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 for nine months ended September 30, 2020, the Company
had a net loss of $4,177,391 and used cash in operations of $1,263,358. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period of time.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
The Company's primary source of operating funds
in 2020 has been from funds generated from proceeds from the issuance of convertible and other debt and issuance of stock through
private placements. With the exception of the current quarter, the Company has experienced net losses from operations since inception,
but expects these conditions to improve as its business develops. The Company has stockholders' deficiencies at September 30, 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 discussed in this filing. 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
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, 2018, and for the quarter ended September 30,
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, and for the three and nine months ended September 30, 2020, 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, and the concurrent delivery of our hempSMART™ product. Since our
hempSMART™ product sales contracts are consummated upon (i) receipt of the customer’s acceptance of our offer; (ii)
our concurrent receipt of our customers payment; and, (iii) 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 (i) parties; (ii) quantity and type of hempSMART™ product ordered; (iii) price; and, (iv) 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 principal revenue and cash flows
as the respective sales contract transactions are completed. 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: (i) the sales contracts are negotiated as a single package; (ii) the payment amount of one sales contract is dependent
upon another sales contract; (iii) 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 occurs 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/or materially alter the timing of our receipt of revenue from our sales contracts.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 contracts do not have significant
financing components, 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 promises to provide the hempSMART™
products to the customer upon receipt of payment, which occurs concurrently and when completed, allows us under our revenue recognition
policy to realize revenue.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Product Sales
Revenue from product
sales, including delivery fees, is recognized when (i) an order is placed by the customer; (ii) the price is fixed and determinable
when the order is placed; (iii) the customer is required to and concurrently pays for the product upon order; and, (iv) 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 (i)
our customers exercise discretion in determining the timing of when they place their product order; and, (ii) 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 year ended 2019 or the three and nine months ended
September 30, 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 will 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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 September
30, 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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 September 30, 2020 and 2019 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:
|
|
September
30,
2020
|
|
September
30,
2019
|
Convertible notes payable
|
|
|
5,281,668,086
|
|
|
|
52,346,160
|
|
Options to purchase common stock
|
|
|
—
|
|
|
|
—
|
|
Warrants to purchase common stock
|
|
|
292,054,702
|
|
|
|
3,602,160
|
|
Restricted stock units
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
5,573,722,788
|
|
|
|
55,948,320
|
|
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.
As a smaller reporting company, the company
is subject to provisions of Rule 8-03(b)(3) of Regulation S-X which requires the disclosure of certain financial information for
equity investees that constitute 20% of more of the Company’s consolidated net income (loss).
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 September 30, 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, as 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 $59,752 and $104,411 for the three and
nine months ended September 30, 2020 and $159,428 and $550,544 for the three and nine months ended September 30, 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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 September 30, 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.
The following table represents the Company’s
hempSMART business, which is its sole operating segment as of September 30, 2020:
hempSMART
|
|
|
|
|
|
|
|
|
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2020
|
|
|
|
|
For the three
months ended September 30,
|
|
For the nine months ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
|
$
|
53,195
|
|
|
$
|
229,371
|
|
|
$
|
217,972
|
|
|
$
|
552,761
|
|
Cost of Sales
|
|
|
37,170
|
|
|
|
90,843
|
|
|
|
110,563
|
|
|
|
159,860
|
|
Gross
profit
|
|
|
16,025
|
|
|
|
138,528
|
|
|
|
107,409
|
|
|
|
392,901
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
1,374
|
|
|
|
1,696
|
|
|
|
4,702
|
|
|
|
5,087
|
|
Payroll and related
expenses
|
|
|
26,394
|
|
|
|
—
|
|
|
|
77,256
|
|
|
|
|
|
General and admin
expenses
|
|
|
55,672
|
|
|
|
137,146
|
|
|
|
169,707
|
|
|
|
1,028,401
|
|
Selling
and marketing
|
|
|
117,978
|
|
|
|
262,516
|
|
|
|
294,231
|
|
|
|
583,180
|
|
Total
Expenses
|
|
|
201,418
|
|
|
|
401,358
|
|
|
|
575,221
|
|
|
|
1,616,668
|
|
Net
Loss from Operations
|
|
$
|
(185,393
|
)
|
|
$
|
(262,830
|
)
|
|
$
|
(467,812
|
)
|
|
$
|
(1,223,767
|
)
|
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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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. The Company negotiated
a 2 year extension on its current office lease.
On July 1, 2019, the
Company entered into an amendment and extension of its one applicable lease for office space until June 30, 2021. The extension
requires the Company to pay monthly rent of $1,308.88 from July 1, 2019 to June 30, 2020; and, $1,348.14 from July 1, 2020 to June
30, 2021. 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. 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 zero.
Consistent with ASC 842-20-50-4,
for the Company's September 30, 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.
In August 2018, the FASB issued ASU No.
2018-13, “Fair Value Measurement (Topic 820).” This standard modifies disclosure requirements related to fair value
measurement and is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019. Early adoption is permitted. Implementation on a prospective or retrospective basis varies by specific disclosure
requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption
of the additional disclosures until their effective date. The Company is currently assessing the impact of adopting this standard
on its consolidated financial statements.
In December 2019, the FASB issued ASU No.
2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. This standard simplifies the accounting for income
taxes. This standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. Early adoption is permitted for all entities. The Company is currently assessing the impact of adopting this standard on
its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06,
“Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in
Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting
for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts
on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary
complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim
periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements.
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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
NOTE 4 – PROPERTY
AND EQUIPMENT
Property and equipment as
of September 30, 2020 and December 31, 2019 is summarized as follows:
|
|
September 30,
2020
|
|
December 31,
2019
|
Computer equipment
|
|
$
|
15,398
|
|
|
$
|
16,358
|
|
Furniture and fixtures
|
|
|
5,140
|
|
|
|
5,140
|
|
Subtotal
|
|
|
20,538
|
|
|
|
21,498
|
|
Less accumulated depreciation
|
|
|
(17,510
|
)
|
|
|
(13,986
|
)
|
Property and equipment, net
|
|
$
|
3,028
|
|
|
$
|
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 $1,374 and $4,702 for the three and nine
months ended September 30, 2020; and $1,696 and $5,087 for the three and nine months ended September 30, 2019, respectively.
