Marijuana Company
of America, Inc. (Converge Global, Inc.)
We have audited the
accompanying balance sheets of Marijuana Company of America, Inc. and its subsidiaries (“the Company”) as of December
31, 2019 and December 31, 2018 and the related statements of operations, stockholders’ deficit, cash flow and the related
notes to consolidated financial statements (collectively referred to as the consolidated financial statements) for the year ended
December 31, 2019 and December 31, 2018. In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 2019 and December 31, 2018, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (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 audit in accordance with the
standards of the 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. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, 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.
Our audit 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.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial
statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses, and has stated that
substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the
events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting
policies applied in the presentation of the accompanying financial statements follows:
Basis and business presentation
Marijuana Company of America, Inc. (The
“Company”) was incorporated under the laws of the State of Utah in October 1985 under the name Mormon Mint, Inc. The
corporation was originally a startup company organized to manufacture and market commemorative medallions related to the Church
of Jesus Christ of Latter Day Saints. On January 5, 1999, Bekam Investments, Ltd. acquired one hundred percent of the common shares
of the Company and spun the Company off changing its name Converge Global, Inc. From August 13, 1999 until November 20, 2002, the
Company focused on the development and implementation of Internet web content and e-commerce applications. In October 2009, in
a 30 for 1 exchange, the Company merged with Sparrowtech, Inc. for the purpose of exploration and development of commercially viable
mining properties. From 2009 to 2014, we operated primarily in the mining exploration business.
In 2015, the Company changed its business
model to a marketing and distribution company for medical marijuana. In conjunction with the change, the Company changed its name
to Marijuana Company of America, Inc. At the time of the transition in 2015, there were no remaining assets, liabilities or operating
activities of the mining business.
On September 21, 2015, the Company formed
H Smart, Inc, a Delaware corporation as a wholly owned subsidiary for the purpose of operating the hempSMART brand. H Smart, Inc.
is also registered with the California Secretary of State as a foreign corporation.
On February 1, 2016, the Company formed
MCOA CA, Inc., a California corporation as a wholly owned subsidiary to facilitate mergers, acquisitions and the offering of investments
or loans to the Company.
On May 3, 2017, the Company formed Hempsmart
Limited, a United Kingdom corporation as a wholly owned subsidiary for the purpose of future expansion into the European market.
On May 23, 2018, the Company formed
H Smart, LLC in Washington State. On January 21, 2019, the Company converted this entity into a Washington State corporation named
H Smart, Inc.
The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries: H Smart, Inc., H Smart, LLC, Hempsmart Limited and MCOA
CA, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
For annual reporting periods after December
15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts
with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in
accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an entity
shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of
revenue and cash flows arising from a contract with a customer. The core principal is to recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled
in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective
approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB ASC Topic 606
for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic 606 effective
in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement FASB ASC Topic
606, with no restatement of the comparative periods presented. Using this transition method, we applied the new standards to all
new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts we determine
are subject to FASB ASC Topic 606 prospectively. For the year ended December 31, 2019, there were no incomplete contracts. As is
more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing
components that require revenue adjustment under FASB ASC Topic 606.
Identification of Our Contracts with Our
Customers.
Contracts included in our application
of FASB ASC Topic 606, consist completely of sales contracts between us and our customers that create enforceable rights and obligations.
For the year ended December 31, 2019, our sales contracts included the following parties: us, our sales associates and our customers.
Our sales contracts were offered by us and our sales associates to our customers directly through our web site. Our sales contracts,
and those formalized by our sales associates, are represented by an electronic order form, which contains the contractual elements
of offer for sale, acceptance and the provision of consideration consisting of the buyer’s payment, which is concurrent with
our delivery of hempSMART™ product. Since our hempSMART™ product sales contracts are consummated upon receipt of the
customer’s acceptance of our offer; our concurrent receipt of our customers payment; and, our delivery of the agreed to hempSMART™
product, all parties are equally committed to fulfilling their respective obligations under the sales contracts. Further, the sales
contracts specifically identify (1) parties; (2) quantity of hempSMART™ product ordered; (3) price; and, (4) subject, and
so each respective party’s rights are identifiable and the payment terms are defined. Since the sales contracts are consummated
concurrent with offer, acceptance, payment and delivery of the hempSMART™ product ordered, we recognize revenue and cash
flows as the principal from the respective sales contract transactions as they complete. Further, because our sales contracts are
offered, accepted and consummated concurrently, our ability to collect revenue is immediate. We receive no payments for agreements
that do not qualify as a contract. If customers agree to multiple sales contracts when they are entered into at or near the same
time, our policy is to combine those contracts if: (1) the sales contracts are negotiated as a single package; (2) the payment
amount of one sales contract is dependent upon another sales contract; (3) our performance obligations of delivering multiple hempSMART™
products can be determined to be part of a single transaction. Since the nature of the entry into and consummation of our sales
contracts occur concurrently, there are no changes or modifications to the terms of the sales contracts that would modify the enforceable
rights and performance obligations of the parties and that would materially alter the timing of our receipt of revenue from our
sales contracts.
Identifying the Performance Obligations
in Our Sales Contracts.
In analyzing our sales contracts, our
policy is to identify the distinct performance obligations in a sales contract arrangement. In determining our performance obligations
under our sales contracts, we consider that the terms and conditions of sales are explicitly outlined in our sales contracts and
are so distinct and identifiable within the context of each sales contract, and so are not integrated with other goods, or constitute
a modification or customization of other goods in our contracts, or are highly dependent or highly integrated with other goods
in our sales contracts. Thus, our performance obligations are singularly related to our promise to provide the hempSMART™
products upon receipt of payment. We offer an assurance warranty on our hempSMART™ products that allows a customer to return
any hempSMART™ products within thirty days if not satisfied for any reason. Assurance warranties are not identifiable performance
obligations, since they are electable at the whim of the customer for any reason. However, we do account for returns of purchase
prices if made.
Determination of the Price in Our
Sales Contracts.
The transaction prices in our sales
contract is the amount of consideration we expect to be entitled to for transferring promised hempSMART™ products. The consideration
amount is fixed and not variable. The transaction price is allocated to the identified performance obligations in the contract.
These allocated amounts are recognized as revenue when or as the performance obligations are fulfilled, which is concurrently upon
receipt of payment. There are no future options for a contract when considering and determining the transaction price. We exclude
amounts third parties will eventually collect, such as sales tax, when determining the transaction price. Since the timing between
receiving consideration and transferring goods or services is immediate, our sales contract do not have a significant financing
component, i.e., recognizing revenue at the amount that reflects the cash payment that the customer would have made at the time
the goods or services were transferred to them (cash selling price), rather than significantly before or after the goods or services
are provided.
Allocation of the Transaction Price of Our Sales Contracts.
Our sales contracts are not considered multi-element
arrangements which require the fulfillment of multiple performance obligations. Rather, our sales contracts include one performance
obligation in each contract. As such, from the outset, we allocate the total consideration to each performance obligation based
on the fixed and determinable standalone selling price, which we believe is an accurate representation of what the price is in
each transaction.
Recognition of Revenue when the Performance
Obligation is Satisfied.
A performance obligation is satisfied
when or as control of the good or service is transferred to the customer. The standard defines control as “the ability to
direct the use of, and obtain substantially all of the remaining benefits from, the asset.” (ASC 606-10-20). For performance
obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation. As noted
above, our single performance obligation sales contracts are singularly related to our promise to provide the hempSMART™
products to the customer upon receipt of payment, which occurs concurrently and when, upon completion, allows us under our revenue
recognition policy to realize revenue.
Regarding our offered financial accounting,
bookkeeping and/or real property management consulting services, to date no contracts have been entered into, and thus no reportable
revenues have resulted for the fiscal years ended 2019 and 2018.
Product Sales
Revenue from product sales, including
delivery fees, FOB shipping point, is recognized when (1) an order is placed by the customer; (2) the price is fixed and determinable
when the order is placed; (3) the customer is required to and concurrently pays for the product upon order; and, (4) the product
is shipped. The evaluation of our recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes
to judgments that affected our reporting of revenues, since our product sales, both pre and post adoption of FASB ASC 606, were
evaluated using the same standards as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs
concurrently when the order is placed and paid for by the customer, and the product is shipped. Further, given the facts that (1)
our customers exercise discretion in determining the timing of when they place their product order; and, (2) the price negotiated
in our product sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, we
are of the opinion that our product sales do not indicate or involve any significant customer financing that would materially change
the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for
us or the customer under FASB ASC Topic 606.
Consulting Services
We also offer professional services
for financial accounting, bookkeeping or real property management consulting services based on consulting agreements. As of the
date of this filing, we have not entered into any contracts for any financial accounting, bookkeeping and/or real property management
consulting services that have generated reportable revenues as of the years ended 2019 and 2018. We intend and expect these arrangements
to be entered into on an hourly fixed fee basis.
For hourly based fixed fee service contracts,
we intend to utilize and rely upon the proportional performance method, which recognizes revenue as services are performed. Under
this method, in order to determine the amount of revenue to be recognized, we will calculate the amount of completed work in comparison
to the total services to be provided under the arrangement or deliverable. We only recognize revenues as we incur and charge billable
hours. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual
performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing,
that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing
component under FASB ASC Topic 606.
The Company determined that upon adoption
of ASC 606 there were no quantitative adjustments converting from ASC 605 to ASC 606 respecting the timing of our revenue recognition
because product sales revenue is recognized upon customer order, payment and shipment, which occurs concurrently, and our consulting
services offered are fixed and determinable and are only earned and recognized as revenue upon actual performance.
Use of Estimates
The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
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. Significant estimates include the fair value of the Company’s stock, stock-based compensation,
fair values relating to derivative liabilities, debt discounts and the valuation allowance related to deferred tax assets. Actual
results may differ from these estimates.
Cash
The Company considers cash to consist of cash
on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.
Concentrations of credit risk
The Company’s financial instruments that
are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash
equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically
reviewed by senior management.
Accounts Receivable
Trade receivables are carried at their estimated
collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade
accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current
financial condition.
Allowance for Doubtful Accounts
Any charges to the allowance for doubtful accounts
on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at
a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based
on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against
the allowance when collectability is determined to be permanently impaired. As of December 31, 2019, and 2018, allowance for doubtful
accounts was $0 and $0, respectively.
Inventories
Inventories are stated at the lower of cost
or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs.
Cost of sales
Cost of sales is comprised of cost of product
sold, packaging, and shipping costs.
Stock Based Compensation
The Company measures the cost of services received
in exchange for an award of equity instruments including stock, stock options and restricted stock awards based on the fair value
of the award. For employees and directors, the fair value of the award is measured on the grant date and recognized over the period
during which services are required to be provided in exchange for the award, usually the vesting period. For non-employees, share-based
compensation awards are recorded at either the fair value of the services rendered or the fair value of the share-based payments,
whichever is more readily determinable. Stock and restricted stock and option awards are based on the closing price of the stock
underlying the awards on the grant date. Stock-based compensation expense is recorded by the Company in the same expense classifications
in the statements of operations, as if such amounts were paid in cash. As of December 31, 2019, and 2018, the number of outstanding
stock options to purchase shares of common stock was 0 and 0 shares, respectively. 0 and 0 shares were vested as of December 31,
2019 and 2018, respectively.
On February 27, 2019, Charles Larsen and Donald
Steinberg agreed to cancel all previously issued stock options to purchase an aggregate of 1,000,000,000 preferred Class “A”
shares.
Net Loss per Common Share, basic and diluted
The Company computes earnings (loss) per share
under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net loss per common share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted
earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially
dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable.
The computation of basic and diluted income
(loss) per share as of December 31, 2019 and 2018 excludes potentially dilutive securities when their inclusion would be anti-dilutive,
or if their exercise prices were greater than the average market price of the common stock during the period.
Potentially dilutive securities excluded from
the computation of basic and diluted net loss per share are as follows:
|
|
2019(1)
|
|
2018
|
Convertible notes payable
|
|
|
137,219,847
|
|
|
|
137,219,847
|
|
Options to purchase common stock(1)
|
|
|
0
|
(1)
|
|
|
0
|
(1)
|
Warrants to purchase common stock
|
|
|
110,846,817
|
|
|
|
110,846,817
|
|
Total
|
|
|
248,066,664
|
|
|
|
248,066,664
|
|
(1) On February 27, 2019, Donald Steinberg and Charles Larsen cancelled
previously issued options to purchase an aggregate of 1,000,000,000 shares at an average exercise price of $0.0005 per share, representing
100% of all previously issued options.
Property and Equipment
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years.
Investments
The Company follows Accounting Standards Codification
subtopic 321-10, Investments-Equity Securities (“ASC 321-10”) which requires the accounting for equity security to
be measured at fair value with changes in unrealized gains and losses are included in current period operations. Where an equity
security is without a readily determinable fair value, the Company may elect to estimate its fair value at cost minus impairment
plus or minus changes resulting from observable price changes (See Note 4).
Derivative Financial Instruments
The Company classifies as equity any
contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement
or settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the
Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including
a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii)
gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The
Company assesses classification of its common stock purchase warrants and other freestanding derivatives at each reporting date
to determine whether a change in classification between equity and liabilities is required.
The Company’s free-standing derivatives
consisted of conversion options embedded within its issued convertible debt and warrants with anti-dilutive (reset) provisions.
The Company evaluated these derivatives to assess their proper classification in the balance sheet using the applicable classification
criteria enumerated under GAAP. The Company determined that certain conversion and exercise options do not contain fixed
settlement provisions. The convertible notes contain a conversion feature and warrants have a reset provision such that the
Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.
As such, the Company was required to record
the conversion feature and the reset provision which does not have fixed settlement provisions as liabilities and mark to market
all such derivatives to fair value at the end of each reporting period.
The Company has adopted a sequencing policy
that reclassifies contracts (from equity to assets or liabilities) with the most recent inception date first. Thus, any available
shares are allocated first to contracts with the most recent inception dates.
Fair Value of Financial Instruments
Fair value estimates discussed herein are
based upon certain market assumptions and pertinent information available to management as of December 31, 2019 and 2018. The
respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts
payables and short-term notes because they are short term in nature.
Advertising
The Company follows the policy of charging
the costs of advertising to expense as incurred. The Company charged to operations $540,474 and $569,832 for the year ended December
31, 2019 and 2018, respectively, as advertising costs.
Income Taxes
Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of December 31, 2019, and 2018, the Company has not recorded any unrecognized tax benefits.
Segment Information
Accounting Standards Codification subtopic
Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments
in annual financial statements and requires selected information for those segments to be presented in interim financial reports
issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources
and assess performance. The information disclosed herein materially represents all of the financial information related to the
Company's only material principal operating segment.
Recent Accounting Pronouncements
There are various updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
Adoption of Accounting Standards
In May 2014, the Financial Accounting Standards
Board (the “FASB”) issued ASU 2014-09 “Revenue from Contracts with Customers” to supersede previous revenue
recognition guidance under current U.S. GAAP. The guidance presents a single five-step model for comprehensive revenue recognition
that requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Two options are
available for implementation of the standard which is either the retrospective approach or cumulative effect adjustment approach.
The guidance becomes effective for annual reporting periods beginning after December 15, 2017, including interim periods within
that reporting period, with early adoption permitted.
The Company has determined that the adoption
of ASU-2014-09 will not have a material impact on its financial statements.
COVID-19 Impacts on Accounting Policies
and Estimates
COVID-19 Impacts on Accounting Policies and
Estimates In light of the currently unknown ultimate duration and severity of COVID-19, we face a greater degree of uncertainty
than normal in making the judgments and estimates needed to apply our significant accounting policies. As COVID-19 continues to
develop, we may make changes to these estimates and judgments over time, which could result in meaningful impacts to our financial
statements in future periods.
As previously reported on Form 8-K filed on
March 30, 2020, the Company was unable to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 by the
original deadline of March 30, 2020, due to circumstances related to COVID-19 pandemic, specifically: (i) the Southern California
area, including the location of the Company’s corporate headquarters, was at one of the epicenters of the coronavirus outbreaks
in the United States and the Governor of California had ordered all residents to stay at home excepting only essential travel;
and (ii) historically, the Company has relied on vendors in China to manufacture certain of its principal products. The outbreak
of COVID-19 caused different levels of delay in operations of the Company, vendors, customers and professional service providers.
As a result, the Company’s books and records were not easily accessible from our Chinese manufacturer of our products, resulting
in a delay in the preparation, audit and completion of the Company’s financial statements for the Annual Report.
Subsequent Events
The Company evaluates events that have occurred
after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not
identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial
statements, except as disclosed.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S
LIQUIDITY PLANS
The accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business. As shown in the accompanying financial statements during year ended December 31, 2019, the Company incurred
net losses of $20,180,318 and used cash in operations of $2,816,282. These factors among others may indicate that the Company will
be unable to continue as a going concern for a reasonable period of time.
The Company's primary source of operating funds
in 2019 and 2018 has been from funds generated from proceeds from the sale of common stock and the issuance of convertible and
other debt. The Company has experienced net losses from operations since its inception, but expects these conditions to improve
in 2020 and beyond as it develops its business model. The Company has stockholders' deficiencies at December 31, 2019 and requires
additional financing to fund future operations.
The Company’s existence is dependent
upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance
that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity
problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue
as a going concern.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2019 and 2018 is summarized
as follows:
|
|
2019
|
|
2018
|
Computer equipment
|
|
$
|
16,358
|
|
|
$
|
15,207
|
|
Furniture and fixtures
|
|
|
5,140
|
|
|
|
5,140
|
|
Subtotal
|
|
|
21,498
|
|
|
|
20,347
|
|
Less accumulated depreciation
|
|
|
(13,986
|
)
|
|
|
(7,917
|
)
|
Property and equipment, net
|
|
$
|
7,512
|
|
|
$
|
12,430
|
|
Property and equipment are stated at cost and
depreciated using the straight-line method over their estimated useful lives of 3 years. When retired or otherwise disposed, the
related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount
realized from disposition, is reflected in earnings.
Depreciation expense was $7,299 and $5,341
for the years ended December 31, 2019 and 2018.
NOTE 4 – INVESTMENTS
MoneyTrac
On March 13, 2017, the Company entered into
a stock purchase agreement to acquire up to 15,000,000 common shares of MoneyTrac Technology, Inc., a corporation organized and
operating under the laws of the state of California, for a total purchase price of $250,000 representing approximately 15% ownership
at the time of the agreement. As of December 31, 2017, the Company had acquired 15,000,000 common shares for $250,000 representing
approximately 15% ownership. In connection with the investment, Donald Steinberg, the Company’s President and Chief Executive
Officer and Director, was appointed as a board member to MoneyTrac.
The Company accounts for its investment in
MoneyTrac Technology, Inc. at estimated market fair value using the market price for the publicly traded shares under the ticker
symbol “PSYC” as listed on OTC Markets as an indicator of fair market value. MoneyTrac Technologies changed its name
to Global Trac Solutions Inc. on April 13, 2020. As of December 31, 2019, the balance of this investment was $27,403 with 869,919
shares and was classified as a short-term investment for the period ended December 31, 2019.
