Mr. Braune was entitled to shares
of common stock of the Company. On December 5, 2016, the PBCCC set aside a court default that had been previously issued. The defendants
have answered the complaint, including the defenses that Mr. Braune advised the Company’s transfer agent and the Company
in his letter of resignation dated November 4, 2015, clearly stating that he has relinquished all shares of common stock. The Company
has filed a counterclaim suit against the Plaintiff, as well as sanctions against the Plaintiff and their counsel.
Note 11 –
Going Concern
The accompanying consolidated financial
statements have been prepared assuming the Company will continue as a going concern. As of December 31, 2016 the Company had an
accumulated deficit of $16,424,767
and working capital deficit of $2,679,929. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 12 –
Segment Reporting
Description of Segments
During the years ended December 31,
2016 and 2015, the Company operated in one reportable segment, wholesale sales.
Note 13 –
Subsequent Events
2017 Convertible Notes
On January 24, 2017, the Company completed
the closing of a private placement financing transaction with LG, pursuant to a Securities Purchase Agreement (the “LG Purchase
Agreement”). Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible Debenture (the “LG Debenture”)
in the aggregate principal amount of $94,500, and delivered on January 25, 2017, gross proceeds of $90,000 excluding transaction
costs, fees, and expenses.
On January 24, 2017, the Company completed
the closing of a private placement financing transaction with Cerberus, pursuant to a Securities Purchase Agreement (the “Cerberus
Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus purchased an 8% Convertible Debenture (the “Cerberus
Debenture”) in the aggregate principal amount of $63,000, and delivered on January 25, 2017, gross proceeds of $60,000 excluding
transaction costs, fees, and expenses.
On February 1, 2017, the Company completed
the closing of a private placement financing transaction with Power Up Lending Group, LTD, pursuant to a Securities Purchase Agreement
(the “Power Up Purchase Agreement”). Pursuant to the Power Up Purchase Agreement, Power Up purchased an 12% Convertible
Debenture (the “Power Up Debenture”) in the aggregate principal amount of $140,000, and delivered on February 3, 2017
(the “Funding Date”), gross proceeds of $136,500 excluding transaction costs, fees, and expenses. Principal and interest
on the Power Up Debentures is due and payable on November 5, 2017, and the Power Up Debenture is convertible into shares of the
Company’s common stock beginning six months from the Funding Date, at a VCP. The VCP is calculated as the average of the
three (3) lowest closing bid price during the ten (10) trading days immediately prior to the conversion date multiplied by fifty
eight percent (58%), representing a forty two percent (42%) discount. The Company may prepay the Power Up Debenture, subject to
prior notice to the holder within an initial 30 day period after issuance, by paying an amount equal to 120% multiplied by the
amount that the Company is prepaying. For each additional 30 day period the amount being prepaid is multiplied by an additional
5%, up to a maximum of 140% on the 180
th
day from issuance. Beginning on the 180
th
day after the issuance
of the Debentures, the Company is not permitted to prepay the Debenture, so long as the Debenture is still outstanding, unless
the Company and the holder agree otherwise in writing.
On February 24, 2017, the Company completed
the closing of a private placement financing transaction with LG. Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible
Debenture in the aggregate principal amount of $26,000, and delivered on February 24, 2017, gross proceeds of $24,000 excluding
transaction costs, fees, and expenses.
On February 24, 2017, the Company completed
the closing of a private placement financing transaction with Cerberus, pursuant to a Securities Purchase Agreement (the “Cerberus
Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus purchased an 8% Convertible Debenture (the “Cerberus
Debenture”) in the aggregate principal amount of $17,500, and delivered on February 27, 2017, gross proceeds of $16,000 excluding
transaction costs, fees, and expenses.
On March 24, 2017, the Company completed
the closing of a private placement financing transaction with LG. Pursuant to the LG Purchase Agreement, LG purchased an 8% Convertible
Debenture in the aggregate principal amount of $52,000, and delivered on March 28, 2017, gross proceeds of $49,600 excluding transaction
costs, fees, and expenses.
Principal and interest on the LG and
Cerberus Debentures above is due and payable one year from their respective funding date, and the LG and Cerberus Debentures are
convertible into shares of the Company’s common stock at any time at the discretion of LG and Cerberus, respectively, at
a VCP. The VCP is calculated as the lowest trading price during the eighteen (18) trading days immediately prior to the conversion
date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount.