NOTE 5 – INVESTMENTS
MoneyTrac
We entered into a stock purchase agreement
on March 13, 2017 with MoneyTrac Technology, Inc., a California stock corporation (“MoneyTrac”) to purchase a 15% equity
position in MoneyTrac. On July 27, 2017, we completed tender of the purchase price of $250,000 pursuant to that stock purchase
agreement. On June 12th, 2018, Global Payout, Inc. (“Global”) entered into a reverse triangular merger business combination
(the “Merger”) with MoneyTrac and MTrac Tech Corporation, a Nevada corporation and wholly-owned subsidiary of Global
(“Merger Sub”), whereby MoneyTrac was successfully merged into Merger Sub, the surviving corporation of the Merger.
Thereafter, the separate existence of MoneyTrac ceased, and all rights, privileges, powers and property of MoneyTrac were assumed
by Merger Sub. Additionally, Merger Sub assumed all of the financial 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 acquisition 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 purchase price of $250,000, representing ownership of approximately fifteen percent (15%) of the post-Merger issued
and outstanding equity of Global. 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 September 30, 2020, have no remaining shares. We have a cash balance in the amount of $12,500 held in our
brokerage account, a receivable resulting from the proceeds of our sale of our Global shares, that we have not collected.
Benihemp
On July 19, 2017,
we agreed to lend $50,000 to Convenient Hemp Mart, LLC (“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 $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,
this credit was impaired and not usable.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Global Hemp Group 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 (“Global
Hemp Group”), in a multi-phase industrial hemp project on the Acadian peninsula New Brunswick, Canada. Our participation
included providing one-half, or $10,775, of the funding for the phase one work of the multi-phase industrial hemp project. On January
10, 2018, phase one of the project was completed by successfully cultivating industrial hemp during the 2017 growing season for
research purposes. The Company’s project-related costs incurred according to the Company’s interest in the industrial
hemp project were $0 and $10,775 for the years ended December 31, 2019 and 2018 respectively and was recorded as other income/expense
in the Company’s Statement of Operations in the appropriate periods. As of December 31, 2019, and September 30, 2020, the
balance of the New Brunswick industrial hemp joint venture 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 Oregon Joint Venture
– Scio, OR
On May 8, 2018, the Company,
Global Hemp Group, and TTO Enterprises, Ltd., an Oregon corporation (“TTO”) entered into a joint venture agreement.
The purpose of the joint venture was to develop an Oregon-licensed industrial hemp project to commercialize the cultivation of
industrial hemp biomass on a 109-acre parcel of farmland owned by the Company and Global Hemp Group in Scio, Oregon. The joint
venture operated through 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 then had equal interests as co-owners of the joint
venture. The joint venture agreement committed 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 performed these payment obligations pursuant to the joint venture agreement.
The 2018 crop of industrial
hemp grown on the joint venture’s farmland consisted of 33 acres of high-yield CBD industrial hemp biomass grown in an orchard-style
cultivation method on our farmland. The 33-acre 2018 harvest produced approximately 37,000 high CBD content industrial hemp plants,
yielding a total of 24 tons of wet harvested industrial hemp biomass that resulted in a saleable harvest of 48,000 pounds of cured
industrial hemp biomass. The joint venture partners prepared processing samples ranging in size from 100 to 2,000 lbs. for sample
offers to licensed industrial hemp handlers and CBD extraction companies. This industrial hemp biomass was processed into a CBD
crude oil concentrate with the option to refine it further into CBD isolate, or full spectrum oil, in order to increase its value
on the market.
As of December 31, 2019,
the combined balance of this joint venture investment and related farmland investment was $0, as the investment was written off
as a loss as a result of its failure to generate any cash flow for the Company for the period ended December 31, 2019. The debt
obligation of $262,414 related to this joint venture was also written off to $0 as of the year ended December 31, 2019. The debt
obligation related to the joint venture for the nine months ended September 30, 2020 was $0.
On September 28, 2020,
the Company and GHG entered into a Settlement and Mutual Release Agreement (the “Agreement”), pursuant to which the
parties agreed to resolve a dispute among them regarding the joint venture agreement. Under the Agreement, GHG agreed to make a
lump sum payment to the Company of $200,000, with $125,000 payable no later than September 30, 2020, and $75,000 payable no later
than November 15, 2020, with applicable interest, and to issue GHG common stock to the Company equal in value to $185,000 as of
the date of the Agreement, or September 28, 2020, subject to a non-dilutive protection provision, and additionally, to pay the
Company $10,000 to cover the Company’s legal fees relating to the Agreement by September 30, 2020. In exchange for the settlement
consideration, the Company has agreed to relinquish its ownership interest in the joint venture.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 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.
Bougainville represented that it had an ownership
interest in real property located in Washington State used for growing cannabis, and possessed information primarily related to
the management and control of cannabis grow operations as conducted in Washington State that included research, development and
know how in the cannabis industry. Bougainville also represented that it had an agreement with a I502 Tier 3 license holder in
Washington
State to operate on the land. 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 250,000 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 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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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. The trial is set for January 26-28, 2021.
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, including: (i) its failure to communicate and cooperate regarding the Company’s audit; (ii) its misrepresentations
concerning its ownership interest in the real property in Okanogan County Washington; (iii) its failure to deed the property to
the joint venture within thirty days of payment pursuant to the amended joint venture agreement; and, (iv) its misrepresentation
that it possessed an agreement with a Tier 3 license holder to operate on the property.
The Company was able to obtain general loans
from St. George Investments LLC, not specific to any of the company’s joint ventures. Therefore, accordingly, the impairment
of this investment did not create any defaults to the loan agreements and covenants. The loan agreement established the lender’s
option to convert the loans to common shares of the Company.
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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 during the six months ended June 30, 2018.