Benihemp
On June 16, 2017, the Company entered into
a Loan Agreement (“Agreement”) with Conveniant Hemp Mart, LLC (“Benihemp”), a limited liability company
formed and operating under the laws of the State of Wyoming. Pursuant to the Agreement, Benihemp executed a promissory note for
a principal loan amount of $50,000, accruing interest at the rate of 4% per annum and payable in one year, subject to one-time
six- month repayment extension. The Agreement also provided that the Company shall have the option to waive repayment of the note
and pay Benihemp an additional $50,000 payment in exchange for a 25% membership interest in Benihemp’s limited liability
company. On May 1, 2019, the Company and Conveniant agreed to cancel the Company’s 25% interest in Conveniant. Conveniant
issued to the Company a credit memo equal to the Company’s $100,000 investment, The Company determined that as of September
30, 2019, approximately $41,000 of this credit was impaired.
Global Hemp Group Joint Ventures
We currently have one ongoing joint
venture with Global Hemp Group, Inc., a Canadian corporation – the Scio, Oregon Joint Venture. As of
September 30, 2019, we withdrew and fully impaired the Joint Venture with Global Hemp Group referred to as
the “New Brunswick” joint venture, because the research project failed to finalize the research studies
and render any tangible revenue to us. The decision to impair this joint venture did not have a material impact on our
reported operations, revenues or gross profits for the fiscal year ended December 31, 2019. This joint venture was a related
party transaction in that Global Hemp Group’s director and CEO, Charles Larsen, is an owner of our common
stock, and a former director of the Company. Further, our former President and Chief Executive Officer Donald Steinberg is a
shareholder in Global Hemp Group. What follows are summaries of both Global Hemp Group Joint Ventures in 2019.
New Brunswick Canada
On September 5, 2017, we announced our agreement
to participate in a joint venture with Global Hemp Group Inc., a Canadian corporation, in a multi-phase industrial hemp project
on the Acadian peninsula of New Brunswick, Canada. The joint venture’s goal is to develop a “Hemp Agro-Industrial Zone”,
a concept that promotes and engages farmers, processors and manufacturers to collaboratively produce and process 100% of the hemp
plant into a number of wholesale materials that can be manufactured into healthy and sustainable products. The “HAIZ”
will be surrounded by hemp production thereby minimizing the cost of expensive transportation to distant processing facilities.
The “Hemp Agro-Industrial Zone” has a goal of producing social and environmental benefits to the communities where
they operate. These zones are envisioned to prospectively create jobs for farmers, foster rural development, provide the opportunity
to develop more sustainable products of superior quality and help support Global Hemp Group’s commitment to creating a carbon
free economy. The first phase of the project involved lab testing in support of the trials. The Collège Communautaire du
Nouveau Brunswick (CCNB) in Bathurst, New Brunswick (“CCNB”) intends to assist Global Hemp Group in research on its
ongoing industrial hemp trials in the region, and to perform laboratory tests in support of these trials. These tests will provide
information to validate agronomic and key yield data in preparation of a large-scale industrial development project that will involve
processing of the full plant: grain, straw, flowers and leaves, scheduled to begin in 2018. The results of these tests will also
be used in discussions with farmers of the region to refine a hemp-based farming model, and to mobilize additional farmers for
the next growing season. Our participation included providing one-half, or $10,775 of the funding for the phase one work. On January
10, 2018, phase-one was completed by successfully cultivating industrial hemp during the 2017 growing season for research purposes.
The objective of phase one was to re-introduce hemp into the area and ensure that it could be productive under New Brunswick growing
conditions prior to significantly increasing cultivation acreage and building a hemp processing facility in the region, in future
phases of the project. As a result of our participation in the joint venture, we will share in the ownership of research and development
of hemp and CBD related studies produced by the New Brunswick Project, and, in the event Canadian laws governing the growing, harvesting,
manufacturing and production of products containing hemp and CBD change (as expected, but not guaranteed) in 2018, we would benefit
from possible preferred pricing and terms for the purchase of hemp and CBD that would enable us to further conduct its business
and research and development into hemp and CBD products. Our New Brunswick joint venture with Global Hemp Group, Inc. is a related
party transaction insofar as its director, Charles Larsen, is a former director of the Company.
The Company’s costs incurred by the Company’s
interest was $0 and $10,775 for the years ended December 31, 2019 and 2018 and was recorded as other income/expense in the Company’s
Statement of Operations in the appropriate periods. As of December 31, 2019, the balance of the New Brunswick JV investment reported
on the balance sheet for the year ended December 31, 2019 was $0 as a result of the investment being deemed fully impaired and
the Company withdrawing from the joint venture as of September 30, 2019. (See Item 1, Business; Principal Products and their Markets;
Joint Ventures and Investments).
Global Hemp Group JV – Scio Oregon
Global Hemp Group Joint Venture/Scio Oregon
Hemp Project; On May 8, 2018, the Company, Global Hemp Group, Inc., a Canadian corporation, and TTO Enterprises, Ltd., an Oregon
corporation entered into a Joint Venture Agreement. The purpose of the joint venture is to develop a project to commercialize the
cultivation of industrial hemp on a 109 acre parcel of real property owned by the Company and Global Hemp Group in Scio, Oregon,
and operating under the Oregon corporation Covered Bridges, Ltd. The joint venture is in the development stage. On May 30, 2018,
the joint venture purchased TTO’s 15% interest in the joint venture for $30,000.
On May 8, 2018, the Company, Global
Hemp Group, Inc., a Canadian corporation, and TTO Enterprises, Ltd., an Oregon corporation entered into a Joint Venture Agreement.
The purpose of the joint venture is to develop a project to commercialize the cultivation of industrial hemp on a 109 acre parcel
of real property owned by the Company and Global Hemp Group in Scio, Oregon, and operating under the Oregon corporation Covered
Bridges, Ltd. The joint venture is in the development stage. On May 30, 2018, the joint venture purchased TTO’s 15% interest
in the joint venture for $30,000. The Company and Global Hemp Group, Inc. now have an equal 50-50 interest in the joint venture.
The joint venture agreement commits the Company to a cash contribution of $600,000 payable on the following funding schedule: $200,000
upon execution of the joint venture agreement; $238,780 by July 31, 2018; $126,445 by October 31, 2018; and, $34,775 by January
31, 2019. The Company has complied with its payments. The 2018 crop of hemp grown on the joint venture’s real property consisted
of 33 acres of high yielding CBD hemp grown in an orchard style cultivation on the property. The 2018 harvest consisted of approximately
37,000 high yielding CBD
hemp plants producing 24 tons of biomass that
produced 48,000 pounds of dried biomass. The joint venture partners prepared processing samples ranging in size from 100 to 2,000
lbs. for sample offers to extraction companies. The biomass is being processed into CBD crude oil with the option to refine it
further into isolate, or full spectrum oil, in order to increase its value on the market. Our joint venture with Global Hemp Group
regarding the Scio Oregon project is a related party transaction insofar as its director, Charles Larsen, is a former director
of the Company.
The Company and Global Hemp Group, Inc. now
have an equal 50% - 50% interest in the joint venture. The joint venture agreement commits the Company to a cash contribution of
$600,000 payable on the following funding schedule: $200,000 upon execution of the joint venture agreement; $238,780 by July 31,
2018; $126,445 by October 31, 2018; and, $34,775 by January 31, 2019. The Company complied with its payment obligations.
As of December 31, 2019, the combined balance
of the Covered Bridge (SCIO) investment and related 41389 Farm investment was $0 as the investment was written off as a loss for
the period ended December 31, 2019. The debt obligation related to this JV of $262,414 was also written off to $0 as of the year
ended December 31, 2019.
Bougainville Ventures, Inc. Joint Venture
On March 16, 2017, we entered into a joint
venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture was for the Company
and Bougainville to (i) jointly engage in the development and promotion of products in the legalized cannabis industry in Washington
State; (ii) utilize Bougainville's high quality cannabis grow operations in the State of Washington, where it claimed to have an
ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement
with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services and resources including,
but not limited to: sales and marketing, agricultural procedures, operations, security and monitoring, processing and delivery,
branding, capital resources and financial management; and, (iv) optimize collaborative business opportunities. The Company and
Bougainville agreed to operate through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized
in the State of Washington on May 16, 2017.
As our contribution to the joint venture, the
Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding schedule. The Company
also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised
of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.
The Company and Bougainville's agreement provided
that funding provided by the Company would contribute towards the joint venture’s ultimate purchase of the land consisting
of a one-acre parcel located in Okanogan County, Washington, for joint venture operations
As disclosed on Form 8-K on December
11, 2017, the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville
amended the joint venture agreement to reduce the amount of the Company's commitment from $1,000,000 to $800,000, and also required
the Company to issue Bougainville 15 million shares of the Company's restricted common stock. The Company completed its payments
pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted
common stock. The amended agreement provided that Bougainville would deed the real property to the joint venture within thirty
days of its receipt of payment.
Thereafter, the Company determined that
Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for
real property that was in breach of contract for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502
license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville
and an unrelated third party, Green Ventures Capital Corp., purchased the land, but did not deed the real property to the joint
venture. Bougainville failed to pay delinquent property taxes to Okanogan County and to date, the property has not been deeded
to the joint venture.
To clarify the respective contributions and
roles of the parties, the Company offered to enter into good faith negotiations to revise and restate the joint venture agreement
with Bougainville. The Company diligently attempted to communicate with Bougainville to accomplish a revised and restated joint
venture agreement, and efforts towards satisfying the conditions to complete the subdivision of the land by the Okanogan County
Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent
taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.
On August 10, 2018, the Company advised
its independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information
concerning the audit of Bougainville’s receipt and expenditures of $800,000 contributed by the Company in the joint venture
agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of
the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally,
the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but
not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that was to be deeded
to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on the real property;
and, (iii) that clear title to the real property associated with the Tier 3 # I502 license would be deeded to the joint venture
thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company filed suit against
Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior
Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable relief for breach of contract, fraud,
breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in
the name of the Company, for the appointment of a receiver, the return to treasury of 15 million shares issued to Bougainville,
and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant has filed a lis pendens on
the real property. The case is currently in litigation.
In connection with the agreement, the
Company recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was comprised of 49.5% ownership of BV-MCOA
Management LLC, and was accounted for using the equity method of accounting. The Company recorded an annual impairment in 2017
of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company
recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded an annual impairment
of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment to be fully impaired due
to Bougainville’s breach of contract and resulting litigation, as discussed above.
GateC Joint Venture
On March 17, 2017, the Company and GateC Research,
Inc. (“GateC”) entered into a Joint Venture Agreement (“Agreement”) whereby the Company committed to raise
up to one and one-half million dollars ($1,500,000) over a six-month period, with a minimum commitment of five hundred thousand
dollars ($500,000) within a three (3) month period; and, information establishing brands and systems for the representation of
cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies, including but
not limited to its affiliate marketing program, directly tailored to the cannabis industry.
GateC agreed to contribute its management and
control services and systems related to cannabis grow operations in Adelanto County, California, and its permit to grow marijuana
in an approved zone in Adelanto, California. GateC did not own a physical site for its operation in Adelanto County, California,
and GateC’s permit to grow cannabis did not contain a conditional use permit.
On or about November 28, 2017, GateC and the
Registrant orally agreed to suspend the Company’s funding commitment, pending the finalization of California State regulations
governing the growth, cultivation and distribution of cannabis, which were expected to be completed in 2018.
On March 19, 2018, the Company and GateC rescinded
the Agreement and concurrently released each other from any all any and all losses, claims, debts, liabilities, demands, obligations,
promises, acts, omissions, agreements, costs and expenses, damages, injuries, suits, actions and causes of action, of whatever
kind or nature, whether known or unknown, suspected or unsuspected, contingent or fixed, that they may have against each other
and their Affiliates, arising out of the Agreement.
The Registrant incurred no termination penalties
as the result of its entry into the Recession and Mutual Release Agreement.
In 2017, the Company recorded a debt obligation
of $1,500,000 to the Joint Venture and a corresponding impairment charge of $1,500,000 during for year ended December 31, 2017.
Upon termination of the material definitive agreement on March 19, 2018, the Company realized a gain on settlement of debt obligation
of $1,500,000 for the year ended December 31, 2018.
The following table indicates the amount of
impairments recorded by the Company quarter to quarter for investment activity related to its joint venture investments:
MARIJUANA COMPANY OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF DECEMBER 31, 2019
|
|
INVESTMENTS
|
|
|
|
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
TOTAL
|
|
|
|
|
TOTAL
|
|
Hemp
|
|
|
|
|
|
Bougainville
|
|
Gate C
|
|
Plant
|
|
|
|
Short-Term
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Benihemp
|
|
MoneyTrac
|
|
Ventues, Inc.
|
|
Research Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
MoneyTrac
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Investments made during 2017
|
|
|
3,049,275
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
1,188,500
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 equity method Loss
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 equity method accounting
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investment in 2017
|
|
|
(2,292,500
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
(792,500
|
)
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
Balances as of 12/31/17
|
|
|
695,477
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
334,702
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during 2018
|
|
|
986,654
|
|
|
|
986,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 equity method Loss
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 equity method Loss
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 equity method Loss
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 equity method Loss
|
|
|
(31,721
|
)
|
|
|
(31,721
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moneytrac investment reclassified to Short-Term investments
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - 2018
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560,000
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2018
|
|
|
(933,195
|
)
|
|
|
(557,631
|
)
|
|
|
(89,578
|
)
|
|
|
|
|
|
|
(285,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
Balance @12-31-18
|
|
$
|
408,077
|
|
|
$
|
408,077
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
$
|
810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 03-31-19
|
|
|
129,040
|
|
|
|
129,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 equity method Loss
|
|
|
(59,541
|
)
|
|
|
(59,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,000
|
)
|
|
$
|
(135,000
|
)
|
Balance @03-31-19
|
|
$
|
477,576
|
|
|
$
|
477,576
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
$
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 06-30-19
|
|
$
|
3,157,234
|
|
|
$
|
83,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,000,000
|
|
|
$
|
73,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-19 equity method Income (Loss)
|
|
$
|
(171,284
|
)
|
|
$
|
(141,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,291
|
)
|
|
$
|
(23,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 06-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
$
|
(150,000
|
)
|
Balance @06-30-19
|
|
$
|
3,463,526
|
|
|
$
|
419,352
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 09-30-19
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 equity method Income (Loss)
|
|
$
|
122,863
|
|
|
$
|
262,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(94,987
|
)
|
|
$
|
(44,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 09-30-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(41,667
|
)
|
|
$
|
(41,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 09-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,625
|
)
|
|
($
|
362,625
|
)
|
Balance @09-30-19
|
|
$
|
3,772,652
|
|
|
$
|
682,141
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
120,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 12-31-19
|
|
$
|
392,226
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 equity method Income (Loss)
|
|
$
|
(178,164
|
)
|
|
($
|
(75,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(23,865
|
)
|
|
$
|
(79,079
|
)
|
|
|
|
|
|
|
|
|
Reversal of Equity method Loss for 2019
|
|
$
|
272,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,143
|
|
|
$
|
147,142
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
$
|
(3,175,420
|
)
|
|
$
|
(869,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,306,085
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Loss on disposition of investment
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,545
|
)
|
|
$
|
(75,545
|
)
|
Balance @12-31-19
|
|
$
|
693,915
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
$
|
27,403
|
|
The following table indicates the amount of
debt the Company recorded quarter to quarter as a result of its joint venture investments:
Loan Payable
|
|
|
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
|
TOTAL
|
|
|
|
Hemp
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville
|
|
|
|
Gate C
|
|
|
|
Plant
|
|
|
|
Robert L
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
JV Debt
|
|
|
|
Group
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Ventues, Inc.
|
|
|
|
Research Inc.
|
|
|
|
Extract
|
|
|
|
Hymers III
|
|
|
|
Vivabuds
|
|
|
|
Expense
|
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 loan borrowings
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 loan activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 loan borrowings
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 loan repayments
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General operational expense
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,856
|
|
Balances as of 12/31/17 (a)
|
|
|
2,067,411
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 loan borrowings (payments)
|
|
|
376,472
|
|
|
|
447,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 cancellation of JV debt obligation
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 loan repayments
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 loan activity
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 loan borrowings
|
|
|
580,425
|
|
|
|
580,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-18 (b)
|
|
|
1,422,410
|
|
|
|
1,027,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
649,575
|
|
|
|
649,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(407,192
|
)
|
|
|
(407,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-19 ©
|
|
|
1,664,793
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
3,836,220
|
|
|
$
|
161,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,000
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
1,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(1,572,971
|
)
|
|
$
|
(161,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(349,650
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(1,062,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-19 (d)
|
|
|
3,928,042
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 loan borrowings
|
|
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 debt conversion to equity
|
|
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-19 (e)
|
|
|
4,322,427
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,007,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 loan borrowings
|
|
|
2,989,378
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
596,784
|
|
|
$
|
4,221
|
|
|
|
|
|
|
$
|
2,125,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
|
(4,083,349
|
)
|
|
$
|
(1,532,652
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(394,555
|
)
|
|
|
|
|
|
$
|
(2,156,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt in 2019
|
|
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to reclassify amount to accrued liabilities
|
|
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-19 (f)
|
|
$
|
3,193,548
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
4,221
|
|
|
$
|
0
|
|
|
$
|
3,133,243
|
|
|
12-31-19
|
09-30-19
|
06-30-19
|
03-31-19
|
12-31-18
|
12-31-17
|
This includes balances for:
|
Note (f)
|
Note (e)
|
Note (d)
|
Note (c)
|
Note (b)
|
Note (a)
|
- Debt obligation of JV
|
0
|
1,633,872
|
1,778,872
|
128,522
|
289,742
|
1,500,000
|
- Convertible NP, net of discount
|
3,193,548
|
2,688,555
|
2,149,170
|
1,536,271
|
1,132,668
|
394,555
|
- Long-term debt
|
0
|
0
|
0
|
0
|
0
|
172,856
|
Total Debt balance
|
3,193,548
|
4,322,427
|
3,928,042
|
1,664,793
|
1,422,410
|
2,067,411
|
NOTE 5 – CONVERTIBLE NOTES PAYABLE
During the year ended December 31, 2019 and
2018, the Company issued an aggregate of 9,251,217 and 2,465,463 shares of its common stock in settlement of the issued convertible
notes payable and accrued interest.
For the years ended December 31, 2019 and 2018,
the Company recorded amortization of debt discounts of $2,906,843 and $732,463, respectively, as a charge to interest expense.