The Company may prepay the LG and/or
the Cerberus Debentures, subject to prior notice to the holder within an initial 30 day period after issuance, by paying an amount
equal to 118% multiplied by the amount that the Company is prepaying. For each additional 30 day period the amount being prepaid
is multiplied by an additional 6%, up to a maximum of 148% on the 180
th
day from issuance. Beginning on the 180
th
day
after the issuance of the Debentures, the Company is not permitted to prepay the Debenture, so long as the Debenture is still outstanding,
unless the Company and the holder agree otherwise in writing.
2017 Convertible Note Conversions
Since December 31, 2016 the Company
issued the following shares of common stock upon the conversions of portions of the Convertible Notes (see Note 6):
Date
|
|
Principal Conversion
|
|
Interest Conversion
|
|
Total Conversion
|
|
Conversion Price
|
|
Shares Issued
|
|
Issued to
|
|
1/10/17
|
|
$
|
73,000
|
|
|
$
|
5,664
|
|
|
$
|
78,664
|
|
|
$
|
0.01595
|
|
|
|
4,931,912
|
|
|
Cerberus
|
|
1/17/17
|
|
$
|
57,500
|
|
|
$
|
4,562
|
|
|
$
|
62,062
|
|
|
$
|
0.01537
|
|
|
|
4,037,878
|
|
|
LG
|
|
1/27/17
|
|
$
|
48,129
|
|
|
$
|
3,914
|
|
|
$
|
52,043
|
|
|
$
|
0.01276
|
|
|
|
4,078,598
|
|
|
Cerberus
|
|
2/8/17
|
|
$
|
60,000
|
|
|
$
|
5,050
|
|
|
$
|
65,050
|
|
|
$
|
0.012934
|
|
|
|
5,029,369
|
|
|
LG
|
|
2/27/17
|
|
$
|
26,120
|
|
|
$
|
2,171
|
|
|
$
|
28,291
|
|
|
$
|
0.013804
|
|
|
|
2,049,467
|
|
|
Cerberus
|
|
3/10/17
|
|
$
|
40,000
|
|
|
$
|
3,630
|
|
|
$
|
43,630
|
|
|
$
|
0.01363
|
|
|
|
3,200,997
|
|
|
LG
|
|
3/27/17
|
|
$
|
34,775
|
|
|
$
|
3,255
|
|
|
$
|
38,030
|
|
|
$
|
0.012876
|
|
|
|
2,953,523
|
|
|
Cerberus
|
|
3/28/17
|
|
$
|
65,625
|
|
|
$
|
3,697
|
|
|
$
|
69,322
|
|
|
$
|
0.01276
|
|
|
|
5,432,725
|
|
|
|
|
|
|
|
$
|
405,149
|
|
|
$
|
31,941
|
|
|
$
|
437,090
|
|
|
|
|
|
|
|
31,714,470
|
|
|
|
Other
On January 16, 2017, the Company entered into
a Business Consultant Agreement (the “BCA”). Pursuant to the BCA, the Company issued 5,000,000 shares of common stock
for services to be provided to the Company related to business development, product marketing, helping identify mergers and acquisition
candidates, and will consult with and advise the Company on matters pertaining to business modeling and strategic alliances.
On January 27,
2017, the Company issued 1,000,000 shares of restricted common stock to
Kopelowitz Ostrow P.A. (“
KO
”)
pursuant to a Debt Settlement and Release Agreement (the “Debt Settlement”) by and between
the Company and KO. Among the terms of the Debt Settlement was the forgiveness of $24,614.49 of debt the Company owed KO for legal
services provided.
On January 30, 2017, the Company issued 10,000,000
shares of common stock to B. Michael Friedman, the Company’s CEO. The shares were issued for services Mr. Friedman has performed
as the sole Officer and director of the Company since November 2014.
Also on January 30, 2017, the Company issued
1,000,000 shares of common stock to Venture Equity as consideration for the cancellation of $12,000 of accrued and unpaid fees
owed Venture Equity.
On February 7, 2017, the Company completed
the purchase and closing of the eighty (80) acre approved cannabis farm for the medicinal and recreational sector located in Pueblo,
Colorado. The Company now owns the parcel including water and mineral rights, a major land asset for the cultivation of cannabis.
The Company plans to section the parcel by acres and lease to licensed cultivators, manufacturers and lab testing companies.
F-26