Natural Plant Extract (“NPE”)
On April
15, 2019, we entered into a joint venture with Natural Plant Extract of California, Inc. (“NPE”) to operate a licensed
psychoactive cannabis distribution service in California to be named Viva Buds. California legalized psychoactive cannabis for
medicinal and recreational use on January 1, 2018. On February 3, 2020, we terminated the NPE joint venture and entered into a
Settlement and Release of All Claims Agreement with NPE. In exchange for that universal release, the Company and NPE (i) agreed
to reduce the Company’s interest in NPE from 20% to 5%; (ii) agreed the Company would pay NPE a total of $85,000 as follows:
$35,000 concurrent with the execution of the universal release, 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, (iii) agreed 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.
Cannabis
Global (“CBGL”)
On September 30, 2020,
the Company entered into a Share Exchange Agreement with Cannabis Global, Inc., a Nevada corporation quoted on OTC Markets Pink
(“CBGL”) dated September 30, 2020, to acquire the number of shares of CBGL’s common stock, par value $0.001,
equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date, in exchange
for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the closing price for the
trading day immediately preceding the effective date (the “Share Exchange Agreement”). For both parties, the Share
Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that
a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant
to the Share Exchange Agreement to fall below $650,000.
Complementary to the
Share Exchange Agreement, the Company and CBGL entered into a Lock-Up Agreement dated September 30, 2020, providing that the shares
of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for
a period of 12 months following issuance, and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week,
or $80,000 per month.
Brazil
and Uruguay Joint Ventures
On October
1, 2020, the Company entered into two Joint Venture Agreements with Marco Guerrero, a director of the Company (“Guerrero”)
dated September 30, 2020, to form joint venture operations in Brazil and in Uruguay (the “Joint Venture Agreements”)
to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America, and will also work to
develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the formation of joint
venture entities in Uruguay and Brazil. The Brazilian joint venture will be headquartered in São Paulo, Brazil, and will
be named HempSmart Produtos Naturais Ltda. (“HempSmart Brazil”). The Uruguayan joint venture will be headquartered
in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S. (“HempSmart Uruguay”).
Under
the Joint Venture Agreements, the Company will acquire a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay. A
minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay will be held by newly formed entities controlled by
Guerrero, a director of the Company, who is a successful Brazilian entrepreneur. The Company will provide capital in the amount
of $50,000 to both HempSmart Brazil and HempSmart Uruguay under the Joint Venture Agreements, for a total capital outlay obligation
of $100,000. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party
manufacturing facilities in Brazil and Uruguay, and related infrastructure and employment of key personnel.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
MARIJUANA COMPANY OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF SEPTEMBER 30, 2020
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
Global Hemp
|
|
|
|
Cannabis Global
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville Ventures,
|
|
|
|
Gate C Research
|
|
|
|
Natural Plant
|
|
|
|
|
|
|
|
TOTAL Short-Term
|
|
|
|
Global Hemp
|
|
|
|
|
|
|
|
|
INVESTMENTS
|
|
|
|
Group
|
|
|
|
Inc.
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Inc.
|
|
|
|
Inc.
|
|
|
|
Extract
|
|
|
|
Vivabuds
|
|
|
|
Investments
|
|
|
|
Group
|
|
|
|
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
|
|
|
|
0
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
334,702
|
|
|
|
0
|
|
|
|
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
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
$
|
0
|
|
|
$
|
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
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
$
|
0
|
|
|
$
|
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
|
|
|
$
|
0
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
0
|
|
|
$
|
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
|
|
|
$
|
0
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
0
|
|
|
$
|
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
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
$
|
0
|
|
|
$
|
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
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
13,458
|
|
|
$
|
0
|
|
|
$
|
13,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 06-30-20
|
|
|
(7,048
|
)
|
|
|
(7,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 06-30-20
|
|
|
7,048
|
|
|
|
7,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of trading securities - quarter ended 06-30-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,458
|
)
|
|
|
|
|
|
$
|
(13,458
|
)
|
Balance @06-30-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Hemp Group trading securities issued
|
|
|
650,000
|
|
|
|
|
|
|
$
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
185,000
|
|
|
$
|
185,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Cannabis Global
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-20
|
|
$
|
1,343,915
|
|
|
$
|
0
|
|
|
$
|
650,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
185,000
|
|
|
$
|
185,000
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Loan
Payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
|
|
|
|
Bougainville
Ventures,
|
|
Gate
C
Research
|
|
Natural
Plant
|
|
Robert
L. Hymers
|
|
|
|
General
Operating
|
|
|
JV
Debt
|
|
Group
|
|
Benihemp
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
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
(c)
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 loan
borrowings, net
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 debt
conversion to equity
|
|
$
|
(727,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(727,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 reclass
of liability
|
|
$
|
83,647
|
|
|
$
|
83,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
06-30-20 Debt Discount adjustments
|
|
$
|
405,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(27,715
|
)
|
|
|
|
|
|
$
|
433,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@06-30-20 (h)
|
|
$
|
3,262,538
|
|
|
$
|
478,495
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
65,735
|
|
|
$
|
0
|
|
|
$
|
2,662,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-20 debt
conversion to equity
|
|
$
|
(606,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(56,085
|
)
|
|
$
|
(65,735
|
)
|
|
|
|
|
|
$
|
(484,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Settlement during Q3 2020
|
|
$
|
(474,495
|
)
|
|
$
|
(474,495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@09-30-20 (i)
|
|
$
|
2,181,571
|
|
|
$
|
4,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,177,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09-30-20
|
|
06-30-20
|
|
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 (i)
|
|
|
|
Note (h)
|
|
|
|
Note (g)
|
|
|
|
Note (f)
|
|
|
|
Note (e)
|
|
|
|
Note (d)
|
|
|
|
Note (c)
|
|
|
|
Note (b)
|
|
|
|
Note (a)
|
|
- Debt obligation of JV
|
|
|
0
|
|
|
|
478,494
|
|
|
|
394,848
|
|
|
|
0
|
|
|
|
1,633,872
|
|
|
|
1,778,872
|
|
|
|
128,522
|
|
|
|
289,742
|
|
|
|
1,500,000
|
|
- Convertible NP, net of discount
|
|
|
2,181,571
|
|
|
|
2,784,044
|
|
|
|
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
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
Total Debt balance
|
|
|
2,181,571
|
|
|
|
3,262,538
|
|
|
|
3,435,172
|
|
|
|
3,193,548
|
|
|
|
4,322,427
|
|
|
|
3,928,042
|
|
|
|
1,664,793
|
|
|
|
1,422,410
|
|
|
|
2,067,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Concerning our investment loans for general
operation for the quarter ended September 30, 2020, the Company accounted these transactions as an investment and a liability -
“debt obligation of Joint Venture”. 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.