Convertible notes payable are comprised of
the following:
|
|
2019
|
|
2018
|
Convertible note payable – John Fife – last due October 27, 2018
|
|
$
|
—
|
|
|
$
|
150,959
|
|
Convertible note payable – Power Up Lending Group
|
|
$
|
294.000
|
|
|
$
|
0
|
|
Convertible note payable – Crown Bridge Partners
|
|
$
|
110,000
|
|
|
$
|
0
|
|
Convertible note payable – Odyssey Funding LLC
|
|
$
|
250,000
|
|
|
$
|
0
|
|
Convertible note payable – Paladin Advisors LLC
|
|
$
|
75,000
|
|
|
$
|
0
|
|
Convertible note payable- GS Capital Partners LLC
|
|
$
|
173,000
|
|
|
$
|
0
|
|
Convertible note payable – Natural Plant Extract
|
|
$
|
56,085
|
|
|
$
|
0
|
|
Convertible note payable – Robert Hymers III
|
|
$
|
96,553
|
|
|
$
|
0
|
|
Convertible notes payable-St George
|
|
$
|
2,947,890
|
|
|
$
|
1,877,889
|
|
Total
|
|
$
|
4,002,528
|
|
|
$
|
2,028,848
|
|
Less debt discounts
|
|
$
|
(808,980
|
)
|
|
$
|
(896,180
|
)
|
Net
|
|
$
|
3,193,548
|
|
|
$
|
1,132,668
|
|
Less current portion
|
|
$
|
(3,193,548
|
)
|
|
$
|
(1,132,668
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
Convertible notes payable-Power Up Lending
From July 1 through September 12, 2019, the
Company issued four convertible promissory notes in the aggregate principal amount of $294,000 to Power Up Lending (“Power
Up”). The promissory notes bear interest at 10% per annum, are due one year from the respective issuance date and include
an original issuance discount (“OID”) in aggregate of $12,000. Interest shall accrue from the issuance date, but interest
shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 61%
of the Market Price (defined as the lowest trading price during the 15-trading-day period prior to the conversion date). Upon the
issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded
in the debentures, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient
number of shares would be available to settle all potential future conversion transactions. As of the funding date of each
note, the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair
value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt)
with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $169,202 is being amortized
to interest expense over the respective terms of the notes.
The Company shall
have the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal
and accrued interest) depending on the Prepayment Period (ranging from 1 to 180 days following the issuance date). The Company
is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together
with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding
immediately after giving effect to the issuance of shares of common stock upon conversion of the note.
As of December 31, 2019, the Company owed an
aggregate of $294,000 of principal and $12,514 of accrued interest on these convertible promissory notes.
Convertible notes payable-Crown Bridge Partners
From October 1 through December 31,
2019, the Company issued convertible promissory notes in the aggregate principal amount of $225,000 to Crown Bridge Partners LLC
(“Crown Bridge”). The promissory notes bear interest at 10% per annum, are due one year from the respective issuance
date and include an original issuance discount (“OID”) in aggregate of $22,500. Interest shall accrue from the issuance
date, but interest shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion
rate equal to 60% of the Market Price (defined as the lowest trading price during the 15-trading-day period prior to the conversion
date). Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded conversion
option embedded in the debentures, should be accounted for at fair value, as a derivative liability, as the Company cannot determine
if a sufficient number of shares would be available to settle all potential future conversion transactions. As of the funding
date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility of each
note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face
value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $88,674
is being amortized to interest expense over the respective terms of the notes.
The Company shall
have the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal
and accrued interest) depending on the Prepayment Period (ranging from 1 to 180 days following the issuance date). The Company
is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together
with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding
immediately after giving effect to the issuance of shares of common stock upon conversion of the note.
As of December 31, 2019, the Company owed an
aggregate of $110,000 of principal and $2,138 of accrued interest on these convertible promissory notes.
Convertible notes payable-Odyssey Funding
LLC
On October 30, 2019, the Company issued
convertible promissory notes in the aggregate principal amount of $250,000 to Odyssey Funding LLC (“Odyssey”). The
promissory notes bear interest at 12% per annum, are due one year from the respective issuance date and include an original issuance
discount (“OID”) in aggregate of $12,500. Interest shall accrue from the issuance date, but interest shall not become
payable until the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 55% the average of
the two lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTC market exchange which the Company's
shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty
prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent
after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares
have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated
by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice
of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions
of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. The Company
agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC "Chill" on
its shares, the conversion price shall be decreased to 45% instead of 55% while that "Chill" is in effect. In no event
shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially
owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may
be increased up to 9.9% upon 60 days' prior written notice by the Investor)
As of the funding date of each note, the Company
determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess
of the derivative liability recognized as interest expense. The aggregate debt discount of $207,650 is being amortized to interest
expense over the respective terms of the notes. As of December 31, 2019, the Company owed an aggregate of $250,000 of principal
and $5,096 of accrued interest on these convertible promissory notes.
Convertible notes payable-Paladin Advisors
LLC
On October 23, 2019, the Company issued
convertible promissory notes in the aggregate principal amount of $75,000 to Paladin Advisors, LLC (“Paladin”). The
promissory notes bear interest at 8% per anum, and is due six months from the respective issuance date of the note along with accrued
and unpaid interest. Principal and interest to be payable as provided below on that date which is six months from the date of issuance
(the “Maturity Date”). All payments due hereunder (to the extent not converted into common stock, $0.001 par value
per share (the “Common Stock”) in accordance with the terms of this agreement and shall be made in lawful money of
the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Company by written
notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is
due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and,
in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date
thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note,
the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the
city of New York, New York are authorized or required by law or executive order to remain closed.
For so long as there remains any amount due
hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued
interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common
stock. The conversion price (the “Conversion Price”) shall be equal to a forty-five percent (45%) discount to the lowest
closing bid of the previous ten (10) day trading period, ending on the business day before a Notice of Conversion is delivered
to the Company. The number of shares of Common Stock into which the Converted Amount shall be convertible (the “Conversion
Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the Conversion Price. For the purposes of this
Section 4(a), a conversion shall be deemed to occur on the date that the Company receives an executed copy of the Conversion Notice.
The aggregate debt discount of $46,721 is being
amortized to interest expense over the respective terms of the notes. As of December 31, 2019, the Company owed an aggregate of
$75,000 of principal and $0 of accrued interest on these convertible promissory notes.
Convertible notes payable-GS Capital Partners
LLC
On December 19, 2019, the Company issued
convertible promissory notes in the aggregate principal amount of $173,000 to GS Capital Partners LLC (“GS Capital”).
The promissory notes bear interest at 10% per annum and is due one year from the respective issuance date and include an original
issuance discount (“OID”) in aggregate of $15,000.
The interest will be paid to the Holder in
whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal
of, and interest on, this Note are payable at 30 Broad Street, Suite 1201, New York, NY 10004, initially, and if changed, last
appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each
interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by
law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address
appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding
principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented
by such check or wire transfer.
The Holder of this Note is entitled, at its
option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding
into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share
of Common Stock equal to 62% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC
Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the
future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received
by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication
to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the
same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded.
Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days
of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional
shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded
to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per
share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest
value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company
experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 52% instead of 62% while that “Chill”
is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of
Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common
Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).
As of the funding date of each note, the Company
determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of
the derivative liability recognized as interest expense. The aggregate debt discount of $166,193 is being amortized to interest
expense over the respective terms of the notes. As of December 31, 2019, the Company owed an aggregate of $173,000 of principal
and $569 of accrued interest on these convertible promissory notes.
Convertible notes payable-St George Investments
Effective November 1, 2017, the Company issued
a secured convertible promissory note in aggregate of $601,420 to St George Investments LLC (“St George”). The promissory
note bears interest at 10% compounded daily, was due upon maturity on September 10, 2018 and includes an original issue discount
(“OID”) of $59,220. The promissory note was funded on November 11, 2017 for $542,200, net of OID and transaction costs.
As of September 30, 2019, the Company owed $417,890 of principal and $38,378 of accrued interest on this convertible promissory
note. As of September 30, 2019, this note was in default, but the lender has not enforced the default interest rate. Effective
December 20, 2017, the Company issued a secured convertible promissory note in aggregate of $1,655,000 to St George Investments
LLC (“St George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on October 27,
2018 and includes an original issue discount (“OID”) of $155,000. In addition, the Company agreed to pay $5,000 for
legal, accounting and other transaction costs of the lender. The promissory note was funded in nine tranches of $300,000; $200,000;
$200,000; $400,000; $75,000; $150,000; $85,000; $120,000 and $70,000, resulting in aggregate net proceeds of $1,500,000. The Company
received aggregate net proceeds of $1,200,000 and $300,000 during the years ended December 31, 2018 and 2017, respectively. As
an investment incentive, the Company issued 1,100,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions.
The promissory notes are convertible, at any
time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as defined)
falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 20% prepayment premium and is secured by a trust deed of
certain assets of the Company.
On November 5, 2018, $250,000 of principal
and accrued interest was assigned to John Fife as an individual with all the terms and conditions of the original note issued to
St George. On March 21, 2019, $150,959 of principal and $4,963 of accrued interest along with $160,454 of derivative liabilities
valued as of the respective conversion date were converted into 394,460 shares of common stock.
During the nine months ended September 30,
2019, $550,000 of principal, $122,694 of accrued interest and $441,394 of derivative liabilities valued as of the respective conversion
dates were converted into 1,710,897 shares of common stock, resulting in a gain on debt settlement of $21,586. As of September
30, 2019, the Company owed $0 of principal and $0 of accrued interest on this convertible promissory note. Although this note was
in default until it was repaid, the lender did not enforce the default interest rate.
Effective August 28, 2018, the Company issued
a secured convertible promissory note in aggregate of $1,128,518 (includes overfunding of $23,518) to St George Investments LLC
(“St George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on June 30, 2019 and
includes an original issue discount (“OID”) of $100,000. In addition, the Company agreed to pay $5,000 for legal, accounting
and other transaction costs of the lender. During the year ended December 31, 2018, the Company received aggregate net proceeds
of $825,000. During the nine months ended September 30, 2019, an additional $218,518 was funded under this note resulting in net
proceeds of $198,518.
As an investment incentive, the Company issued
750,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions. The aggregate fair value of the issued
warrants was $1,588,493. The face value of the debt was then allocated, on a relative fair value basis, between the debt and the
warrants. The portion allocated to warrants has been added to the debt discount with a resulting increase in additional paid-in
capital. As of the funding date of each tranche of this note, the Company determined the fair value of the embedded derivative
associated with the convertibility of this note. The fair value of the embedded derivative has been added to the debt discount
(total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest
expense. As of the aggregate debt discount of $1,114,698 is being amortized to interest expense over the respective term of each
tranche.
The promissory notes are convertible, at any
time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as defined)
falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured by a trust deed of
certain assets of the Company.
During the nine months ended September 30,
2019, $1,000,859 of principal and $840,299 of derivative liabilities valued as of the respective conversion dates were converted
into 4,475,543 shares of common stock, resulting in a loss on debt settlement of $612,034. As of September 30, 2019, the Company
owed $828,518 of principal and $28,138 of accrued interest on this convertible promissory note. As of September 30, 2019, this
note was in default, but the lender has not enforced the default interest rate.
Effective January 29, 2019, the Company issued
a secured convertible promissory note in aggregate of $2,205,000 to St George Investments LLC (“St George”). The promissory
note bears interest at 10% compounded daily, is due upon maturity on December 5, 2019 and includes an original issue discount (“OID”)
of $200,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During
the nine months ended September 30, 2019, the promissory note was funded in eight tranches totaling $1,406,482 resulting in aggregate
net proceeds of $1,276,482 under this note. As an investment incentive, the Company issued 1,500,000 5-year warrants, exercisable
at $2.40 per share, with certain reset provisions. The aggregate fair value of the issued warrants was $999,838. The face value
of the debt was then allocated, on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants
has been added to the debt discount with a resulting increase in additional paid-in capital. As of the funding date of each tranche
of this note, the Company determined the fair value of the embedded derivative associated with the convertibility of this note.
The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value
of the debt) with any excess of the derivative liability recognized as interest expense.
The promissory notes are convertible, at any
time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as defined)
falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured by a trust deed of
certain assets of the Company.
Effective March 25, 2019, the Company issued
a secured convertible promissory note in the amount of $580,000 to St George Investments LLC (“St George”). The promissory
note bears interest at 10% compounded daily, is due upon maturity on January 24, 2020 and includes an original issue discount (“OID”)
of $75,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender.
During
the nine months ended September 30, 2019, the promissory note was funded in the amount of $580,000 resulting in net proceeds of
$500,000 under this note. As an investment incentive, the Company issued 375,000 five-year warrants, exercisable at $2.40 per
share, with certain reset provisions. The aggregate fair value of the issued warrants was $258,701. The face value of the debt
was then allocated, on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants has been
added to the debt discount with a resulting increase in additional paid-in capital. As of the funding date of this note, the Company
determined the fair value of the embedded derivative associated with the convertibility of this note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess
of the derivative liability recognized as interest expense. The aggregate debt discount of $483,966 is being amortized to interest
expense over the term of the note.
The promissory notes are convertible, at any
time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as defined)
falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured by a trust deed of
certain assets of the Company. As of December 31, 2019, the Company owed $2,947,890 of principal and $314,547 of accrued interest
on this convertible promissory note.
Convertible notes payable - Robert L. Hymers
III
On December 23, 2019, the Company issued convertible
promissory notes in the aggregate principal amount of $96,552.70 to Robert L. Hymers III (“Hymers”) in satisfaction
of funds owed to Mr. Hymers from his consulting contract with the Company for past services rendered and completed. The promissory
notes bear interest at 10% per anum, and is due six months from the respective issuance date of the note along with accrued and
unpaid interest. Principal and interest to be payable as provided below on that date which is six months from the date of issuance
(the “Maturity Date”). All payments due hereunder (to the extent not converted into common stock, $0.001 par value
per share (the “Common Stock”) in accordance with the terms of this agreement and shall be made in lawful money of
the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Company by written
notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is
due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and,
in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date
thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note,
the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the
city of New York, New York are authorized or required by law or executive order to remain closed.
For so long as there remains any amount due
hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued
interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common
stock. The conversion price (the “Conversion Price”) shall be equal to a fifty percent (50%) discount to the lowest
closing bid of the previous fifteen (15) day trading period, ending on the business day before a Notice of Conversion is delivered
to the Company. The number of shares of Common Stock into which the Converted Amount shall be convertible (the “Conversion
Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the Conversion Price. A conversion shall be deemed
to occur on the date that the Company receives an executed copy of the Conversion Notice.
The aggregate debt discount of $92,332 is being
amortized to interest expense over the respective terms of the notes. As of December 31, 2019, the Company owed an aggregate of
$96,552.70 of principal and $212 of accrued interest on these convertible promissory notes. The derivative liability at December
31, 2019 associated with this convertible note was $158,307.
Convertible notes payable – Natural
Plant Extract
On April 15, 2019, we entered into a joint
venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a licensed psychoactive cannabis distribution
service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018. On
February 3, 2020, we terminated the joint venture.
The Original Material Definitive Agreement
Pursuant to the original material definitive
agreement, we agreed to acquire twenty percent (equal to 200,000) of NPE’s authorized shares in exchange for our payment
of $2,000,000 and $1,000,000 worth of our restricted common stock. We agreed to form a joint venture with NPE incorporated in California
under the name “Viva Buds, Inc.” (“Viva Buds”) for the purpose of operating a California licensed cannabis
distribution business pursuant to California law legalizing THC psychoactive cannabis for recreational and medicinal use.
Our payment obligations were governed
by a stock purchase agreement which required us to make the following payments:
a. Deposit of $350,000 within 5 days
of the execution of the material definitive agreement;
b. Deposit of $250,000 payable within
30 days;
c. Deposit of $400,000 within 60 days;
d. Deposit of $500,000 within 75 days;
e. Deposit of $500,000 within 90 days
We made our initial payment pursuant
to this schedule, but otherwise failed to comply with the payment schedule and we were in breach of contract.
Settlement and Release of All Claims
Agreement
On February 3, 2020, the Company and
NPE entered into a settlement and release of all claims agreement. In exchange for a complete release of all claims, the Company
and NPE (1) agreed to reduce our interest in NPE from 20% to 5%; (2) we agreed to pay NPE a total of $85,000 as follows: $35,000
concurrent with the execution of the Settlement and Release of All Claims Agreement, and $25,000 no later than the 5th calendar
day for each of the two months following execution of Settlement and Release of All Claims Agreement; and, (3) to retire the balance
of our original valuation obligation from the material definitive agreement, representing a shortfall of $56,085.15, in a convertible
promissory note, with terms allowing NPE to convert the note into common stock of MCOA at a 50% discount to the closing price of
MCOA’s common stock as of the maturity date.
Of the total amount due and payable
by us as of the date of this filing, we owe $75,000, and we are in breach of the settlement agreement. On February 3, 2020, we
executed a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of our settlement agreement
with NPE, we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the City of Lynwood and the
State of California to transfer the cannabis licenses back to NPE. To date, we have not paid this amount and it is due and owing.
Summary:
The Company has identified the embedded derivatives
related to the above described notes and warrants. These embedded derivatives included certain conversion and reset features. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the note and to fair value as of each subsequent reporting date.
At December 31, 2018, the Company determined
the aggregate fair values of $2,256,631 of embedded derivatives. The fair values were determined using the Binomial Option Pricing
Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 112.98% to 240.62%, (3) weighted
average risk-free interest rate of
1.59% to 2.56%, (4) expected life of 0.083
to 1 year, and (5) estimated fair value of the Company's common stock from $0.0203 per share.
For the year ended December 31, 2019, the Company
recorded a loss on the change in fair value of derivative liabilities of $2,123,570, while for the year ended December 31, 2018,
the Company recorded a gain on the change in fair value of derivative liabilities of $1,443,249. For the years ended December 31,
2019 and 2018, the Company recorded amortization of debt discounts of $2,906,843 and $1,146,549, respectively, as a charge to interest
expense, respectively.
NOTE 6 – DERIVATIVE LIABILITIES
As described in Notes 4 and 7, the Company
issued convertible notes and warrants that contained conversion features and a reset provisions. The accounting treatment of derivative
financial instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value
as of each subsequent reporting date.
If an embedded conversion option in a convertible
debt instrument no longer meets the bifurcation criteria in this Subtopic, an issuer shall account for the previously bifurcated
conversion option by reclassifying the carrying amount of the liability for the conversion option (that is, its fair value on the
date of reclassification) to shareholders' equity. Any debt discount recognized when the conversion option was bifurcated from
the convertible debt instrument shall continue to be amortized.
NOTE 7 – STOCKHOLDERS’ DEFICIT
Preferred stock
The Company is authorized to issue 10,000,000
shares of $0.001 par value preferred stock as of December 31, 2019 and December 31, 2018. As of December 31, 2019, and 2018, the
Company has designated and issued 10,000,000 shares of Class A Preferred Stock.
Each share of Class A Preferred Stock is entitled
to 100 votes on all matters submitted to a vote to the stockholders of the Company, does not have conversion, dividend or distribution
upon liquidation rights.
Common stock
The Company is authorized to issue 5,000,000,000
shares of $0.001 par value common stock as of December 31, 2019 and 2018. As of December 31, 2019, and 2018, the Company had 77,958,081
and 42,687,301, respectively, common shares issued and outstanding.
On September 3, 2019, the Company completed
a 1 for 60 reverse stock-split of its common stock.
In 2019, the Company issued an aggregate of
141,669 shares of its common stock in settled amounts previously accrued with an estimated fair value of $193,800
In 2019, the Company issued an aggregate of
18,510,381 shares of its common stock for services rendered with an estimated fair value of $3,293,688.
In 2019, the Company issued an aggregate of
9,251,217 shares of its common stock in settlement of convertible notes payable and accrued interest with an estimated fair value
of $3,388,774.
In 2019, the Company issued an aggregate of
1,000,000 shares of its common stock in issuance of warrants and BCF with convertible debt with an estimated fair value of $856,717.
In 2019, the Company issued an aggregate of
1,220,856 shares of its common stock in conversion of related party notes payable with an estimated fair value of $1,182,415.