NOTE 6 – NOTES
PAYABLE, RELATED PARTY
As of September 30, 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 September 30, 2020 and December 31, 2019 was $40,000 and $40,000 respectively. These notes are payable to the estate of Charles
Larsen, who passed away on May 15, 2020.
NOTE
7 – CONVERTIBLE NOTES PAYABLE
During
the nine months ended September 30, 2020, the Company issued an aggregate of 1,491,109,401 shares of its common stock in settlement
of the issued convertible notes payable and accrued interest.
For
the nine months ended September 30, 2020 and September 30, 2019, the Company recorded amortization of debt discounts of $1,373,575
and $2,172,936, respectively, as a charge to interest expense.
Convertible
notes payable as of September 30, 2020 and December 31, 2019 was comprised of the following:
|
|
2020
|
|
2019
|
Lender
|
|
(Unaudited)
|
|
(Audited)
|
Convertible note payable - Power Up Lending Group
|
|
$
|
73,000
|
|
|
$
|
294,000
|
|
Convertible note payable - Crown Bridge Partners
|
|
$
|
117,040
|
|
|
$
|
110,000
|
|
Convertible note payable - Odyssey Funding LLC
|
|
$
|
—
|
|
|
$
|
250,000
|
|
Convertible note payable - Paladin Advisors LLC
|
|
$
|
—
|
|
|
$
|
75,000
|
|
Convertible note payable - GS Capital Partners LLC
|
|
$
|
143,500
|
|
|
$
|
173,000
|
|
Convertible note payable - Natural Plant Extract
|
|
$
|
—
|
|
|
$
|
56,085
|
|
Convertible note payable - Robert L. Hymers III
|
|
$
|
205,803
|
|
|
$
|
96,553
|
|
Convertible note payable - St. George
|
|
$
|
1,977,208
|
|
|
$
|
2,947,890
|
|
Total
|
|
$
|
2,516,551
|
|
|
$
|
4,002,528
|
|
Less debt discounts
|
|
$
|
(334,980
|
)
|
|
$
|
(808,980
|
)
|
Net
|
|
$
|
2,181,571
|
|
|
$
|
3,193,548
|
|
Less current portion
|
|
$
|
(2,181,571
|
)
|
|
$
|
(3,193,548
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 Group Ltd. (“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 in the aggregate of $12,000. Interest on the notes
accrues from the issuance date, but interest will not become payable until the notes become payable. The notes are convertible
at any time at a conversion rate equal to 61% of the market price of the Company’s common stock, 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 has 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 September 30, 2020, and December 31, 2019, the Company owed an aggregate of $73,000 and, $294,000 of principal, respectively
on these convertible promissory notes. As of September 30, 2020, the Company owed $1,825 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
accrues 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 of the Company’s common stock, 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 also issued a total of 519,230 warrants with an initial exercise price of $0.26, with reset provisions
based on issuances of common stock subsequent to the issuance date. Due to the reset provision, the conversion option of these
warrants is also accounted for as a derivative liability. See Note 10.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
The
Company has 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 September 30, 2020, and December 31, 2019, the Company owed an aggregate of $117,040 and, $110,000 of principal, respectively
on these convertible promissory notes. As of September 30, 2020, the Company owed $1,607 of accrued interest.
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 in an aggregate of $12,500. Interest accrues from the issuance date, but interest
does 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 Company’s common stock as quoted on the National Quotations Bureau OTC
market or exchange where the Company's shares are traded or any exchange upon which the Common Stock may be traded in the future,
for the twenty prior trading days to the conversion date.
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 September 30, 2020, and December
31, 2019, the Company owed principal of $0 and $250,000. As of September 30, 2020, the Company owed $0 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 $75,000 to Paladin Advisors,
LLC (“Paladin”). The promissory notes bear interest at 8% per annum and are due six months from the respective issuance
date of each note along with accrued and unpaid interest. Principal and interest is payable on the date six months from the date
of issuance of the note. Pursuant to the notes, Paladin has the option to convert all or any portion of the unpaid principal amount
of the notes, plus accrued interest, into shares of the Company’s common stock at a conversion price equal to a 45% discount
to the lowest closing bid of the previous 10 day trading period prior to the conversion.
The
aggregate debt discount of $46,721 is being amortized to interest expense over the respective terms of the notes. As of September
30, 2020, and December 31, 2019, the Company owed an aggregate of $0 and $75,000 of principal. As of September 30, 2020, the Company
owed $0 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, are due one year from the respective
issuance date, and include an original issuance discount in an aggregate of $15,000.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Pursuant
to the notes, GS Capital is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal
face amount of the notes into shares of the Company's common stock at a per-share conversion price equal to 62% of the lowest trading
price of the Company's common stock as reported on the National Quotations Bureau OTC Marketplace exchange on which the Company’s
shares are quoted, or any exchange upon which the Company's common stock may be traded in the future, for the twenty trading days
prior to the conversion.
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 September 30, 2020, and December
31, 2019, the Company owed principal of $143,500 and $173,000 respectively. As of September 30, 2020, the Company owed $1,593 in
accrued interest.
Convertible
notes payable-St George Investments
On
November 1, 2017, the Company issued a secured convertible promissory note in the amount 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 of $59,220. The promissory note was funded on November 11, 2017 for $542,200, net
of the original issue discount 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. On 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 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. As of June 30, 2020, the warrants had an exercise price of $0.0085 for 5,274,146 total warrants.
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 pursuant to the promissory notes will be 60% of
the 3 lowest closing trade prices from the 20 trading days immediately preceding the date of conversion. In addition, the promissory
notes include 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, 2020, $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, 2020, 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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
On
August 28, 2018, the Company issued a secured convertible promissory note in the amount of $1,128,518 (including 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 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, 2020, an additional $218,518 was funded
under this note resulting in net proceeds of $198,518.
As
an investment incentive to St. George, the Company issued to St. George 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. As of June 30, 2020, the warrants had an exercise price
of $0.0085 for 3,750,000 total warrants.
The
promissory notes are convertible, at any time at St. George’s option, at $2.40 per share. However, in the event the Company’s
market capitalization falls below $30,000,000, the conversion rate will be 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
notes include 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, 2020, $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.
On
January 29, 2019, the Company issued a secured convertible promissory note in the amount 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 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, 2020, the promissory note was funded in eight
tranches totaling $1,406,482, resulting in aggregate net proceeds of $1,276,482. As an investment incentive to St. George, the
Company issued to St. George 1,500,000 5-year warrants, exercisable at $2.40 per share, with certain reset provisions. As of September
30, 2020, the warrants had an exercise price of $0.0085 for 7,500,000 total warrants. 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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 will be 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.
On
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 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. As an investment incentive, the Company issued 375,000 five-year warrants, exercisable
at $2.40 per share, with certain reset provisions. As of September 30, 2020, the warrants had an exercise price of $0.0085 for
1,875,000 total warrants. 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 St. George’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 will be 60% of the 3 lowest closing trade prices
from the 20 trading days immediately preceding the date of conversion, subject to additional adjustments. 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 September 30, 2020, and December 31, 2019, the Company owed
principal of $1,977,208 and $ 2,947,890 respectively. As of September 30, 2020, the Company owed $391,986 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 annum, and are due six months from the respective
issuance date of the note along with accrued and unpaid interest. Principal and interest are payable to Hymers six months after
the date of issuance. Hymers has the option to convert all or any portion of the unpaid principal amount of the note, plus accrued
interest, into shares of the Company’s common stock. The conversion price will be equal to a 50% discount to the lowest closing
bid of the previous 15 day trading period. The aggregate debt discount of $92,332 is being amortized to interest expense over the
respective terms of the notes. As of September 30, 2020, and December 31, 2019, the Company owed an aggregate of $ 205,803 and
$96,553 of principal respectively. As of September 30, 2020, the Company owed $422 in accrued interest.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
NOTE
8 – DERIVATIVE LIABILITIES
As described
in Note 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. See Note 10 for further details.
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 September 30, 2020 and December 31, 2019. As
of September 30, 2020, and December 31, 2019, the Company 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. On November 9, 2020, the Company issued 2,000,000 shares of its
Class B Preferred Common Stock to Jesus Quintero. The Class B Preferred Stock carries a voting preference of One Thousand (1,000)
times that number of votes on all matters submitted to the shareholders that is equal to the number of shares of Common Stock (rounded
to the nearest whole number), at the record date for the determination of the shareholders entitled to vote on such matters or,
if no such record date is established, at the date such vote is taken or any written consent of such shareholders is affected.
The issuance constitutes a change of control of the Company, as the voting preference of the issued Class B Preferred Stock provides
Mr. Quintero with the right to control a majority of the votes of shareholders eligible to cast votes on any matter brought before
the stockholders.
On October 28, 2019, Donald Steinberg, Charles
Larsen and the Company agreed, in exchange for a mutual release of all claims, to cancel and return to treasury Messrs. Steinberg
and Larsen’s respective 5,000,000 shares of Preferred Class A common stock. The Board of Directors subsequently issued pro
rata, 10 million Class A Preferred shares of common stock to directors Robert Coale, Edward Manolos and Jesus Quintero. On May
20, 2020, Robert Coale resigned his position as a director. As part of a severance agreement, Mr. Coale returned to treasury 3,333,333
shares of Class A Preferred Shares. On July 10, 2020, the Company issued 3,333,333 Class A Preferred Shares to Jesus M. Quintero.
On July 18, 2019, the Company designated Class
B Preferred shares in the amount of 5,000,000 shares authorized, par value $0.001 per share. As
of September 30, 2020, and December 31, 2018, the Company has 0 shares of Class B Preferred shares issued and outstanding. Holders
of Series B Preferred stock shall have one thousand times that number of votes on all matters submitted to the shareholders that
is equal to the number of shares of common stock, at the record date for the determination of the shareholders entitled to vote
such matters.
Common
stock
The Company is authorized to issue 5,000,000,000
shares of $0.001 par value common stock. As of September 30, 2020, and December 31, 2019, the Company had 1,913,880,887 and 77,958,081
shares issued and outstanding, respectively. All references to our common stock in this filing reflect a 1:60 reverse stock split
effective September 3, 2019.
During the nine months
ended September 30, 2020, the Company issued an aggregate of 156,444,047 shares of its common stock for services rendered with
an estimated fair value of $665,767.
During the nine months
ended September 30, 2020, the Company issued an aggregate of 21,384,103 shares of its common stock, in settlement of outstanding
related party notes payable, for a total aggregate value of $50,613.
During the nine months
ended September 30, 2020, the Company issued 1,469,725,298 shares of its common stock in settlement of convertible notes payable,
accrued interest of $2,635,647.
During the nine months
ended September 30, 2020, the Company issued 51,054,214 shares of its common stock in exchange for exercise of warrants on a cashless
basis with an aggregate value of $427,500.
During the nine
months ended September 30, 2020, the Company sold an aggregate of 127,012,847 shares of its common stock for net proceeds of
$153,686. On November 9, 2020, the Company issued 2,000,000 shares of its
Class B Preferred Common Stock to Jesus Quintero. The Class B Preferred Stock carries a voting preference of One Thousand (1,000)
times that number of votes on all matters submitted to the shareholders that is equal to the number of shares of Common Stock (rounded
to the nearest whole number), at the record date for the determination of the shareholders entitled to vote on such matters or,
if no such record date is established, at the date such vote is taken or any written consent of such shareholders is affected.