In 2019, the Company issued an aggregate of
1,653,175 common shares of its common stock in exchange for exercise of warrants on a cashless basis.
In 2019, the Company sold shares 222,221 shares
of its common stock with an estimated value of $65,000.
In 2019, the Company issued an aggregate of
2,082,398 common shares in settlement of a legal cases with an estimated fair value of $541,424.
In 2019, the Company issued an aggregate of
2,222,047 common shares in settlement of a for investments in joint ventures with an estimated fair value of $1,219,040.
During the year ended December 31, 2018, the
Company issued an aggregate of 31,000,794 shares of its common stock for services rendered with an estimated fair value of $718,099.
During the year ended December 31, 2018, the
Company sold an aggregate of 18,693,636 shares of its common stock for net proceeds of $152,000.
During the year ended December 31, 2018, the
Company issued an aggregate of 80,428,246 shares of its common stock in settlement of $804,279 related party notes payable and
accrued interest.
During the year ended December 31, 2018, the
Company issued 147,927,794 shares of its common stock in part settlement of $5,466,333 convertible notes payable, accrued interest
and penalties.
During the year ended December 31, 2018, the
Company issued 57,676,810 shares of its common stock in settlement of a legal case at a cost of $1,701,466.
During the year ended December 31, 2018,
the company issued 122,046,796 shares of its common stock in exchange for exercise of warrants on a cashless basis.
During the year ended December 31, 2018,
the company received proceeds from common stock subscriptions for $90,000.
Options
Option valuation models
require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Binomial
Option Pricing Model with a volatility figure derived from using the Company’s historical stock prices. Management determined
this assumption to be a more accurate indicator of value. The Company accounts for the expected life of options based on the contractual
life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the
“simplified” method, which is used for “plain-vanilla" options, as defined in the accounting standards codification.
The risk-free interest
rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected
term of the options.
In addition, the Company
is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating
the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options,
and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is
materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation
expense could be significantly different from what the Company has recorded in the current period.
The following table summarizes the stock option
activity for the years ended December 31, 2019 and 2018:
|
|
Shares
|
|
|
Weighted-Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic Value
|
Outstanding at December 31, 2017
|
|
|
16,666,667
|
|
|
$
|
0.30
|
|
|
|
7.76
|
|
$
|
15,400,000
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Forfeitures or expirations
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
16,666,667
|
|
|
$
|
0.30
|
|
|
|
6.76
|
|
$
|
|
15,296,667
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeitures or expirations
|
|
|
(16,666,667)
|
|
|
|
0.30
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
0(1)
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
Exercisable at December 31, 2019
|
|
|
0(1)
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
(1) On February 27, 2019, Donald Steinberg
and Charles Larsen cancelled previously issued options to purchase an aggregate of 16,666,667 shares at an average exercise price
of $0.30 per share, representing 100% of all previously issued option.
The aggregate intrinsic value in the preceding
tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock
price of $0 and $1.22 as of December 31, 2019 and 2018, respectively, which would have been received by the option holders had
those option holders exercised their options as of that date.
The following table presents information
related to stock options at December 31, 2019(1):
Options Outstanding(1)
|
|
|
Options Exercisable
|
|
Exercise
Price
|
|
|
Number of
Options
|
|
|
Weighted Average
Remaining Life
In Years
|
|
|
Exercisable
Number of
Options
|
|
$
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The stock-based compensation
expense related to option grants was $0 and $450,000 during the years ended December 31, 2019 and 2018, respectively.
(1) On February 27,
2019, Donald Steinberg and Charles Larsen cancelled previously issued options to purchase an aggregate of 16,666,667 shares at
an average exercise price of $0.30 per share, representing 100% of all previously issued options.
Warrants
The following table summarizes the stock warrant
activity for the two years ended December 31, 2019:
|
|
Shares
|
|
|
Weighted-Average
Exercise Price
|
|
|
Weighted Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at December 31, 2017
|
|
|
186,550
|
|
|
$
|
2.40
|
|
|
|
|
|
$
|
1,873,492
|
|
Granted
|
|
|
1,827,564
|
|
|
|
2.34
|
|
|
|
|
|
|
|
|
Forfeitures or expirations
|
|
|
(166,667
|
)
|
|
$
|
1.50-
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
1,847,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,370,298
|
|
|
|
1.98
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(192,521
|
)
|
|
|
1.78
|
|
|
|
|
|
|
|
|
|
Forfeitures or expirations
|
|
|
(14,113)
|
|
|
|
1.80
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
4,011,111
|
|
|
$
|
2.15
|
|
|
|
3.60
|
|
|
$
|
-
|
|
Exercisable at December 31, 2019
|
|
|
4,011,111
|
|
|
$
|
2.15
|
|
|
|
3.60
|
|
|
$
|
-
|
|
The aggregate intrinsic value in the preceding
tables represents the total pretax intrinsic value, based on warrants with an exercise price less than the Company’s stock
price of $0.07 and $1.22 as of December 31, 2019 and 2018, respectively, which would have been received by the warrant holders
had those option holders exercised their warrants as of that date.
The following table presents information related to warrants
at December 31, 2019:
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Exercise
Price
|
|
|
Number of
Warrants
|
|
|
Weighted Average
Remaining Life
In Years
|
|
|
Exercisable
Number of
Warrants
|
|
$
|
0.01 - $1.00
|
|
|
|
484,187
|
|
|
2.70
|
|
|
|
484,187
|
|
$
|
1.01 - $2.00
|
|
|
|
27,778
|
|
|
2.50
|
|
|
|
27,778
|
|
$
|
2.01 - $3.00
|
|
|
|
3,499,146
|
|
|
3.74
|
|
|
|
3,499,146
|
|
In connection with the issuance of convertible
notes payable, the Company issued an aggregate of 2,370,298 warrants to purchase the Company’s common stock from $0.26 to
$2.40, vesting immediately and expiring 5 years from the date of issuance.
NOTE 8 — FAIR VALUE MEASUREMENT
The Company adopted the provisions of Accounting
Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines
fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact
and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels
of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets
for identical assets or liabilities.
Level 2 – Observable inputs other than
Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived
principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs to the
valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured
on a recurring basis are based upon level 3 inputs.
To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on
the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative
effect adjustment to beginning retained earnings and no impact on the financial statements.
The carrying value of the Company’s cash
and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other
current assets and liabilities approximate fair value because of their short-term maturity.
As of December 31, 2019, and 2018, the Company
did not have any items that would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative liabilities
as level 3 and values its derivatives using the methods discussed in note 6. While the Company believes that its valuation methods
are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting
date. The primary assumptions that would significantly affect the fair values using the methods discussed in Notes 4 and 5 are
that of volatility and market price of the underlying common stock of the Company.
As of December 31, 2019, and 2018, the Company
did not have any derivative instruments that were designated as hedges.
The combined derivative and warrant liability
as of December 31, 2019 and 2018, in the amounts of $5,222,186 and $2,256,631, respectively, have a level 3 classification.
The following table provides a summary of changes
in fair value of the Company’s Level 3 financial liabilities for the two years ended December 31, 2019:
The derivative liabilities as of December 31,
2019 and 2018, in the amount of $5,693,071 and $2,256,631, respectively, have a level 3 classification.
The following table provides a summary of changes
in fair value of the Company’s Level 3 financial liabilities for the year ended December 31, 2019:
|
|
|
Debt
Derivative
|
|
|
Balance, December 31, 2018
|
|
$
|
2,256,631
|
|
|
Increase resulting from initial issuances of additional convertible notes payable
|
|
|
2,895,717
|
|
|
Decreases resulting from conversion or payoff of convertible notes payable
|
|
|
(1,582,847
|
)
|
|
Mark-to-market at December 31, 2019
|
|
|
2,123,570
|
|
|
Balance, December 31, 2019
|
|
$
|
5,693,071
|
|
|
|
|
|
|
|
|
Net change in fair value included in earnings related to derivative liabilities during the year ended December 31, 2019
|
|
$
|
2,123,570
|
|
|
Fluctuations in the Company’s stock price
are a primary driver for the changes in the derivative valuations during each reporting period. During the year ended December
31, 2019, the Company’s stock price decreased significantly from initial valuations. As the stock price decreases for each
of the related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the
significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.
NOTE 9 — RELATED PARTY TRANSACTIONS
The Company’s current officers and stockholders
advanced funds to the Company for travel related and working capital purposes. As of December 31, 2019, and 2018, there were no
related party advances outstanding.
As of December 31, 2019, and 2018, accrued
compensation due officers and executives included as accrued compensation was $4,875 and $454,316, respectively.
For the years ended December 31, 2019 and 2018,
the Company had sales to related parties of $21,157 and $11,683, respectively.
NOTE 10 — COMMITMENTS AND CONTINGENCIES
Operating lease
On July 1, 2019, the Company entered into a
lease extension agreement, whereby the Company leased for office space in Escondido, California, commencing June 30, 2020 and expiring
on June 30, 2021 at a base monthly lease rate of $1,308.88 per month through June 30, 2020, and $1,348.14 to June 30, 2021.
To evaluate the impact on adoption of ASC842
– Leases, on the accounting treatment for leasing of real office property referred to as the “Premises”. The
premises is located in Escondido, CA.
On July 1, 2019, the Company entered into a
lease extension agreement for its single operating lease, whereby the Company extended its office lease Escondido, California, in
for two year. The extension period commenced on June 30, 2020 and will expire on June 30, 2021 at a base monthly lease rate of
$1,308.88 per month through June 30, 2020, and $1,348.14 to June 30, 2021.
To evaluate the impact
on adoption of ASC842 – Leases, on the accounting treatment for leasing of real office property referred to as the “Premises”.
The premises is located in Escondido, CA.
The Company utilizes
the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable.
The Company used an estimated incremental borrowing rate of 10% to estimate the present value of the right of use liability.
The Company has right-of-use
assets of $22,101 and operating lease liabilities of $22,219 as of December 31, 2019. Operating lease expense for the year ended
December 31, 2019 was $30,048.76. The Company had cash used in operating activities related to leases of $29,930.76 during the
year ended December 31, 2019. The lease has a remaining term of eighteen months.
The following table
provides the maturities of lease liabilities at December 31, 2019:
|
|
|
|
Maturity of Lease Liabilities at December 31, 2019
|
|
|
|
2020
|
$
|
15,942
|
|
2021
|
|
8,089
|
|
2021 and thereafter
|
|
-
|
|
|
|
|
|
Total future undiscounted lease payments
|
|
24,031
|
|
Less: Interest
|
|
(1,812)
|
|
Present value of lease liabilities
|
$
|
22,219
|
|
Minimum lease payments
under the Company’s operating lease under ASC 840 as of for 2020 and 2021 are $15,942 and $8,089, respectively.
Litigation
The Company is subject at times to other
legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions
or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect
on its financial position, results of operations or liquidity.
Bougainville Ventures
On September 20, 2018,
the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan
County Washington Superior Court, case number 18-2- 0045324.
Background.
On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose
of the joint venture was for the Company and Bougainville to jointly engage in the development and promotion of products in the
legalized cannabis industry in Washington State; (ii) utilize Bougainville’s high quality cannabis grow operations in the
State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry;
(iii) leverage Bougainville’s agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical
and management services and resources including, but not limited to: sales and marketing, agricultural procedures, operations security
and monitoring, processing and delivery, branding, capital resources and financial management; and, (iv) optimize collaborative
business opportunities. The Company and Bougainville agreed to operate through a Washington State Limited Liability Company, and
BV-MCOA Management, LLC was organized in the State of Washington on May 16, 2017.
As our contribution
to the joint venture, the Company committed to raise not less than $1 million dollars to fund joint venture operations based upon
a funding schedule. The Company also committed to providing branding and systems for the representation of cannabis related products
and derivatives comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.
The Company and Bougainville's agreement provided that funding provided by the Company would go, in part, towards the joint venture’s
ultimate purchase of the land consisting of a one-acre parcel located in Okanogan County, Washington, for joint venture operations.
As disclosed
on Form 8-K on December 11, 2017, the Company did not comply with the funding schedule for the joint venture. On November 6, 2017,
the Company and Bougainville amended the joint venture agreement to reduce the amount of the Company's commitment to $800,000 and
also required the Company to issue Bougainville 15 million shares of the Company's restricted common stock. The Company completed
its payments pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million
shares of restricted common stock. The amended agreement provided that Bougainville would deed the real property to the joint venture
within thirty days of its receipt of payment.
Thereafter, the Company
determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party to a purchase
agreement for real property that was in breach for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502
license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville
and an unrelated third party, Green Ventures Capital Corp., purchased the land. The land is currently pending the payment of delinquent
property taxes that would allow for the Okanogan County Assessor to sub-divide the property, so that the appropriate portion could
be deeded to the joint venture. Although Bougainville represented it would pay the delinquent taxes, it has not. To date, the property
has not been deeded to the joint venture.
To clarify
the respective contributions and roles of the parties, the Company also offered to enter into good faith negotiations to revise
and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville in
good faith to accomplish a revised and restated joint venture agreement, and efforts towards satisfying the conditions to complete
the subdivision of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the
Company in good faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding
of the real property to the joint venture.
Company Determines
to File Suit. On August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or communicate
with the Company regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures of
funds contributed by the Company in the joint venture agreement. Bougainville had a material obligation to do so under the joint
venture agreement. The Company believes that some of the funds it paid to Bougainville were misappropriated and that there was
self-dealing with respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in
the joint venture agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had an
ownership interest in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis
license holder to grow cannabis on the real property; and, (iii) that clear title to the real property associated with the Tier
3 # I502 license would be deeded to the joint venture thirty days after the Company made its final funding contribution. As a result,
on September 20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard
Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2- 0045324. The Company’s complaint seeks legal
and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement,
an accounting, quiet title to real property in the name of the Company, for the appointment of a receiver, the return to treasury
of 15 million shares issued to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State.
The registrant has filed a lis pendens on the real property. The case is currently in litigation. Trial is set for January 26-28,
2021.
Caren Glasser
On March 2, 2020, Caren Glasser filed
a request for arbitration against the Company alleging non-payment for past due compensation. The case was filed in the American
Arbitration Association under Case no. 01-20-0000-6290. The Company and Ms. Glasser agreed to settle her dispute on May 7, 2020.
The settlement agreement obligates the Company to pay Ms. Glasser $24,000 thirty days of Ms. Glasser’s review and execution,
consistent with the Older Workers Benefit Protection Act (29 U.S.C. § 626(f). The Company issued the $24,000 settlement payment
on June 12, 2020.
NOTE 11 – INCOME TAXES
At December 31, 2019, the Company has available
for federal income tax purposes a net operating loss carry forward of approximately $74,164,213, expiring in the year 2038, that
may be used to offset future taxable income, but could be limited under Section 382. The Company has provided a valuation reserve
against the full amount of the net operating loss benefit, since in the opinion of management based upon the earnings history of
the Company; it is more likely than not that the benefits will not be realized. Due to possible significant changes in the Company's
ownership, the future use of its existing net operating losses may be limited. All or portion of the remaining valuation allowance
may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.
We have adopted the provisions of ASC 740-10-25,
which provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in
income tax returns. ASC 740-10-25 requires that a position taken or expected to be taken in a tax return be recognized
in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities.
Tax position that meet the more likely than
not threshold is then measured using a probability weighted approach recognizing the largest amount of tax benefit that is greater
than 50% likely of being realized upon ultimate settlement. The Company had no tax positions relating to open income
tax returns that were considered to be uncertain. We file income tax returns in the U.S. and in the state of California and
Utah with varying statutes of limitations.
The Company is required to file income tax
returns in the U.S. Federal jurisdiction and in California. The Company is no longer subject to income tax examinations by tax
authorities for tax years ending before December 31, 2016.
The Company’s deferred taxes as of December
31, 2019 and 2018 consist of the following:
|
|
2019
|
|
2018
|
Non-Current deferred tax asset:
|
|
|
|
|
|
|
|
|
Net operating loss carry-forwards
|
|
$
|
74,164,213
|
|
|
$
|
53,983,895
|
|
Valuation allowance
|
|
|
(74,164,213
|
)
|
|
|
(53,983,895
|
)
|
Net non-current deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE 12 – SUBSEQUENT EVENTS
On April 15, 2019, we entered into a joint
venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a licensed psychoactive cannabis distribution
service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018. On
February 3, 2020, we terminated the joint venture.
The Original Material Definitive Agreement
Pursuant to the original material definitive
agreement, we agreed to acquire twenty percent (equal to 200,000) of NPE’s authorized shares in exchange for our payment
of $2,000,000 and $1,000,000 worth of our restricted common stock. We agreed to form a joint venture with NPE incorporated in California
under the name “Viva Buds, Inc.” (“Viva Buds”) for the purpose of operating a California licensed cannabis
distribution business pursuant to California law legalizing THC psychoactive cannabis for recreational and medicinal use.
Our payment obligations were governed
by a stock purchase agreement which required us to make the following payments:
a. Deposit of $350,000 within 5 days
of the execution of the material definitive agreement;
b. Deposit of $250,000 payable within
30 days;
c. Deposit of $400,000 within 60 days;
d. Deposit of $500,000 within 75 days;
e. Deposit of $500,000 within 90 days
We made our initial payment pursuant
to this schedule, but otherwise failed to comply with the payment schedule and we were in breach of contract.
Settlement and Release of All Claims
Agreement
On February 3, 2020, the Company and
NPE entered into a settlement and release of all claims agreement. In exchange for a complete release of all claims, the Company
and NPE (1) agreed to reduce our interest in NPE from 20% to 5%; (2) we agreed to pay NPE a total of $85,000 as follows: $35,000
concurrent with the execution of the Settlement and Release of All Claims Agreement, and $25,000 no later than the 5th calendar
day for each of the two months following execution of Settlement and Release of All Claims Agreement; and, (3) to retire the balance
of our original valuation obligation from the material definitive agreement, representing a shortfall of $56,085.15, in a convertible
promissory note, with terms allowing NPE to convert the note into common stock of MCOA at a 50% discount to the closing price of
MCOA’s common stock as of the maturity date.
Of the total amount due and payable by
us as of the date of this filing, we owe $75,000, and we are in breach of the settlement agreement. On February 3, 2020, we executed
a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of our settlement agreement with NPE,
we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the City of Lynwood and the State of California
to transfer the cannabis licenses back to NPE. To date, we have not paid this amount and it is due and owing. As of the date of
this filing, there is no pending legal action by NPE against us for these matters.
On February 3, 2020, the Company entered into
an executive employment agreement with Jesus M. Quintero, our CEO and CFO providing for a gross salary of $15,000 monthly, consisting
of $12,000 in cash and $3,000 worth of our common stock valued on the closing price of our common stock on the last trading day
of each month.
On February 28, 2020, Themistocles Psomiadis was appointed as an
independent member to the board of directors.
On February 28, 2020, the Company entered into
executive contracts with its directors Edward Manolos and Themistocles Psomiadis. The agreements are for a term lasting from the
effective date until the earlier of the date of the next annual or special stockholders meeting called for the purposes of electing
directors, and the earliest of the following to occur: (a) the death of the Director; (b) the termination of the Director from
his membership on the Board by the mutual agreement of the Company and the Director; (c) the removal of the Director from the Board
by the majority stockholders of the Company; and (d) the resignation by the Director from the Board. Mr. Psomiadis and Mr. Manolos’
2020 contracts provide for payments of $5,000 quarterly.’