The issuance constitutes a change of control of the Company, as the voting preference of the issued Class B Preferred Stock provides
Mr. Quintero with the right to control a majority of the votes of shareholders eligible to cast votes on any matter brought before
the stockholders.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Warrants
The following table presents
information related to warrants at September 30, 2020:
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Exercise
Price
|
|
|
Number of
Options
|
|
|
|
Weighted Average
Remaining Life
In Years
|
|
|
|
Exercisable
Number of
Options
|
|
$.01-1.00
|
|
|
61,111
|
|
|
|
2.18
|
|
|
|
61,111
|
|
$1.01-2.00
|
|
|
41,891
|
|
|
|
1.86
|
|
|
|
41,891
|
|
$2.01-3.00
|
|
|
3,499,146
|
|
|
|
3.99
|
|
|
|
3,499,146
|
|
|
|
|
3,602,148
|
|
|
|
|
|
|
|
3,602,148
|
|
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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 September 30, 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 7. 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 September 30, 2020, and December 31, 2019, the Company did not have any derivative instruments that were designated as hedges.
The derivative liability as
of September 30, 2020 in the amount of $3,426,888, has 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
September 30, 2020:
|
|
|
Debt Derivative
|
|
|
Balance, December 31, 2019
|
|
$
|
5,693,071
|
|
Initial fair value of debt derivative at note issuance
|
|
|
1,308,157
|
|
Mark-to-market at September 30, 2020
|
|
|
7,001,228
|
|
Transfers out of Level 3 upon conversion or payoff of notes payable
|
|
|
(3,886,971
|
)
|
Net loss in fair value included in earnings related to derivative liabilities during the nine months ended September 30, 2020
|
|
$
|
312,631
|
|
Balance, September 30, 2020
|
|
$
|
3,426,888
|
|
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 September 30, 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.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
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 September 30, 2020, and December 31, 2019, there were no related party advances outstanding.
As
of September 30, 2020, and December 31, 2019, accrued compensation due officers and executives was accrued compensation was $125,738
and $4,875, respectively.
During
the nine months ended September 30, 2020, the Company issued an aggregate of 21,384,103 shares of its common stock in settlement
of outstanding related party notes payable of $50,613.
NOTE
12 – SUBSEQUENT EVENTS
Share Exchange Agreement
with Cannabis Global
On September 30, 2020,
the Company entered into a Share Exchange Agreement with Cannabis Global, Inc., a Nevada corporation quoted on OTC Markets Pink
(“CBGL”) dated September 30, 2020, to acquire the number of shares of CBGL’s common stock, par value $0.001,
equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date, in exchange
for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the closing price for the
trading day immediately preceding the effective date (the “Share Exchange Agreement”). For both parties, the Share
Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that
a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant
to the Share Exchange Agreement to fall below $650,000.
Complementary to the
Share Exchange Agreement, the Company and CBGL entered into a Lock-Up Agreement dated September 30, 2020, providing that the shares
of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for
a period of 12 months following issuance, and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week,
or $80,000 per month.
Brazil
and Uruguay Joint Ventures
On October
1, 2020, the Company entered into two Joint Venture Agreements with Marco Guerrero, a director of the Company (“Guerrero”)
dated September 30, 2020, to form joint venture operations in Brazil and in Uruguay (the “Joint Venture Agreements”)
to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America, and will also work to
develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the formation of joint
venture entities in Uruguay and Brazil. The Brazilian joint venture will be headquartered in São Paulo, Brazil, and will
be named HempSmart Produtos Naturais Ltda. (“HempSmart Brazil”). The Uruguayan joint venture will be headquartered
in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S. (“HempSmart Uruguay”).
Under
the Joint Venture Agreements, the Company will acquire a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay. A
minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay will be held by newly formed entities controlled by
Guerrero, a director of the Company, who is a successful Brazilian entrepreneur. The Company will provide capital in the amount
of $50,000 to both HempSmart Brazil and HempSmart Uruguay under the Joint Venture Agreements, for a total capital outlay obligation
of $100,000. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party
manufacturing facilities in Brazil and Uruguay, and related infrastructure and employment of key personnel.
On November
9, 2020, the Company issued 2,000,000 shares of its Class B Preferred Common Stock to Jesus Quintero. The Class B Preferred Stock
carries a voting preference of One Thousand (1,000) times that number of votes on all matters submitted to the shareholders that
is equal to the number of shares of Common Stock (rounded to the nearest whole number), at the record date for the determination
of the shareholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken
or any written consent of such shareholders is affected. The issuance constitutes a change of control of the Company, as the voting
preference of the issued Class B Preferred Stock provides Mr. Quintero with the right to control a majority of the votes of shareholders
eligible to cast votes on any matter brought before the stockholders.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking
statements that reflect Management’s current views with respect to future events and financial performance. You can identify
these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,”
“believe,” “estimate” and “continue,” or similar words. Those statements include statements
regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which
such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future
performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking
statements.
Readers
are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with
the Securities and Exchange Commission. Important factors currently known to Management could cause actual results to differ materially
from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect
changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that
our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made
that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors
that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing
for materials, and competition.
Business Overview
Plan
of Operations – Marijuana Company of America and subsidiaries is a publicly listed company quoted on the OTC Pink tier
Exchange under the symbol “MCOA”. We are based in Escondido, California. Our business plan and operation focuses in
part on the development, manufacturing, marketing and sale of non-psychoactive industrial hemp, and hemp-derived consumer products
containing CBD. Our business includes the research and development of (1) varieties of various species of hemp; (2) beneficial
uses of hemp and hemp derivatives; (3) indoor and outdoor cultivation methods for hemp; (4) technology used for cultivation and
harvesting of different species of hemp, including but not limited to lighting, venting, irrigation, hydroponics, nutrients and
soil; (5) different industrial hemp derived CBD, and the possible health benefits thereof; (6) new and improved methods of hemp
CBD extraction omitting or eliminating the delta-9 tetrahydrocannabinol “THC” molecule.
hempSMART,™
Inc.