On March 30, 2020, Robert Coale resigned as a member of the board
of directors.
INTERIM FINANCIAL STATEMENTS
The following tables set forth our most recent
interim financial statements. Our unaudited quarterly results of operations data have been prepared on the same basis as our audited
consolidated financial statements included elsewhere in this prospectus. In the opinion of management, the financial information
set forth in the table below reflects all normal recurring adjustments necessary for the fair statement of results of operations
for these periods in accordance with generally accepted accounting principles in the United States. Our historical results are
not necessarily indicative of the results that may be expected in the future and the results of a particular quarter or other interim
period are not necessarily indicative of the results for a full year. This data should be read in conjunction with the section
titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements and related notes included elsewhere in this prospectus.
MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
|
December 31, 2019
|
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
55,251
|
|
|
$
|
211,765
|
|
Short-term Investments
|
|
|
13,458
|
|
|
|
27,403
|
|
Accounts receivable, net
|
|
|
12,874
|
|
|
|
18,317
|
|
Inventory
|
|
|
136,388
|
|
|
|
149,175
|
|
Other current assets
|
|
|
45,363
|
|
|
|
11,034
|
|
Total current assets
|
|
|
263,334
|
|
|
|
417,694
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
7,038
|
|
|
|
7,512
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Long-term Investments
|
|
|
693,915
|
|
|
|
693,915
|
|
Right-of-use-assets
|
|
|
18,702
|
|
|
|
22,101
|
|
Security deposit
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
985,489
|
|
|
|
1,143,722
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
722,440
|
|
|
|
797,789
|
|
Accrued compensation
|
|
|
32,375
|
|
|
|
4,875
|
|
Accrued liabilities
|
|
|
465,328
|
|
|
|
522,258
|
|
Debt obligation of Joint Venture
|
|
|
394,848
|
|
|
|
—
|
|
Notes payable, related parties
|
|
|
40,000
|
|
|
|
40,000
|
|
Convertible notes payable, net of debt discount of $785,204 and $808,980, respectively
|
|
|
3,040,324
|
|
|
|
3,193,548
|
|
Right-of-use liabilities - current portion
|
|
|
10,962
|
|
|
|
14,361
|
|
Warrant liability to be settled
|
|
|
—
|
|
|
|
192,115
|
|
Contingency Liability
|
|
|
—
|
|
|
|
956,251
|
|
Subscriptions payable
|
|
|
327,383
|
|
|
|
330,797
|
|
Derivative liability
|
|
|
6,059,349
|
|
|
|
5,693,071
|
|
Total current liabilities
|
|
|
11,093,009
|
|
|
|
11,745,065
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
Right-of-use liabilities
|
|
|
7,858
|
|
|
|
7,858
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
11,100,867
|
|
|
|
11,752,923
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 50,000,000 shares authorized
|
|
|
|
|
|
|
|
|
Class A preferred stock, $0.001 par value, 10,000,000 shares designated, 10,000,000 shares issued and outstanding as of March 31, 2020 and December 31, 2019 and
|
|
|
10,000
|
|
|
|
10,000
|
|
Class B preferred stock, $0.001 par value, 5,000,000 shares designated, 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.001 par value; 5,000,000,000 shares authorized; 126,702,818 and 77,958,081 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
|
|
|
126,703
|
|
|
|
77,958
|
|
Common stock to be issued, 1,000,000 and 0 shares, respectively
|
|
|
1,000
|
|
|
|
—
|
|
Additional paid in capital
|
|
|
66,029,435
|
|
|
|
63,467,054
|
|
Accumulated deficit
|
|
|
(76,282,515
|
)
|
|
|
(74,164,213
|
)
|
Total stockholders' deficit
|
|
|
(10,115,377
|
)
|
|
|
(10,609,201
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
985,489
|
|
|
$
|
1,143,722
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to these unaudited condensed consolidated financial statements
|
|
MARIJUANA COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
FOR THE THREE MONTHS ENDED MARCH 31, 2020 and 2019
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
2020
|
|
|
|
2019
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
78,647
|
|
|
$
|
113,271
|
|
Related party Sales
|
|
|
3,172
|
|
|
|
1,539
|
|
Total Revenues
|
|
|
81,819
|
|
|
|
114,810
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
34,205
|
|
|
|
39,878
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
47,614
|
|
|
|
74,932
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,746
|
|
|
|
1,696
|
|
Selling and marketing
|
|
|
126,455
|
|
|
|
429,012
|
|
Payroll and related
|
|
|
101,199
|
|
|
|
130,000
|
|
Stock-based compensation
|
|
|
6,000
|
|
|
|
100,350
|
|
General and administrative
|
|
|
204,371
|
|
|
|
327,979
|
|
Total operating expenses
|
|
|
439,771
|
|
|
|
989,037
|
|
|
|
|
|
|
|
|
|
|
Net loss from operations
|
|
|
(392,157
|
)
|
|
|
(914,105
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(890,151
|
)
|
|
|
(436,282
|
)
|
Impairment gain on Joint Ventures
|
|
|
(268,002
|
)
|
|
|
—
|
|
Loss on equity investment
|
|
|
(126,845
|
)
|
|
|
(59,541
|
)
|
Loss on change in fair value of derivative liabilities
|
|
|
(430,692
|
)
|
|
|
(2,687,449
|
)
|
Unrealized Loss on trading securities
|
|
|
(13,945
|
)
|
|
|
(135,000
|
)
|
Gain on settlement of debt
|
|
|
3,490
|
|
|
|
—
|
|
Total other income (expense)
|
|
|
(1,726,145
|
)
|
|
|
(3,318,272
|
)
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes
|
|
|
(2,118,302
|
)
|
|
|
(4,232,377
|
)
|
|
|
|
|
|
|
|
|
|
Income taxes (benefit)
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
(2,118,302
|
)
|
|
$
|
(4,232,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted (after stock-split)
|
|
|
94,235,680
|
|
|
|
38,779,190
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to these unaudited condensed consolidated financial statements
|
MARIJUANA
COMPANY OF AMERICA, INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
|
FOR
THE THREE MONTHS MARCH 31, 2020 AND 2019 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A
Preferred
Stock
|
|
Class
B Preferred Stock
|
|
Common
Stock
|
|
Common
Stock to be issued
|
|
Common
Stock
|
|
Additional
Paid
In
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Subscriptions
|
|
Capital
|
|
Deficit
|
|
Total
|
Balance,
December 31, 2018
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
42,687,301
|
|
|
$
|
42,687
|
|
|
|
316,693
|
|
|
$
|
90,000
|
|
|
$
|
—
|
|
|
$
|
50,707,103
|
|
|
$
|
(53,983,895
|
)
|
|
$
|
(3,134,105
|
)
|
Common stock issued
for services rendered
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
141,667
|
|
|
|
142
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
153,708
|
|
|
|
|
|
|
|
153,850
|
|
Common stock issued
in settlement of convertible notes payable and accrued interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
913,651
|
|
|
|
914
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
635,798
|
|
|
|
—
|
|
|
|
636,712
|
|
Additional paid-in
capital due to issuance of convertible debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,714
|
|
|
|
|
|
|
|
462,714
|
|
Common stock issued
in exchange for exercise of warrants on a cashless basis
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
655,556
|
|
|
|
656
|
|
|
|
(140,752
|
)
|
|
|
(40,000
|
)
|
|
|
|
|
|
|
79,344
|
|
|
|
—
|
|
|
|
40,000
|
|
Sale of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
398,338
|
|
|
|
398
|
|
|
|
(175,941
|
)
|
|
|
(50,000
|
)
|
|
|
|
|
|
|
178,658
|
|
|
|
|
|
|
|
129,056
|
|
Net Loss
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,232,377
|
)
|
|
|
(4,232,377
|
)
|
Balance, March
31, 2019
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
44,796,513
|
|
|
$
|
44,797
|
|
|
|
(0
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,217,325
|
|
|
$
|
(58,216,272
|
)
|
|
$
|
(5,944,151
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A
Preferred
Stock
|
|
Class
B
Preferred
Stock
|
|
Common
Stock
|
|
Common
Stock to be issued
|
|
Common
Stock
|
|
Additional
Paid
In
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Subscriptions
|
|
Capital
|
|
Deficit
|
|
Total
|
Balance, December
31, 2019
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
77,958,081
|
|
|
$
|
77,958
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63,467,054
|
|
|
$
|
(74,164,213
|
)
|
|
$
|
(10,609,201
|
)
|
Common stock
issued to settle amounts previously accrued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,333
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,692
|
|
|
|
|
|
|
|
6,700
|
|
Common stock issued
for services rendered
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
8,333
|
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
306
|
|
|
|
|
|
|
|
314
|
|
Common stock issued
in settlement of convertible notes payable and accrued interest
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
32,805,286
|
|
|
|
32,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600,895
|
|
|
|
—
|
|
|
|
633,700
|
|
Common stock issued
in exchange for exercise of warrants on a cashless basis
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
12,244,897
|
|
|
|
12,245
|
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
342,755
|
|
|
|
—
|
|
|
|
356,000
|
|
Common shares issued
in settlement of legal case
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,677,889
|
|
|
|
3,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
952,573
|
|
|
|
|
|
|
|
956,251
|
|
Reclassification
of derivative liabilities to additional paid in capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
659,160
|
|
|
|
|
|
|
|
659,160
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,118,302
|
)
|
|
|
(2,118,302
|
)
|
Balance, March
31, 2020
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
|
10,000,000
|
|
|
$
|
—
|
|
|
|
126,702,819
|
|
|
$
|
126,703
|
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
$
|
—
|
|
|
$
|
66,029,435
|
|
|
$
|
(76,282,515
|
)
|
|
$
|
(10,115,377
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
the accompanying notes to these unaudited condensed consolidated financial statements
|
|
|
MARIJUANA COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
|
(UNAUDITED)
|
|
|
|
2020
|
|
|
|
2019
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(2,118,302
|
)
|
|
$
|
(4,232,377
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization of debt discount
|
|
|
436,593
|
|
|
|
495,438
|
|
Depreciation and amortization
|
|
|
1,746
|
|
|
|
1,696
|
|
Impairment Loss on equity method investee
|
|
|
268,002
|
|
|
|
|
|
Loss on equity investment
|
|
|
126,845
|
|
|
|
59,541
|
|
Loss on change in fair value of derivative liability
|
|
|
430,692
|
|
|
|
2,687,449
|
|
Interest expense recognized for the excess of fair value of derivative liability over net book value of notes payable at issuance
|
|
|
206,094
|
|
|
|
—
|
|
Loss on share inducement and settlement of warrant liability
|
|
|
138,885
|
|
|
|
436,282
|
|
Share-based compensation
|
|
|
6,000
|
|
|
|
254,200
|
|
Unrealized Loss on trading securities
|
|
|
13,946
|
|
|
|
135,000
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
5,443
|
|
|
|
(31,118
|
)
|
Inventories
|
|
|
12,787
|
|
|
|
(44,677
|
)
|
Prepaid expenses and other current assets
|
|
|
(34,329
|
)
|
|
|
(62,591
|
)
|
Accounts payable
|
|
|
(78,764
|
)
|
|
|
69,278
|
|
Accrued expenses and other current liabilities
|
|
|
(12,881
|
)
|
|
|
24,781
|
|
Right-of-use assets
|
|
|
3,399
|
|
|
|
—
|
|
Right-of-use liabilities
|
|
|
(3,399
|
)
|
|
|
—
|
|
Net cash provided by (used in) operating activities
|
|
|
(597,243
|
)
|
|
|
(207,098
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(1,271
|
)
|
|
|
(2,332
|
)
|
Purchase of investments
|
|
|
—
|
|
|
|
(290,260
|
)
|
Net cash provided by (used in) investing activities
|
|
|
(1,271
|
)
|
|
|
(292,592
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of notes payable
|
|
|
442,000
|
|
|
|
649,575
|
|
Net cash provided by (used in) financing activities
|
|
|
442,000
|
|
|
|
649,575
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(156,514
|
)
|
|
|
149,885
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
211,765
|
|
|
|
359,577
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
55,251
|
|
|
$
|
509,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
—
|
|
|
|
—
|
|
Cash paid for taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Non cash financing activities:
|
|
|
|
|
|
|
|
|
Common stock issued in settlement of convertible notes payable
|
|
$
|
633,700
|
|
|
$
|
462,714
|
|
Reclassification of derivative liabilities to additional paid-in capital
|
|
$
|
659,160
|
|
|
$
|
—
|
|
Common shares issued in settlement of legal case
|
|
$
|
956,251
|
|
|
$
|
—
|
|
See the accompanying notes to these unaudited condensed consolidated financial statements
|
NOTES TO INTERIM FINANCIAL STATEMENTS
MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2020
(unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Marijuana Company of America, Inc. (The “Company”)
was incorporated under the laws of the State of Utah in October 1985 under the name Mormon Mint, Inc. The corporation was originally
a startup company organized to manufacture and market commemorative medallions related to the Church of Jesus Christ of Latter
Day Saints. On January 5, 1999, Bekam Investments, Ltd. acquired one hundred percent of the common shares of the Company and spun
the Company off changing its name Converge Global, Inc. From August 13, 1999 until November 20, 2002, the Company focused on the
development and implementation of Internet web content and e-commerce applications. In October 2009, in a 30 for 1 exchange, the
Company merged with Sparrowtech, Inc. for the purpose of exploration and development of commercially viable mining properties.
From 2009 to 2014, we operated primarily in the mining exploration business.
In 2015, the Company changed its business model
to a marketing and distribution company for medical marijuana. In conjunction with the change, the Company changed its name to
Marijuana Company of America, Inc. At the time of the transition in 2015, there were no remaining assets, liabilities or operating
activities of the mining business.
On September 21, 2015, the Company formed H
Smart, Inc., a Delaware corporation as a wholly owned subsidiary for the purpose of operating the hempSMART™ brand.
On February 1, 2016, the Company formed MCOA
CA, Inc., a California corporation as a wholly owned subsidiary to facilitate mergers, acquisitions and the offering of investments
or loans to the Company.
On May 3, 2017, the Company formed Hempsmart
Limited, a United Kingdom corporation as a wholly owned subsidiary for the purpose of future expansion into the European market.
The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries: H Smart, Inc., Hempsmart Limited and MCOA CA, Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.
The condensed balance sheet as of December
31, 2019 has been derived from audited financial statements.
Operating results for the three months ended
March 31, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020. These condensed
financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2019.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S
LIQUIDITY PLANS
The accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business. As shown in the accompanying financial statements during three months ended March 31, 2020, the Company
incurred net losses from operations of $2,118,302 and used cash in operations of $597,243. These factors among others may indicate
that the Company will be unable to continue as a going concern for a reasonable period of time.
The Company's primary source of operating funds
for the three months ended March 31, 2020 has been from revenue generated from proceeds from the issuance of convertible and other
debt. The Company has experienced net losses from operations since inception, but expects these conditions to improve in 2020 and
beyond as it continues to develop its business model. The Company has stockholders' deficiencies at March 31, 2020 and requires
additional financing to fund future operations.
The Company’s existence is dependent
upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance
that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity
problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue
as a going concern.
NOTE 3 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The unaudited condensed interim financial statements
of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)
for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
Revenue Recognition
For annual reporting periods after December
15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts
with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in
accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an entity
shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of
revenue and cash flows arising from a contract with a customer. The core principal is to recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled
in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective
approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB ASC Topic 606
for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic 606 effective
in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement FASB ASC Topic
606, with no restatement of the comparative periods presented. Using this transition method, we applied the new standards to all
new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts we determine
are subject to FASB ASC Topic 606 prospectively. For the quarter ended March 31, 2020, there were no incomplete contracts. As is
more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant financing
components that require revenue adjustment under FASB ASC Topic 606.
Contracts included in our application
of FASB ASC Topic 606, for the quarter ended March 31, 2020, consisted solely of sales of our hempSMART™ products made by
our sales associates and by us directly through our web site. Regarding our offered financial accounting, bookkeeping and/or real
property management consulting services, to date no contracts have been entered into, and thus no reportable revenues have resulted
for the fiscal years ended 2017, 2018 and 2019, or for the quarter ended March 31, 2020.
In accordance with FASB ASC Topic 606, Revenue
Recognition, we are of the opinion that none of our hempSMART™ product sales or offered consulting service, as each are discussed
below, have a significant financing component. Our opinion is based upon the transactional basis for our product sales, with revenue
recognized upon customer order, payment and shipment, which occurs concurrently. Our evaluation of the length of time between the
customer order, payment and shipping is not a significant financing component, because shipment occurs the same day as the order
is placed and payment made by the customer. Our evaluation of our consulting services is based upon recognizing revenue as the
services are performed for a determinable price per hour. We only recognize revenues as we incur and charge billable hours. Because
our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual performance,
we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing, that would
materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing component
under FASB ASC Topic 606.
Product Sales
Revenue from product sales, including delivery
fees, is recognized when (1) an order is placed by the customer; (2) the price is fixed and determinable when the order is placed;
(3) the customer is required to and concurrently pays for the product upon order; and, (4) the product is shipped. The evaluation
of our recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes to judgments that affected
our reporting of revenues, since our product sales, both pre and post adoption of FASB ASC 606, were evaluated using the same standards
as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs concurrently when the order is
placed and paid for by the customer, and the product is shipped. Further, given the facts that (1) our customers exercise discretion
in determining the timing of when they place their product order; and, (2) the price negotiated in our product sales is fixed and
determinable at the time the customer places the order, and there is no delay in shipment, we are of the opinion that our product
sales do not indicate or involve any significant customer financing that would materially change the amount of revenue recognized
under the sales transaction, or would otherwise contain a significant financing component for us or the customer under FASB ASC
Topic 606.
Consulting Services
We also offer professional services for financial
accounting, bookkeeping or real property management consulting services based on consulting agreements. As of the date of this
filing, we have not entered into any contracts for any financial accounting, bookkeeping and/or real property management consulting
services that have generated reportable revenues as of the years ended 2017, 2018 and 2019 or the quarter ended March 31, 2020.
We intend and expect these arrangements to be entered into on an hourly fixed fee basis.
For hourly based fixed fee service contracts,
we intend to utilize and rely upon the proportional performance method, which recognizes revenue as services are performed. Under
this method, in order to determine the amount of revenue to be recognized, we will calculate the amount of completed work in comparison
to the total services to be provided under the arrangement or deliverable. We only recognize revenues as we incur and charge billable
hours. Because our hourly fees for services are fixed and determinable and are only earned and recognized as revenue upon actual
performance, we are of the opinion that such arrangements are not an indicator of a vendor or customer based significant financing,
that would materially change the amount of revenue we recognize under the contract or would otherwise contain a significant financing
component under FASB ASC Topic 606.
The Company determined that upon adoption
of ASC 606 there were no adjustments converting from ASC 605 to ASC 606 because product sales revenue is recognized upon customer
order, payment and shipment, which occurs concurrently, and our consulting services offered are fixed and determinable and are
only earned and recognized as revenue upon actual performance.
Use of Estimates
The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
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. Significant estimates include the fair value of the Company’s stock, stock-based compensation,
fair values relating to derivative liabilities, debt discounts and the valuation allowance related to deferred tax assets. Actual
results may differ from these estimates.
Cash
The Company considers cash to consist of cash
on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.
Concentrations of credit risk
The Company’s financial instruments that
are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s cash and cash
equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions is periodically
reviewed by senior management.
Accounts Receivable
Trade receivables are carried at their estimated
collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables do not bear interest. Trade
accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current
financial condition.
Allowance for Doubtful Accounts
Any charges to the allowance for doubtful accounts
on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at
a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based
on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against
the allowance when collectability is determined to be permanently impaired. As of March 31, 2020, and December 31, 2019, allowance
for doubtful accounts was $0 and $0 respectively.
Inventories
Inventories are stated at the lower of cost
or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs.
Cost of sales
Cost of sales is comprised of cost of product
sold, packaging, and shipping costs.
Stock Based Compensation
The Company measures the cost of services received
in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value
of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting
dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over
the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based
compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such
amounts were paid in cash.
Earnings per Share
Basic earnings per share are calculated by
dividing net income (loss) by the weighted average number of shares of the Company’s common stock outstanding during the
period. “Diluted earnings per share” reflects the potential dilution that could occur if our share-based awards and
convertible securities were exercised or converted into common stock. The dilutive effect of our share-based awards is computed
using the treasury stock method, which assumes all share-based awards are exercised and the hypothetical proceeds from exercise
are used to purchase common stock at the average market price during the period. The incremental shares (difference between shares
assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted
EPS calculation. The dilutive effect of our convertible preferred stock and convertible debentures is computed using the if-converted
method, which assumes conversion at the beginning of the year.
Property and Equipment
Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 5 years.
Investments
The Company follows Accounting Standards Codification
subtopic 321-10, Investments-Equity Securities (“ASC 321-10) which requires the accounting for equity security to be measured
at fair value with changes in unrealized gains and losses are included in current period operations. Where an equity security is
without a readily determinable fair value, the Company may elect to estimate its fair value at cost minus impairment plus or minus
changes resulting from observable price changes (See Note 4).
Derivative Financial Instruments
The Company classifies as equity any contracts
that (i) require physical settlement or net-share settlement or (ii) provide the Company with a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share settlement) providing that such contracts are indexed to the Company's
own stock. The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement
to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or (ii) gives the
counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company
assesses classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine
whether a change in classification between equity and liabilities is required.
The Company’s free-standing derivatives
consisted of conversion options embedded within its issued convertible debt and warrants with anti-dilutive (reset) provisions.
The Company evaluated these derivatives to assess their proper classification in the balance sheet using the applicable classification
criteria enumerated under GAAP. The Company determined that certain conversion and exercise options do not contain fixed
settlement provisions. The convertible notes contain a conversion feature and warrants have a reset provision such that the
Company could not ensure it would have adequate authorized shares to meet all possible conversion demands.
As such, the Company was required to
record the conversion feature and the reset provision which does not have fixed settlement provisions as liabilities and mark to
market all such derivatives to fair value at the end of each reporting period.
The Company has adopted a sequencing policy
that reclassifies contracts (from equity to assets or liabilities) with the most recent inception date first. Thus, any available
shares are allocated first to contracts with the most recent inception dates.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management as of March 31, 2020 and December 31, 2019. The
respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments
include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts payables and short
term notes because they are short term in nature.
Advertising
The Company follows the policy of charging
the costs of advertising to expense as incurred. The Company charged to operations $26,277 and $141,339 for the three months ended
March 31, 2020 and 2019, respectively, as advertising costs.
Income Taxes
Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.
The Company recognizes a tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of March 31, 2020, and 2019, the Company has not recorded any unrecognized tax benefits.
Segment Information
Accounting Standards Codification subtopic
Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments
in annual financial statements and requires selected information for those segments to be presented in interim financial reports
issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources
and assess performance. The information disclosed herein
materially represents all of the financial information related to the Company's only material principal operating segment.
Recent Accounting Pronouncements
In February 2016, the FASB issued
ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use
asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued
ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new lease standard. Topic 842 can
be applied using either a modified retrospective approach at the beginning of the earliest period presented, or as permitted by
ASU 2018-11, at the beginning of the period in which it is adopted.
We adopted this standard using a
modified retrospective approach on January 1, 2019. The modified retrospective approach includes a number of optional practical
expedients relating to the identification and classification of leases that commenced before the adoption date; initial direct
costs for leases that commenced before the adoption date; and, the ability to use hindsight in evaluating lessee options to extend
or terminate a lease or to purchase the underlying asset.
The Company elected the package of
practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced before the
adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease; (ii)
the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842.
In considering its qualitative disclosure
obligations under ASC 842-20-50-3, the Company examined its one lease for office space that has a fixed monthly rent with no variable
lease payments and no options to extend. The lease is for an office space with no right of use assets. The lease does not provide
for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants imposed by the lease
for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term lease exception
policy and an accounting policy to not separate non-lease components from lease components for our facility lease, as we determined
our right of use asset to be $18,819.
Consistent with ASC 842-20-50-4,
for the Company's March 31, 2020, quarterly financial statements, the Company calculated its total lease cost based solely on its
monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or
variable lease costs. Our office lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback
transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for
amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash
information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease
term; or the weighted-average discount rate.
The adoption of this guidance resulted
in no significant impact to our results of operations or cash flows.
NOTE 4 – OPERATING LEASE
On July 1, 2019, the Company entered into a
lease extension agreement for its single operating lease, whereby the Company extended its office lease located in Escondido, California, for
one year. The extension period commenced on June 30, 2020 and will expire on June 30, 2021 at a base monthly lease rate of $1,308.88
per month through June 30, 2020, and $1,348.14 to June 30, 2021.
To evaluate the impact
on adoption of ASC842 – Leases, on the accounting treatment for leasing of real office property referred to as the “Premises,”
the Company utilizes the incremental borrowing rate in determining the present value of lease payments, unless the implicit rate
is readily determinable. The Company used an estimated incremental borrowing rate of 10% to estimate the present value of the right
of use liability.
The Company has right-of-use
assets of $18,702 and operating lease liabilities of $18,819 as of March 31, 2020. Operating lease expense for the year ended December
31, 2019 was $30,048.76. The Company had cash used in operating activities related to leases of $29,930.76 during the year ended
December 31, 2019.
The following table
provides the maturities of lease liabilities at March 31, 2020:
Maturity of Lease Liabilities at March 31, 2020
|
|
|
2020
|
|
$
|
12,015
|
|
2021
|
|
|
8,089
|
|
2021 and thereafter
|
|
|
—
|
|
|
|
|
—
|
|
Total future undiscounted lease payments
|
|
|
20,104
|
|
Less: Interest
|
|
|
(1,285
|
)
|
Present value of lease liabilities
|
|
$
|
18,819
|
|
Minimum lease payments
under the Company’s operating lease under ASC 840 as of for 2020 and 2021 are $12,015 and $8,089, respectively.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment as of March 31, 2020 and December 31, 2019
is summarized as follows:
|
|
March 31,
2020
|
|
December 31,
2019
|
Computer equipment
|
|
$
|
17,629
|
|
|
$
|
16,358
|
|
Furniture and fixtures
|
|
|
5,140
|
|
|
|
5,140
|
|
Subtotal
|
|
|
22,769
|
|
|
|
21,498
|
|
Less accumulated depreciation
|
|
|
(15,731
|
)
|
|
|
(13,986
|
)
|
Property and equipment, net
|
|
$
|
7,038
|
|
|
$
|
7,512
|
|
Property and equipment are stated at cost and
depreciated using the straight-line method over their estimated useful lives of 3 years. When retired or otherwise disposed, the
related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount
realized from disposition, is reflected in earnings.
Depreciation expense was $1,746 and $1,696
for the three months ended March 31, 2020 and 2019, respectively.
NOTE 6 – INVESTMENTS
MoneyTrac
We entered into a stock purchase
agreement with MoneyTrac on March 13, 2017 to purchase a 15% equity position in MoneyTrac. On July 27, 2017 we completed tender
of the purchase price of $250,000. On June 12th, 2018 Global Payout, Inc. (“Global”) entered into a Reverse Triangular
Merger (the “Merger”) with MoneyTrac Technology, Inc. (“MoneyTrac”) a California Corporation and MTrac
Tech Corporation (“Merger Sub”) a Nevada corporation and wholly-owned subsidiary of Global Payout, Inc. whereby MoneyTrac
was successfully merged into Merger Sub, the surviving corporation of the merger, and thereafter the separate existence of MoneyTrac
ceased, and all rights, privileges, powers and property, including, without limitation, all rights, privileges, franchise, patents,
trademarks, licenses, registrations, bank accounts, contracts, patents, copyrights, and other assets of every kind and description
of MoneyTrac, were assumed by Merger Sub. Additionally, Merger Sub assumed all of the obligations and liabilities of MoneyTrac,
except minute books and stock records of MoneyTrac insofar as they relate solely to its organization and capitalization, and the
rights of MoneyTrac arising out of the executed Merger. Pursuant to the terms of the Merger, Global issued 1,100,000,000 (one billion,
one hundred million) shares of its common stock to MoneyTrac as consideration for the purchase of MoneyTrac. Pursuant to the terms
of the Merger, a conversion of issued MoneyTrac stock was completed whereby each one (1) share of MoneyTrac stock, issued and outstanding
immediately prior to the effective date of the Merger, was canceled and extinguished and converted automatically into ten (10)
shares of Global common stock. As of the effective date of the Merger, all shares of Global Preferred Stock issued prior to the
effective date of the Merger were canceled and extinguished without any conversion thereof. We acquired 150,000,000 Global common
shares for our original $250,000 representing approximately 15% ownership. Global’s name changed in April, 2020 to Global
Trac Solutions, Inc. Global’s common stock is traded on the OTC Markets under the symbol “PYSC.” We realized
$51,748.17 from the sales of all of our Global securities, and as of March 31, 2020, has no remaining shares.
Benihemp
Conveniant Hemp Mart, LLC (“Benihemp”);
On July 19, 2017, we agreed to lend fifty thousand dollars ($50,000) to Benihemp based on a promissory note. The note provided
that in lieu of receiving repayment, we could elect to exercise a right to convert the loaned amount into a payment towards the
purchase of a 25% interest in Benihemp, subject to our payment of an additional fifty thousand dollars [$50,000] equaling a total
purchase price of $100,000. The Company exercised this option on November 20, 2017 and made payment to Benihemp on November 21,
2017. On May 1, 2019, the Company and Benihemp agreed to cancel the Company’s 25% interest in Benihemp. Benihemp issued to
the Company a credit memo equal to the Company’s $100,000 investment. The Company determined that as of December 31, 2019,
approximately $41,000 of this credit was impaired and not usable.
Global Hemp Group, Inc. New Brunswick Joint
Venture
On September 5, 2017, we announced our agreement
to participate in a joint venture with Global Hemp Group Inc., a Canadian corporation, in a multi-phase industrial hemp project
on the Acadian peninsula of New Brunswick, Canada. Our participation included providing one-half, or $10,775 of the funding for
the phase one work. On January 10, 2018, phase-one was completed by successfully cultivating industrial hemp during the 2017 growing
season for research purposes. The Company’s costs incurred by the Company’s interest was $0 and $10,775 for the years
ended December 31, 2019 and 2018 and was recorded as other income/expense in the Company’s Statement of Operations in the
appropriate periods. As of December 31, 2019, and March 31, 2020, the balance of the New Brunswick JV investment reported on the
balance sheet for the year ended December 31, 2019 was $0 as a result of the investment being deemed fully impaired and the Company
withdrawing from the joint venture as of September 30, 2019.
Global Hemp Group Joint Venture/Scio Oregon Hemp Project
On May 8, 2018, the Company, Global Hemp Group,
Inc., a Canadian corporation, and TTO Enterprises, Ltd., an Oregon corporation entered into a Joint Venture Agreement. The purpose
of the joint venture is to develop a project to commercialize the cultivation of industrial hemp on a 109 acre parcel of real property
owned by the Company and Global Hemp Group in Scio, Oregon, and operating under the Oregon corporation Covered Bridges, Ltd. On
May 30, 2018, the joint venture purchased TTO’s 15% interest in the joint venture for $30,000. The Company and Global Hemp
Group, Inc. now have an equal 50-50 interest in the joint venture. The joint venture agreement commits the Company to a cash contribution
of $600,000 payable on the following funding schedule: $200,000 upon execution of the joint venture agreement; $238,780 by July
31, 2018; $126,445 by October 31, 2018; and, $34,775 by January 31, 2019. The Company complied with its payments. The 2018 crop
of hemp grown on the joint venture’s real property consisted of 33 acres of high yielding CBD hemp grown in an orchard style
cultivation on the property. The 2018 harvest consisted of approximately 37,000 high yielding CBD hemp plants producing 24 tons
of biomass that produced 48,000 pounds of dried biomass. The joint venture partners prepared processing samples ranging in size
from 100 to 2,000 lbs. for sample offers to extraction companies. The biomass is being processed into CBD crude oil with the option
to refine it further into isolate, or full spectrum oil, in order to increase its value on the market.
As of December 31, 2019, the combined balance
of the Covered Bridge (SCIO) investment and related 41389 Farm investment was $0 as the investment was written off as a loss for
the period ended December 31, 2019. The debt obligation related to this JV of $262,414 was also written off to $0 as of the year
ended December 31, 2019. The debt obligation related to the joint venture for the three months ended March 31, 2020 $394,848.
Bougainville Ventures, Inc. Joint
Venture
On March 16, 2017, we entered into a joint
venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture was for the Company
and Bougainville to (i) jointly engage in the development and promotion of products in the legalized cannabis industry in Washington
State; (ii) utilize Bougainville's high quality cannabis grow operations in the State of Washington, where it claimed to have an
ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s agreement
with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services and resources including,
but not limited to: sales and marketing, agricultural procedures, operations, security and monitoring, processing and delivery,
branding, capital resources and financial management; and, (iv) optimize collaborative business opportunities. The Company and
Bougainville agreed to operate through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized
in the State of Washington on May 16, 2017.
As our contribution to the joint venture, the
Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding schedule. The Company
also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised
of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.
The Company and Bougainville's agreement provided
that funding provided by the Company would contribute towards the joint venture’s ultimate purchase of the land consisting
of a one-acre parcel located in Okanogan County, Washington, for joint venture operations
As disclosed on Form 8-K on December 11, 2017,
the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville amended
the joint venture agreement to reduce the amount of the Company's commitment from $1,000,000 to $800,000, and also required the
Company to issue Bougainville 15 million shares of the Company's restricted common stock. The Company completed its payments pursuant
to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted common
stock. The amended agreement provided that Bougainville would deed the real property to the joint venture within thirty days of
its receipt of payment.
Thereafter, the Company determined that Bougainville
had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for real property
that was in breach of contract for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502 license holder
to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville and an unrelated
third party, Green Ventures Capital Corp., purchased the land, but did not deed the real property to the joint venture. Bougainville
failed to pay delinquent property taxes to Okanogan County and to date, the property has not been deeded to the joint venture.
To clarify the respective contributions and
roles of the parties, the Company offered to enter into good faith negotiations to revise and restate the joint venture agreement
with Bougainville. The Company diligently attempted to communicate with Bougainville to accomplish a revised and restated joint
venture agreement, and efforts towards satisfying the conditions to complete the subdivision of the land by the Okanogan County
Assessor. However, Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent
taxes on the real property that would allow for sub-division and the deeding of the real property to the joint venture.
On August 10, 2018, the Company advised its
independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information
concerning the audit of Bougainville’s receipt and expenditures of $800,000 contributed by the Company in the joint venture
agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of
the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally,
the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but
not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that was to be deeded
to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on the real property;
and, (iii) that clear title to the real property associated with the Tier 3 # I502 license would be deeded to the joint venture
thirty days after the Company made its final funding contribution. As a result, on September 20, 2018, the Company filed suit against
Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior
Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable relief for breach of contract, fraud,
breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting, quiet title to real property in
the name of the Company, for the appointment of a receiver, the return to treasury of 15 million shares issued to Bougainville,
and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant has filed a lis pendens on
the real property. The case is currently in litigation.
In connection with the agreement, the
Company recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was comprised of 49.5% ownership of BV-MCOA
Management LLC, and was accounted for using the equity method of accounting. The Company recorded an annual impairment in 2017
of $792,500, reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company
recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded an annual impairment
of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment to be fully impaired due
to Bougainville’s breach of contract and resulting litigation, as discussed above.
GateC Joint Venture
On March 17, 2017, the Company and GateC Research,
Inc. (“GateC”) entered into a Joint Venture Agreement (“Agreement”) whereby the Company committed to raise
up to one and one-half million dollars ($1,500,000) over a six-month period, with a minimum commitment of five hundred thousand
dollars ($500,000) within a three (3) month period; and, information establishing brands and systems for the representation of
cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies, including but
not limited to its affiliate marketing program, directly tailored to the cannabis industry.
GateC agreed to contribute its management and
control services and systems related to cannabis grow operations in Adelanto County, California, and its permit to grow marijuana
in an approved zone in Adelanto, California. GateC did not own a physical site for its operation in Adelanto County, California,
and GateC’s permit to grow cannabis did not contain a conditional use permit.
On or about November 28, 2017, GateC and the
Company orally agreed to suspend the Company’s funding commitment, pending the finalization of California State regulations
governing the growth, cultivation and distribution of cannabis, which were expected to be completed in 2018.
On March 19, 2018, the Company and GateC rescinded
the Agreement and concurrently released each other from any all any and all losses, claims, debts, liabilities, demands, obligations,
promises, acts, omissions, agreements, costs and expenses, damages, injuries, suits, actions and causes of action, of whatever
kind or nature, whether known or unknown, suspected or unsuspected, contingent or fixed, that they may have against each other
and their Affiliates, arising out of the Agreement.
We incurred no termination penalties as the
result of its entry into the Recession and Mutual Release Agreement.
In 2017, the Company recorded a debt obligation
of $1,500,000 to the Joint Venture and a corresponding impairment charge of $1,500,000 during for year ended December 31, 2017.
Upon termination of the material definitive agreement on March 19, 2018, the Company realized a gain on settlement of debt obligation
of $1,500,000 for the year ended December 31, 2018.
Natural Plant Extract
On April 15, 2019, we entered into a joint
venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a licensed psychoactive cannabis distribution
service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018. On
February 3, 2020, we terminated the joint venture and entered into a settlement and release of all claims agreement. In exchange
for a complete release of all claims, the Company and NPE (1) agreed to reduce our interest in NPE from 20% to 5%; (2) we agreed
to pay NPE a total of $85,000 as follows: $35,000 concurrent with the execution of the Settlement and Release of All Claims Agreement,
and $25,000 no later than the 5th calendar day for each of the two months following execution of Settlement and Release of All
Claims Agreement; and, (3) to retire the balance of our original valuation obligation from the material definitive agreement, representing
a shortfall of $56,085.15, in a convertible promissory note, with terms allowing NPE to convert the note into common stock of MCOA
at a 50% discount to the closing price of MCOA’s common stock as of the maturity date.