The Company
operates two distinct and separate business divisions related to its two wholly owned subsidiaries, H Smart, Inc. and MCOA CA,
Inc.
Through
our wholly owned subsidiary H Smart, Inc., we develop consumer products that include industrial hemp derived, non-psychoactive
CBD as an ingredient, under the brand name “hempSMART™.
Our industrial hemp-based products are specifically developed with an enriched CBD molecular composition with a THC concentration
of three-tenths of one percent or less by dry weight. We market and sell our hempSMART™
products directly through our web site, and through our affiliate marketing program, where qualified sales affiliates use
a secure multi-level-marketing sales software program that facilitates order placement over the internet via a web site, and accounts
for affiliate orders and sales; calculates referral benefits apportionable to specific sales associates, and calculates and accounts
for loyalty and rewards benefits for returning customers. We also retained a full-service marketing company that uses a multi-channel
transactional marketing campaign focused on digital advertising, infographics, content marketing, customer incentives and acquisition,
a broad social media presence, as well as search engine marketing and optimization that includes comprehensive research and analytics
and order fulfillment in order to boost direct sales.
Results
of Operations
We anticipate
that our results of operations will fluctuate for the foreseeable future due to several factors, such as the progress of our hempSMART™
product sales and research and development efforts. Due to these uncertainties, accurate
predictions of future operations are difficult or impossible to make.
Three
Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
Revenues
Total revenues for the three
months ended September 30, 2020 and 2019, were $53,195 and $229,371, respectively, a decrease of $176,176. This decrease continues
to be attributed to the Company’s restructuring of its sales team and new sales programs since the 1st
quarter 2020 as well as the effects of the slowing general market demand due to the COVID-19 pandemic during the third quarter
ended September 30, 2020. In addition, the Company’s continued changes to the sales strategy implemented includes rebranding
of hempSMART products. However, the Company continues to make progress with its sales program as it continues to promote and support
its affiliate marketing sales program and direct sales through its website.
During the third quarter ended
September 30, 2020 the Company released a new industrial hemp based hempSMART Drink Mix product.
The following
table identifies a comparison of our sales of products during the three months ended September 30, 2020 and 2019, respectively:
For the three months ended September 30, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
Body Lotion
|
|
$
|
679
|
|
|
$
|
7,299
|
|
|
|
Brain Capsules
|
|
|
4,610
|
|
|
|
20,569
|
|
|
|
Industrial hemp Drink
|
|
|
563
|
|
|
|
0
|
|
|
New Product in 2020
|
Drops
|
|
|
25,541
|
|
|
|
96,885
|
|
|
|
Face Moisturizer
|
|
|
1,606
|
|
|
|
8,848
|
|
|
|
Pain Capsules
|
|
|
2,714
|
|
|
|
9,840
|
|
|
|
Pain Cream
|
|
|
14,911
|
|
|
|
63,449
|
|
|
|
Pet Drops
|
|
|
2,571
|
|
|
|
22,481
|
|
|
|
TOTALS
|
|
$
|
53,195
|
|
|
$
|
229,371
|
|
|
|
Related Party Sales
Related party sales contributed
$3,262 and $4,015 to the revenues for the three months ended September 30, 2020 and 2019, respectively. Related party sales are
comprised of sales of our hempSMART products to our directors, officers, employees, and sales team members. No related party sales
were for services. All sales made at listed retail prices and were for cash considerations.
Cost of Sales
Cost of sales primarily consist
of inventory cost and overhead, manufacturing, packaging, warehousing, shipping, and direct labor costs directly attributable to
our hempSMART products. For the three months ended September 30, 2020 and 2019, our total costs of sales were $37,170 and $90,843,
respectively. The high costs reflect product discounts and cost incentive on products sold due to the COVID-19 pandemic.
Gross Profit
For the three months ended September 30, 2020
and 2019, gross profit was $16,025 and $138,528, respectively. This decrease was primarily attributed to new pricing and promotions
associated with the company’s continued sales restructuring and strategies from 1st quarter 2020, along with the
effects of the COVID-19 pandemic during the three months ended September 30, 2020. As a result, the gross margins were 30.1% and
60.4% for the three months ended September 30, 2020 and 2019, respectively. However, the Company will continue to market its products
aggressively as it continues to support its affiliate sales program in the near future.
Selling and marketing expenses
For the three months
ended September 30, 2020 and 2019, selling and marketing expenses was $125,942 and $376,342, respectively. This decrease of $250,400
is due primarily to the effects of the Company’s restructuring of its sales team and new sales strategies during the three
months ended September 30, 2020, as well as the discontinuation of the VivaBuds delivery business at the end of 2019. This include
elimination of redundant expenses of our sales operations in the United Kingdom, reduction in media costs, reduction in sample
product costs and reduced overhead pertaining to the VivaBuds joint venture. These reductions were implemented to reduce overhead
as the Company aggressively works towards more cost effective strategies to sell its hempSMART’s products.
Payroll and related expenses
For the three months
ended September 30, 2020 and 2019, payroll and related expenses were $62,000 and $90,000, respectively. This decrease of $28,000
is attributed to the current CEO’s compensation being reduced compared to the prior CEO’s higher salary in 2019, marginally
offset by new hires as of the third quarter ended September 30, 2020 versus $0 during the same period in 2019.
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. For the three months ended September 30, 2020 and 2019, stock-based compensation
was $123,000 and $0, respectively. This increase of $123,000 is due to shares issued to the Company’s new officers, directors
and vendors to pay compensation due to the Company’s low cash positions during the three months ended September 30, 2020.
General and administrative expenses
Other general and administrative
expenses increased to $294,921 for the three months ended September 30, 2020 compared to $295,113 for the three months ended September
30, 2019. General and administrative expenses include research and development, building rent, utilities, legal fees, office supplies,
subscriptions, and office equipment. The increase of $79,798 was mainly attributed to issuance of the Company’s shares to
consultants for services provided to the Company. The shares were issued to pay compensation due to the Company’s low cash
positions during the three months ended September 30, 2020.