Of the total amount due and payable by us as
of the date of this filing, we owe $75,000, and we are in breach of the settlement agreement. On February 3, 2020, we executed
a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of our settlement agreement with NPE,
we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the City of Lynwood and the State of California
to transfer the cannabis licenses back to NPE. To date, we have not paid this amount and it is due and owing.
MARIJUANA COMPANY OF AMERICA, INC.
|
|
|
|
|
|
|
INVESTMENT ROLL-FORWARD
AS OF MARCH 31, 2020
|
|
|
|
|
|
|
|
|
|
INVESTMENTS
|
|
|
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
|
TOTAL
|
|
|
|
Hemp
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville
|
|
|
|
Gate C
|
|
|
|
Plant
|
|
|
|
|
|
|
|
Short-Term
|
|
|
|
|
|
|
|
|
INVESTMENTS
|
|
|
|
Group
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Ventues, Inc.
|
|
|
|
Research Inc.
|
|
|
|
Extract
|
|
|
|
Vivabuds
|
|
|
|
Investments
|
|
|
|
MoneyTrac
|
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Investments made during 2017
|
|
|
3,049,275
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
1,188,500
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 equity method Loss
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 equity method accounting
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investment in 2017
|
|
|
(2,292,500
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
(792,500
|
)
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
Balances as of 12/31/17
|
|
|
695,477
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
334,702
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during 2018
|
|
|
986,654
|
|
|
|
986,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 equity method Loss
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 equity method Loss
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 equity method Loss
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 equity method Loss
|
|
|
(31,721
|
)
|
|
|
(31,721
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moneytrac investment reclassified to Short-Term investments
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - 2018
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560,000
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2018
|
|
|
(933,195
|
)
|
|
|
(557,631
|
)
|
|
|
(89,578
|
)
|
|
|
|
|
|
|
(285,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
Balance @12-31-18
|
|
$
|
408,077
|
|
|
$
|
408,077
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
$
|
810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 03-31-19
|
|
|
129,040
|
|
|
|
129,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 equity method Loss
|
|
|
(59,541
|
)
|
|
|
(59,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,000
|
)
|
|
($
|
135,000
|
)
|
Balance @03-31-19
|
|
$
|
477,576
|
|
|
$
|
477,576
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
$
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 06-30-19
|
|
$
|
3,157,234
|
|
|
$
|
83,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,000,000
|
|
|
$
|
73,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-19 equity method Income (Loss)
|
|
$
|
(171,284
|
)
|
|
($
|
141,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,291
|
)
|
|
$
|
(23,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 06-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
$
|
(150,000
|
)
|
Balance @06-30-19
|
|
$
|
3,463,526
|
|
|
$
|
419,352
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 09-30-19
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 equity method Income (Loss)
|
|
$
|
122,863
|
|
|
$
|
262,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(94,987
|
)
|
|
$
|
(44,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 09-30-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(41,667
|
)
|
|
$
|
(41,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 09-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,625
|
)
|
|
$
|
(362,625
|
)
|
Balance @09-30-19
|
|
$
|
3,772,652
|
|
|
$
|
682,141
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
120,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 12-31-19
|
|
$
|
392,226
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 equity method Income (Loss)
|
|
$
|
(178,164
|
)
|
|
$
|
(75,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(23,865
|
)
|
|
$
|
(79,079
|
)
|
|
|
|
|
|
|
|
|
Reversal of Equity method Loss for 2019
|
|
$
|
272,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,143
|
|
|
$
|
147,142
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
$
|
(3,175,420
|
)
|
|
$
|
(869,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,306,085
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Loss on disposition of investment
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,545
|
)
|
|
$
|
(75,545
|
)
|
Balance @12-31-19
|
|
$
|
693,915
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
$
|
27,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 03-31-20
|
|
|
126,845
|
|
|
|
126,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
|
394,848
|
|
|
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 03-31-20
|
|
|
(521,692
|
)
|
|
|
(521,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,945
|
)
|
|
$
|
(13,945
|
)
|
Balance @03-31-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
13,458
|
|
|
$
|
13,458
|
|
MARIJUANA COMPANY OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
MARCH 31, 2020
(unaudited)
Loan Payable
|
|
|
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
|
TOTAL
|
|
|
|
Hemp
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville
|
|
|
|
Gate C
|
|
|
|
Plant
|
|
|
|
RobertL
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
JV Debt
|
|
|
|
Group
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Ventures, Inc.
|
|
|
|
Research Inc.
|
|
|
|
Extract
|
|
|
|
Hymers III
|
|
|
|
Vivabuds
|
|
|
|
Expense
|
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 loan borrowings
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 loan activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 loan borrowings
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 loan repayments
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General operational expense
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,856
|
|
Balances as of 12/31/17 (a)
|
|
|
2,067,411
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 loan borrowings (payments)
|
|
|
376,472
|
|
|
|
447,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 cancellation of JV debt obligation
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 loan repayments
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 loan activity
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 loan borrowings
|
|
|
580,425
|
|
|
|
580,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-18 (b)
|
|
|
1,422,410
|
|
|
|
1,027,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
649,575
|
|
|
|
649,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(407,192
|
)
|
|
|
(407,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-19 ©
|
|
|
1,664,793
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
3,836,220
|
|
|
$
|
161,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,000
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
1,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(1,572,971
|
)
|
|
$
|
(161,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(349,650
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(1,062,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-19 (d)
|
|
|
3,928,042
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 loan borrowings
|
|
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 debt conversion to equity
|
|
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-19 (e)
|
|
|
4,322,427
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,007,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 loan borrowings
|
|
|
2,989,378
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
596,784
|
|
|
$
|
4,221
|
|
|
|
|
|
|
$
|
2,125,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
|
(4,083,349
|
)
|
|
$
|
(1,532,652
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(394,555
|
)
|
|
|
|
|
|
$
|
(2,156,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt in 2019
|
|
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to reclassify amount to accrued liabilities
|
|
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-19 (f)
|
|
$
|
3,193,548
|
|
|
$
|
0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
4,221
|
|
|
$
|
0
|
|
|
$
|
3,133,243
|
|
Quarter 03-31-20 loan borrowings
|
|
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 debt conversion to equity
|
|
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
|
394,848
|
|
|
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 Debt Discount adjustments
|
|
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-20 (g)
|
|
|
3,435,172
|
|
|
|
394,848
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
56,085
|
|
|
|
28,359
|
|
|
|
0
|
|
|
|
2,955,881
|
|
|
|
03-31-20
|
|
12-31-19
|
|
09-30-19
|
|
06-30-19
|
|
03-31-19
|
|
12-31-18
|
|
12-31-17
|
This includes balances for:
|
|
Note (g)
|
|
Note (f)
|
|
Note (e)
|
|
Note (d)
|
|
Note (c)
|
|
Note (b)
|
|
Note (a)
|
- Debt obligation of JV
|
|
|
394,848
|
|
|
|
0
|
|
|
|
1,633,872
|
|
|
|
1,778,872
|
|
|
|
128,522
|
|
|
|
289,742
|
|
|
|
1,500,000
|
|
- Convertible NP, net of discount
|
|
|
3,040,324
|
|
|
|
3,193,548
|
|
|
|
2,688,555
|
|
|
|
2,149,170
|
|
|
|
1,536,271
|
|
|
|
1,132,668
|
|
|
|
394,555
|
|
- Long-term debt
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
Total Debt balance
|
|
|
3,435,172
|
|
|
|
3,193,548
|
|
|
|
4,322,427
|
|
|
|
3,928,042
|
|
|
|
1,664,793
|
|
|
|
1,422,410
|
|
|
|
2,067,411
|
|
NOTE 7 – NOTES PAYABLE, RELATED
PARTY
As of March 31, 2020, and December 31, 2019,
the Company’s officers and directors have provided advances and incurred expenses on behalf of the Company. The issued notes
are unsecured, due on demand and bear 5% interest. The balance due to Notes Payable Related Party as of March 31, 2020 and December
31, 2019 was $40,000 and $40,000 respectively. These notes are payable to the estate of Charles Larsen. Mr. Larsen who passed away
on May 15, 2020.
NOTE 8 – CONVERTIBLE NOTES PAYABLE
During the quarter ended March 31, 2020, the Company issued an aggregate
of 32,805,286 shares of its common stock in settlement of the issued convertible notes payable and accrued interest.
For the quarter ended March 31, 2020 and the year ended December
31, 2019, the Company recorded amortization of debt discounts of $436,593 and $495,438, respectively, as a charge to interest expense.
Convertible notes payable are comprised of
the following:
|
|
March 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Lender
|
|
(Unaudited)
|
|
(Audited)
|
Convertible note payable - Power Up Lending Group
|
|
$
|
209,000
|
|
|
$
|
294,000
|
|
Convertible note payable - Crown Bridge Partners
|
|
$
|
135,000
|
|
|
$
|
110,000
|
|
Convertible note payable - Odyssey Funding LLC
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
Convertible note payable - Paladin Advisors LLC
|
|
$
|
75,000
|
|
|
$
|
75,000
|
|
Convertible note payable – Nellcote Capital, LLC
|
|
|
25,000
|
|
|
|
25,000
|
|
Convertible note payable - GS Capital Partners LLC
|
|
$
|
173,000
|
|
|
$
|
173,000
|
|
Convertible note payable - Natural Plant Extract
|
|
$
|
56,085
|
|
|
$
|
56,085
|
|
Convertible note payable - Robert Hymers III
|
|
$
|
96,553
|
|
|
$
|
96,553
|
|
Convertible note payable - LG Capital
|
|
$
|
50,000
|
|
|
$
|
—
|
|
Convertible note payable - BHP Capital
|
|
$
|
37,625
|
|
|
$
|
—
|
|
Convertible note payable - Jefferson Capital
|
|
$
|
37,625
|
|
|
$
|
—
|
|
Convertible note payable - GW Holdings
|
|
$
|
57,750
|
|
|
$
|
—
|
|
Convertible note payable - St. George
|
|
$
|
2,622,890
|
|
|
$
|
2,947,890
|
|
Total
|
|
$
|
3,825,528
|
|
|
$
|
4,002,528
|
|
Less debt discounts
|
|
$
|
(785,204
|
)
|
|
$
|
(808,980
|
)
|
Net
|
|
$
|
3,040,324
|
|
|
$
|
3,193,548
|
|
Less current portion
|
|
$
|
(3,040,324
|
)
|
|
$
|
(3,193,548
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
Convertible notes payable-Power Up Lending
From July 1 through September 12, 2019, the
Company issued four convertible promissory notes in the aggregate principal amount of $294,000 to Power Up Lending (“Power
Up”). The promissory notes bear interest at 10% per annum, are due one year from the respective issuance date and include
an original issuance discount (“OID”) in aggregate of $12,000. Interest shall accrue from the issuance date, but interest
shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 61%
of the Market Price (defined as the lowest trading price during the 15-trading-day period prior to the conversion date). Upon the
issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded
in the debentures, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient
number of shares would be available to settle all potential future conversion transactions. As of the funding date of each note,
the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value
of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with
any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $169,202 is being amortized
to interest expense over the respective terms of the notes.
The Company shall have the right to prepay
the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal and accrued interest) depending
on the Prepayment Period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion
of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially
own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to
the issuance of shares of common stock upon conversion of the note.
As of March 31, 2020, and December 31, 2019,
the Company owed an aggregate of $209,000 and, $294,000 of principal, respectively on these convertible promissory notes. As of
March 31, 2020, the Company owed $2,704 of accrued interest.
Convertible notes payable-Crown Bridge Partners
From October 1 through December 31, 2019, the
Company issued convertible promissory notes in the aggregate principal amount of $225,000 to Crown Bridge Partners LLC (“Crown
Bridge”). The promissory notes bear interest at 10% per annum, are due one year from the respective issuance date and include
an original issuance discount (“OID”) in aggregate of $22,500. Interest shall accrue from the issuance date, but interest
shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 60%
of the Market Price (defined as the lowest trading price during the 15-trading-day period prior to the conversion date). Upon the
issuance of these convertible notes, the Company determined that the features associated with the embedded conversion option embedded
in the debentures, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient
number of shares would be available to settle all potential future conversion transactions. As of the funding date of each note,
the Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value
of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with
any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $88,674 is being amortized
to interest expense over the respective terms of the notes.
The Company shall have the right to prepay
the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal and accrued interest) depending
on the Prepayment Period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion
of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially
own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to
the issuance of shares of common stock upon conversion of the note.
As of March 31, 2020, and December 31, 2019, the Company owed an
aggregate of $135,000, and $110,000 of principal respectively. As of March 31, 2020, the Company owed of accrued interest of $5,513,
on these convertible promissory notes.
Convertible notes payable-Odyssey Funding LLC
On October 30, 2019, the Company issued convertible
promissory notes in the aggregate principal amount of $250,000 to Odyssey Funding LLC (“Odyssey”). The promissory notes
bear interest at 12% per annum, are due one year from the respective issuance date and include an original issuance discount (“OID”)
in aggregate of $12,500. Interest shall accrue from the issuance date, but interest shall not become payable until the notes becomes
payable. The notes are convertible at any time at a conversion rate equal to 55% the average of the two lowest trading prices of
the Common Stock as reported on the National Quotations Bureau OTC market exchange which the Company's shares are traded or any
exchange upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including
the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion
is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but
unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest whole share. The Company agrees to honor all conversions
submitted pending this increase. In the event the Company experiences a DTC "Chill" on its shares, the conversion price
shall be decreased to 45% instead of 55% while that "Chill" is in effect. In no event shall the Holder be allowed to
effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and
its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased up to 9.9%
upon 60 days' prior written notice by the Investor)
As of the funding date of each note, the Company
determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of
the derivative liability recognized as interest expense. The aggregate debt discount of $207,650 is being amortized to interest
expense over the respective terms of the notes. As of March 31, 2020, and December 31, 2019, the Company owed principal of $250,000
and $250,000. As of March 31, 2020, the Company owed $12,596 in accrued interest.
Convertible notes payable-Paladin Advisors LLC
On October 23, 2019, the Company issued convertible
promissory notes in the aggregate principal amount of $100,000 to Paladin Advisors, LLC (“Paladin”). The promissory
notes bear interest at 8% per anum, and is due six months from the respective issuance date of the note along with accrued and
unpaid interest. Principal and interest to be payable as provided below on that date which is six months from the date of issuance
(the “Maturity Date”). All payments due hereunder (to the extent not converted into common stock, $0.001 par value
per share (the “Common Stock”) in accordance with the terms of this agreement and shall be made in lawful money of
the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Company. Paladin
subsequently sold in a private transaction rights to $25,000 of the convertible promissory note to Nellcote Capital, LLC.
notice made in accordance with the provisions
of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day,
the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date
which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account
for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day”
shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized
or required by law or executive order to remain closed.
For so long as there remains any amount due
hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued
interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common
stock. The conversion price (the “Conversion Price”) shall be equal to a forty-five percent (45%) discount to the lowest
closing bid of the previous ten (10) day trading period, ending on the business day before a Notice of Conversion is delivered
to the Company. The number of shares of Common Stock into which the Converted Amount shall be convertible (the “Conversion
Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the Conversion Price. For the purposes of this
Section 4(a), a conversion shall be deemed to occur on the date that the Company receives an executed copy of the Conversion Notice.
The aggregate debt discount of $46,721
is being amortized to interest expense over the respective terms of the notes. As of March 31, 2020, and December 31, 2019, the
Company owed an aggregate of $100,000 comprised of $25,000 and $75,000 of principal. As of March 31, 2020, the Company owed $500
in accrued interest.
Convertible notes payable-GS Capital Partners LLC
On December 19, 2019, the Company issued convertible
promissory notes in the aggregate principal amount of $173,000 to GS Capital Partners LLC (“GS Capital”). The promissory
notes bear interest at 10% per annum and is due one year from the respective issuance date and include an original issuance discount
(“OID”) in aggregate of $15,000.
The interest will be paid to the Holder in
whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal
of, and interest on, this Note are payable at 30 Broad Street, Suite 1201, New York, NY 10004, initially, and if changed, last
appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each
interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by
law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address
appearing on the records of the Company. The forwarding of such check
or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for
principal on this Note to the extent of the sum represented by such check or wire transfer.
The Holder of this Note is entitled, at its
option, at any time after cash payment, to convert all or any amount of the principal face amount of this Note then outstanding
into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share
of Common Stock equal to 62% of the lowest trading price of the Common Stock as reported on the National Quotations Bureau OTC
Marketplace exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the
future ("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received
by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication
to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the
same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded.
Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days
of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional
shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded
to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per
share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest
value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company
experiences a DTC “Chill” on its shares, the Conversion Price shall be decreased to 52% instead of 62% while that “Chill”
is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of
Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common
Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).
As of the funding date of each note, the Company
determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of
the derivative liability recognized as interest expense. The aggregate debt discount of $166,193 is being amortized to interest
expense over the respective terms of the notes. As of March 31, 2020, and December 31, 2019, the Company owed principal of $173,000
and $173,000 respectively. As of March 31, 2020, the Company owed $4,894 in accrued interest.
Convertible notes payable-St George Investments
Effective November 1, 2017, the Company issued
a secured convertible promissory note in aggregate of $601,420 to St George Investments LLC (“St George”). The promissory
note bears interest at 10% compounded daily, was due upon maturity on September 10, 2018 and includes an original issue discount
(“OID”) of $59,220. The promissory note was funded on November 11, 2017 for $542,200, net of OID and transaction costs.
As of September 30, 2019, the Company owed $417,890 of principal and $38,378 of accrued interest on this convertible promissory
note. As of September 30, 2019, this note was in default, but the lender has not enforced the default interest rate. Effective
December 20, 2017, the Company issued a secured convertible promissory note in aggregate of $1,655,000 to St George Investments
LLC (“St George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on October 27,
2018 and includes an original issue discount (“OID”) of $155,000. In addition, the Company agreed to pay $5,000 for
legal, accounting and other transaction costs of the lender. The promissory note was funded in nine tranches of $300,000; $200,000;
$200,000; $400,000; $75,000; $150,000; $85,000; $120,000 and $70,000, resulting in aggregate net proceeds of $1,500,000. The Company
received aggregate net proceeds of $1,200,000 and $300,000 during the years ended December 31, 2018 and 2017, respectively. As
an investment incentive, the Company issued 1,100,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions.
The promissory notes are convertible, at any
time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as defined)
falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 20% prepayment premium and is secured by a trust deed of
certain assets of the Company.
On November 5, 2018, $250,000 of principal
and accrued interest was assigned to John Fife as an individual with all the terms and conditions of the original note issued to
St George. On March 21, 2019, $150,959 of principal and $4,963 of accrued interest along with $160,454 of derivative liabilities
valued as of the respective conversion date were converted into 394,460 shares of common stock.
During the nine months ended September 30,
2019, $550,000 of principal, $122,694 of accrued interest and $441,394 of derivative liabilities valued as of the respective conversion
dates were converted into 1,710,897 shares of common stock, resulting in a gain on debt settlement of $21,586. As of September
30, 2019, the Company owed $0 of principal and $0 of accrued interest on this convertible promissory note. Although this note was
in default until it was repaid, the lender did not enforce the default interest rate.
Effective August 28, 2018, the Company issued
a secured convertible promissory note in aggregate of $1,128,518 (includes overfunding of $23,518) to St George Investments LLC
(“St George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on June 30, 2019 and
includes an original issue discount (“OID”) of $100,000. In addition, the Company agreed to pay $5,000 for legal, accounting
and other transaction costs of the lender. During the year ended December 31, 2018, the Company received aggregate net proceeds
of $825,000. During the nine months ended September 30, 2019, an additional $218,518 was funded under this note resulting in net
proceeds of $198,518.
As an investment incentive, the Company issued
750,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions. The aggregate fair value of the issued
warrants was $1,588,493. The face value of the debt was then allocated, on a relative fair value basis, between the debt and the
warrants. The portion allocated to warrants has been added to the debt discount with a resulting increase in additional paid-in
capital. As of the funding date of each tranche of this note, the Company determined the fair value of the embedded derivative
associated with the convertibility of this note. The fair value of the embedded derivative has been added to the debt discount
(total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest
expense. As of the aggregate debt discount of $1,114,698 is being amortized to interest expense over the respective term of each
tranche.
The promissory notes are convertible,
at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as
defined) falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately
preceding date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain
anti-dilution provisions should the Company subsequently issue any common stock or equivalents at an effective price less than
the lender conversion price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured
by a trust deed of certain assets of the Company.
During the nine months ended September 30,
2019, $1,000,859 of principal and $840,299 of derivative liabilities valued as of the respective conversion dates were converted
into 4,475,543 shares of common stock, resulting in a loss on debt settlement of $612,034. As of September 30, 2019, the Company
owed $828,518 of principal and $28,138 of accrued interest on this convertible promissory note. As of September 30, 2019, this
note was in default, but the lender has not enforced the default interest rate.
Effective January 29, 2019, the Company issued
a secured convertible promissory note in aggregate of $2,205,000 to St George Investments LLC (“St George”). The promissory
note bears interest at 10% compounded daily, is due upon maturity on December 5, 2019 and includes an original issue discount (“OID”)
of $200,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During
the nine months ended September 30, 2019, the promissory note was funded in eight tranches totaling $1,406,482 resulting in aggregate
net proceeds of $1,276,482 under this note. As an investment incentive, the Company issued 1,500,000 5-year warrants, exercisable
at $2.40 per share, with certain reset provisions. The aggregate fair value of the issued warrants was $999,838. The face value
of the debt was then allocated, on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants
has been added to the debt discount with a resulting increase in additional paid-in capital. As of the funding date of each tranche
of this note, the Company determined the fair value of the embedded derivative associated with the convertibility of this note.
The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value
of the debt) with any excess of the derivative liability recognized as interest expense.
The promissory notes are convertible, at any
time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as defined)
falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured by a trust deed of
certain assets of the Company.
Effective March 25, 2019, the Company issued
a secured convertible promissory note in the amount of $580,000 to St George Investments LLC (“St George”). The promissory
note bears interest at 10% compounded daily, is due upon maturity on January 24, 2020 and includes an original issue discount (“OID”)
of $75,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During
the nine months ended September 30, 2019, the promissory note was funded in the amount of $580,000 resulting in net proceeds of
$500,000 under this note. As an investment incentive, the Company issued 375,000 five-year warrants, exercisable at $2.40 per share,
with certain reset provisions. The aggregate fair value of the issued warrants was $258,701. The face value of the debt was then
allocated, on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants has been added
to the debt discount with a resulting increase in additional paid-in capital. As of the funding date of this note, the Company
determined the fair value of the embedded derivative associated with the convertibility of this note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of
the derivative liability recognized as interest expense. The aggregate debt discount of $483,966 is being amortized to interest
expense over the term of the note.
The promissory notes are convertible, at any
time at the lender’s option, at $2.40 per share. However, in the event the Company’s market capitalization (as defined)
falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due the 20 trading days immediately preceding
date of conversion, subject to additional adjustments, as defined. In addition, the promissory note includes certain anti-dilution
provisions should the Company subsequently issue any common stock or equivalents at an effective price less than the lender conversion
price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium and is secured by a trust deed of
certain assets of the Company. As of March 31, 2020, and December 31, 2019, the Company owed principal of $2,622,890 and $2,947,890
of principal. As of March 31, 2020, the Company owed $380,117 of accrued interest.
Convertible notes payable - Robert L. Hymers III
On December 23, 2019, the Company issued convertible
promissory notes in the aggregate principal amount of $96,552.70 to Robert L. Hymers III (“Hymers”) in satisfaction
of funds owed to Mr. Hymers from his consulting contract with the Company for past services rendered and completed. The promissory
notes bear interest at 10% per anum, and is due six months from the respective issuance date of the note along with accrued and
unpaid interest. Principal and interest to be payable as provided below on that date which is six months from the date of issuance
(the “Maturity Date”). All payments due hereunder (to the extent not converted into common stock, $0.001 par value
per share (the “Common Stock”) in accordance with the terms
of this agreement and shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Company by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed.
For so long as there remains any amount due
hereunder, the Holder shall have the option to convert all or any portion of the unpaid principal amount of this Note, plus accrued
interest (together with the unpaid principal amount, the “Converted Amount”), into shares of the Company’s common
stock. The conversion price (the “Conversion Price”) shall be equal to a fifty percent (50%) discount to the lowest
closing bid of the previous fifteen (15) day trading period, ending on the business day before a Notice of Conversion is delivered
to the Company. The number of shares of Common Stock into which the Converted Amount shall be convertible (the “Conversion
Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the Conversion Price. A conversion shall be deemed
to occur on the date that the Company receives an executed copy of the Conversion Notice.
The aggregate debt discount of $92,332 is being
amortized to interest expense over the respective terms of the notes. As of March 31, 2020, and December 31, 2019, the Company
owed an aggregate of $96,553 and $96,553 of principal respectively. As of March 31, 2020, the Company owed $2,626 in accrued interest.
Convertible notes payable – Natural Plant Extract
On April 15, 2019, we entered into a joint
venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a licensed psychoactive cannabis distribution
service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018. On
February 3, 2020, we terminated the joint venture.
The Original Material Definitive Agreement
Pursuant to the original material definitive
agreement, we agreed to acquire twenty percent (equal to 200,000) of NPE’s authorized shares in exchange for our payment
of $2,000,000 and $1,000,000 worth of our restricted common stock. We agreed to form a joint venture with NPE incorporated in California
under the name “Viva Buds, Inc.” (“Viva Buds”) for the purpose of operating a California licensed cannabis
distribution business pursuant to California law legalizing THC psychoactive cannabis for recreational and medicinal use.
Our payment obligations were governed
by a stock purchase agreement which required us to make the following payments:
a. Deposit of $350,000 within 5 days of the
execution of the material definitive agreement;
b. Deposit of $250,000 payable within 30 days;
c. Deposit of $400,000 within 60 days;
d. Deposit of $500,000 within 75 days;
e. Deposit of $500,000 within 90 days
We made our initial payment pursuant to this
schedule, but otherwise failed to comply with the payment schedule and we were in breach of contract.
Settlement and Release of All Claims Agreement
On February 3, 2020, the Company and NPE entered
into a settlement and release of all claims agreement. In exchange for a complete release of all claims, the Company and NPE (1)
agreed to reduce our interest in NPE from 20% to 5%; (2) we agreed to pay NPE a total of $85,000 as follows: $35,000 concurrent
with the execution of the Settlement and Release of All Claims Agreement, and $25,000 no later than the 5th calendar day for each
of the two months following execution of Settlement and Release of All Claims Agreement; and, (3) to retire the balance of our
original valuation obligation from the material definitive agreement, representing a shortfall of $56,085.15, in a convertible
promissory note, with terms allowing NPE to convert the note into common stock of MCOA at a 50% discount to the closing price of
MCOA’s common stock as of the maturity date.
Of the total amount due and payable by us as
of the date of this filing, we owe $75,000, and we are in breach of the settlement agreement. On February 3, 2020, we executed
a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of our settlement agreement with NPE,
we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the City of Lynwood and the State of California
to transfer the cannabis licenses back to NPE. To date, we have not paid this amount and it is due and owing.
Convertible Note payable – GW Holding
Group
On January 6, 2020, the Company entered into
a convertible promissory note in the amount of $57,750.00 with GW Holdings Group, LLC, a New York limited liability company. GW
has the option, beginning on the six (6) month anniversary of the date of execution, to convert all or any amount of the principal
face amount of the note then outstanding into shares of the Company's common stock equal to 40% discount of the lowest trading
price for fifteen prior trading days. The note bears interest at a rate of 10% per annum and include a $5,250.00 OID such that
the price of the note shall be $57,750.00 As of March 31, 2020, and December 31, 2019, the Company owed principal of $57,750 and
$0 respectively. As of March 31, 2020, the Company owed $1,444 in accrued interest.
Convertible Note payable – Jefferson
Capital
On January 20, 2020, the Company entered into
a convertible promissory note with Jefferson Capital, LLC, a New Jersey limited liability company. The maturity date is January
20, 2021. Jefferson has the right to convert any or all of the debt into common stock of the Company, calculated on 60% multiplied
by the lowest Trading Price of the Common Stock during the twenty (20) Trading Day period prior to the Issue Date of this Note,
or (ii) 60% multiplied by the market price, meaning the lowest trade price for the Common Stock during the twenty (20) Trading
Day period ending on the latest complete Trading Day prior to the Conversion Date. On the OTC Markets. As of March 31, 2020, and
December 31, 2019, the Company owed principal of $37,625 and $0 respectively. As of March 31, 2020, the Company owed $627 in accrued
interest.
Convertible Note payable – BHP
Capital
On January 21, 2020, the Company entered into
a convertible promissory note in the principal sum of Thirty Seven Thousand Six Hundred Twenty Five Dollars ($37,625.00), plus
accrued but unpaid interest thereon, on January 21, 2021 (the “Maturity Date”). The Company agreed to simple
interest on the outstanding principal amount of the Note at the annual rate of ten percent (10%). All amounts owed pursuant to
the note shall be convertible, in whole or in part, into shares of Common Stock at BHP’s option at the lower of (i) the lowest
price at which the Company has issued stock (the “Fixed Conversion Price”); or (ii) the Market Price, subject to adjustment.
The “Market Price” means sixty percent (60%) of the lowest Trading Price for the Common Stock during the twenty (20)
Trading Day period ending on the last trading day prior to the conversion date. As of March 31, 2020, and December 31, 2019, the
Company owed principal of $37,625 and $0 respectively. As of March 31, 2020, the Company owed $627 in accrued interest.
Convertible Notes payable – LG Capital
Funding, LLC
On March 2, 2020, the Company entered into
a convertible promissory note in the amount of $50,000 with LG Capital Funding, LLC. The maturity date of the note is March 2,
2021. The Company agreed to pay interest of 8% per annum. LG Capital is entitled, at its option, at any time after cash payment,
to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock
at a price for each share of Common Stock equal to 55% of the lowest trading price of the Common Stock as reported on the National
Quotations Bureau OTC Markets exchange which the Company’s shares are traded for the twenty prior trading days including
the day upon which a Notice of Conversion is received. As of March 31, 2020, and December 31, 2019, the Company owed principal
of $50,000 respectively. As of March 31, 2020, the Company owed $333 in accrued interest.
Summary:
The Company has identified the embedded derivatives
related to the above described notes and warrants. These embedded derivatives included certain conversion and reset features. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the note and to fair value as of each subsequent reporting date.
At March 31, 2020, the Company determined the
aggregate fair value of embedded derivatives to be $6,059,348. The fair values were determined using the Binomial Option Pricing
Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 154.7% to 186,8%, (3) weighted average
risk-free interest rate of 0.15% to 0.17%, (4) expected life of 0.083 to 1 year, (5) conversion prices of $0.00605 to $0.00975
and (6) the Company's common stock price of $0.177 per share as of March 31, 2020.
For the three months period ended March 31,
2020, the Company recorded a loss on the change in fair value of derivative liabilities of $430,692 and an additionally loss of
$206,094 related to the excess of the fair value of derivatives at issuance above convertible note principle as a charge to interest
expense. During the three months ended March 31, 2020, derivative liabilities of $659,160 were reclassified to additional paid
in capital as a result of conversions of the underlying notes payable into common stock. For the period ended March 31, 2019, the
Company recorded a loss on change in fair value of derivative liabilities of $2,687,449, and recorded amortization of debt discounts
of $495,438 as a charge to interest expense.
NOTE 9 – STOCKHOLDERS’ DEFICIT
Preferred stock
The Company is authorized to issue 50,000,000
shares of $0.001 par value preferred stock as of March 31, 2020 and December 31, 2019. As of March 31, 2020, and December 31, 2019,
the Company has designated and issued 10,000,000 shares of Class A Preferred Stock, and 5,000,000 of Class B Preferred Stock.
Each share of Class A Preferred Stock is entitled
to 100 votes on all matters submitted to a vote to the stockholders of the Company, does not have conversion, dividend or distribution
upon liquidation rights.
Each share of Class "B" Preferred
Stock is entitled to 1,000 votes on all matters submitted to a vote to the stockholders of the Company, does not have conversion,
dividend or distribution upon liquidation rights.
Common stock
The Company is authorized to issue 5,000,000,000
shares of $0.001 par value common stock as of March 31, 2020 and December 31, 2019. As of March 31, 2020, and December 31, 2019,
the Company had 126,702,818 and 77,958,081, respectively, common shares issued and outstanding
During the three months ended March 31, 2020,
the Company issued an aggregate of 8,333 shares of its common stock issued to settle amounts previous accrued with an estimated
fair value of $6,700.
During the three months ended March 31,2020,
the Company issued an aggregate of 8,333 shares of its common stock for services rendered with an estimated fair value of $314.
During the three months ended March 31,2020,
the Company issued an aggregate of 32,805,286 shares of its common stock in settlement of convertible notes payable, accrued interest
and embedded derivative liabilities of $633,700.
During the three months ended March 31,2020,
the Company issued 12,244,897 shares of its common stock in exchange for exercise of warrants on a cashless basis.
During the three months ended March 31, 2020,
the Company issued 3,677,889 shares of its common stock in settlement of a legal case with an estimate fair value of $956,251.
.
On January 17, 2020, the Company entered into
an amendment of an existing convertible promissory note issued to Paladin Advisors, LLC. The Company authorized the issuance of
a cashless warrant to purchase 5,750,000 common shares.
Options
As of March 31, 2020, the Company has no stock
options.
The following table summarizes the stock option
activity for the three months ended March 31, 2020 and the year ended December 31, 2019:
|
|
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
|
|
Aggregate
Intrinsic Value
|
Outstanding at December 31, 2019
|
|
|
0
|
(1)
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
0
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Cancellations
|
|
|
(1,000,000,000
|
)(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Forfeitures or expirations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
Outstanding at March 31, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
Exercisable at March 31, 2020
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
(1)
On February 27, 2019, Donald Steinberg and Charles Larsen canceled all 1,000,000,000 stock options
previously issued to them by the Company.
Warrants
The following table summarizes the stock warrant
activity for the three months ended March 31, 2020:
|
|
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
|
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding at January 1, 2020
|
|
|
|
4,011,111
|
|
|
$
|
2.15
|
|
|
|
3.60
|
|
|
|
|
$
|
—
|
|
|
Granted
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Exercised
|
|
|
|
(44,444
|
)
|
|
|
0.90
|
|
|
|
1.82
|
|
|
|
|
|
—
|
|
|
Outstanding at March 31, 2020
|
|
|
|
3,966,667
|
|
|
$
|
2.16
|
|
|
|
3.37
|
|
|
|
|
$
|
—
|
|
|
Exercisable at March 31, 2020
|
|
|
|
3,966,667
|
|
|
$
|
2.16
|
|
|
|
3.37
|
|
|
|
|
$
|
—
|
|
The aggregate intrinsic value in the preceding
tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock
price of $0.0177 as of March 31, 2020, which would have been received by the option holders had those option holders exercised
their options as of that date.
NOTE 10 — FAIR VALUE MEASUREMENT
The Company adopted the provisions of Accounting
Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines
fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact
and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels
of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets
for identical assets or liabilities.
Level 2 – Observable inputs other than
Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived
principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs to the
valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured
on a recurring basis are based upon level 3 inputs.
To the extent that valuation is based on models
or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on
the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative
effect adjustment to beginning retained earnings and no impact on the financial statements.
The carrying value of the Company’s cash
and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other
current assets and liabilities approximate fair value because of their short-term maturity.
As of March 31, 2020, and December 31, 2019,
the Company did not have any items that would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative liabilities
as level 3 and values its derivatives using the methods discussed in note 6. While the Company believes that its valuation methods
are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions
to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting
date. The primary assumptions that would significantly affect the fair values using the methods discussed in Note 6 are that of
volatility and market price of the underlying common stock of the Company.
As of March 31, 2020, and December 31, 2019,
the Company did not have any derivative instruments that were designated as hedges.
The derivative liability as of March 31, 2020
and December 31, 2019, in the amount of $6,059,349 and $5,693,071, respectively, have a level 3 classification.
The following table provides a summary of changes
in fair value of the Company’s Level 3 financial liabilities for the three years ended March 31, 2020:
|
|
Debt
Derivative
|
Balance, January 1, 2020
|
|
$
|
5,693,071
|
|
Increase resulting from initial issuance of additional convertible notes payable
|
|
|
|
|
Initial fair value of debt derivative at note issuance
|
|
|
441,750
|
|
Mark-to-market at March 31, 2020:
|
|
|
6,134,821
|
|
Transfers out of Level 3 upon conversion or payoff of notes payable
|
|
|
(75,472
|
)
|
Balance, March 31, 2020
|
|
$
|
6,059,349
|
|
Net gain for the period included in earnings relating to the liabilities held during the period ended March 31, 2020
|
|
$
|
430,692
|
|
Fluctuations in the Company’s stock price
are a primary driver for the changes in the derivative valuations during each reporting period. During the period ended March 31,
2020, the Company’s stock price decreased significantly from initial valuations. As the stock price decreases for each of
the related derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the significant
unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.
NOTE 11 — RELATED PARTY TRANSACTIONS
The Company’s current officers and stockholders
advanced funds to the Company for travel related and working capital purposes. As of March 31, 2020, and December 31, 2019, there
were no related party advances outstanding.
As of March 31, 2020, and December 31, 2019,
accrued compensation due officers and executives included as accrued compensation was $32,375 and $4,875, respectively.
At March 31, 2020 and December 31, 2019, there
were an aggregate of $0 and $0 notes payable due to officers.
NOTE 12 – SUBSEQUENT EVENTS
The Company evaluates events that have occurred
after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not
identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the financial
statements, except as disclosed.
On April 14, 2020, the Company appointed Gloria
A. Lynch as Chief Marketing Officer.
On May 15, 2020 the Company’s former
director and a related party, Charles Larsen, passed away.
On May 20, 2020, the Company’s former
director, Robert Coale, agreed to cancel and return to treasury 3,333,333 shares of Preferred Class “A” Common Stock.
On June 12, 2020, the Company appointed Marco
Guerrero as a member of its board of directors.
On June 17, 2020, the Company entered into
a material definitive agreement with White Lion Capital, LLC, a Nevada Limited Liability Company (“White Lion”). White
Lion agreed to invest up to ten million dollars ($10,000,000) to purchase the Registrant’s Common Stock, par value $0.001
per share, subject to the Company providing certain registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, and applicable state securities laws.