Gain/Loss on change in fair value of
derivative liabilities
During 2020 and 2019,
we issued convertible promissory notes and warrants with an embedded derivative, all requiring us to fair value the derivatives
each reporting period, and mark to market as a non-cash adjustment to our current period operations. This resulted in losses of
$1,454,903 and $1,668,112 change in fair value of derivative liabilities for the three months ended September 30, 2020 and 2019,
respectively.
Loss on equity investment
During the three months
ended September 30, 2020 and 2019, we adjusted the carrying value of our investment for our pro rata share of loss and gain on
equity investments of $240,198 and $122,864, respectively.
Gain and loss on settlement of debt
During the three months
ended September 30, 2020 and 2019, the Company realized a gain and a loss on settlement of debt of $383,440 and $612,034, respectively.
Interest Expense
Interest expense during
the three months ended September 30, 2020 was $688,090 compared to $1,559,720 for the three months ended September 30, 2019. Interest
expense primarily consists of interest incurred on our convertible and other debt. The debt discounts amortization incurred during
the three months ended September 30, 2020 and 2019 was $429,227 and $864,386, respectively. In addition, we incurred a non-cash
interest of $0 and $444,585 non-cash interest in connection with convertible notes for the three months ended September 30, 2020
and 2019, respectively.
Net Loss
The Company’s net
loss for the three months ended September 30, 2020 and 2019 was $1,872,271 and $6,226,622, respectively, a decrease of $4,354,351.
The net loss of $1,872,271 for the three months ended September 30, 2020, represents 3,520% of total revenues for the period. The
net loss of $6,226,622 for the three months ended September 30, 2019 represents 2,715% of the total revenues for the period.
Nine
Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
Total
Revenues - Total revenues were $217,972 for the nine months ended September 30, 2019 as compared to $552,761 for the nine
months ended September 30, 2019, a decrease of $334,789. Although the reported revenues for each period also reflect the Company’s
initial steps towards marketing and selling its hempSMART™ products, the decrease in total revenues of hempSMART™ products
was due to the volume of sales being impacted by COVID-19 pandemic. However, management plans
to expand its marketing and selling efforts for the remainder of 2020 and expects revenues to increase during the coming months.
The following table identifies our product offerings and the revenues
related to these products for the nine months ended September 30, 2020 and 2019, respectively:
For the nine months ended September 30, 2020 and 2019
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
Body Lotion
|
|
$
|
3,131
|
|
|
$
|
7,294
|
|
|
|
Brain Capsules
|
|
|
24,284
|
|
|
|
55,564
|
|
|
|
Drink
|
|
|
2,615
|
|
|
|
0
|
|
|
New Product in 2020
|
Drops
|
|
|
111,673
|
|
|
|
223,154
|
|
|
|
Face Moisturizer
|
|
|
8,915
|
|
|
|
29,486
|
|
|
|
Pain Capsules
|
|
|
6,360
|
|
|
|
37,612
|
|
|
|
Pain Cream
|
|
|
46,817
|
|
|
|
151,596
|
|
|
|
Pet Drops
|
|
|
14,177
|
|
|
|
48,055
|
|
|
|
TOTALS
|
|
$
|
217,972
|
|
|
$
|
552,761
|
|
|
|
Related Party Sales
Related party sales contributed
$11,565 and $12,363 to the revenues for the nine months ended September 30, 2020 and 2019, respectively. Related party sales are
comprised of sales of our hempSMART products to our directors, officers, employees, and sales team members. No related party sales
were for services. All sales made at listed retail prices and were for cash considerations.
Cost of Sales
Cost of sales primarily consist
of inventory cost and overhead, manufacturing, packaging, warehousing, shipping, and direct labor costs directly attributable to
our hempSMART products. For the nine months ended September 30, 2020 and 2019, our total costs of sales were $110,563 and $159,859,
respectively. The cumulative high costs for the nine months ended September 30, 2020 reflects product discounts and cost incentive
on products sold due to the COVID-19 pandemic.
Gross Profit
For the nine months ended September 30, 2020
and 2019, gross profit was $107,409 and $392,902, respectively. This decrease was primarily attributed to new pricing and promotions
associated with the company’s continued sales restructuring and strategies during 2020, along with the effects of the COVID-19
pandemic during the nine months ended September 30, 2020. As a result, the gross margins were 49.3% and 71.1% for the nine months
ended September 30, 2020 and 2019, respectively. However, the Company will continue to market its products aggressively as it continues
to support its affiliate sales program in the near future.
Selling and marketing expenses
For the nine months ended September 30, 2020
and 2019, selling and marketing expenses was $326,608 and $1,462,104, respectively. This decrease of $1,135,496 is due primarily
to the effects of the Company’s restructuring of its sales team and new sales strategies during the nine months ended September
30, 2020. This include reduction of over $460,000 of redundant expenses of our sales operations in the United Kingdom, over $432,000
in reductions in media costs, $105,000 decrease in commissions due to sales levels for the nine months ended September 30, 2020
and a $60,663 reduction in sample product costs during the nine months of 2020. These reductions were implemented to streamline
expenses as the company aggressively works towards more cost-effective strategies to improve the sale of its hempSMART’s
products.
Payroll and related expenses
For the nine months
ended September 30, 2020 and 2019, payroll and related expenses was $258,842 and $310,000, respectively. This decrease of $51,158
is attributed to the elimination of redundant positions within the Company during the nine months ended September 30, 2020 as
compared to the nine months ended September 30, 2019.
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. For the nine months ended September 30, 2020, stock-based compensation was $665,767 and $100,350, respectively.
This increase of $485,427 is due to shares issued to the Company officers, directors and vendors due to the Company’s low
cash positions during the nine months ended September 30, 2020.
General and administrative expenses
Other general and administrative expenses
decreased to $710,094 for the nine months ended September 30, 2020 compared to $1,353,757 for the nine months ended September 30,
2019. General and administrative expenses include research and development, building rent, utilities, legal fees, office supplies,
subscriptions, and office equipment. The decrease of $563,673 is attributed cost saving measures to eliminate redundancy such as
a reduction of approximately $ 88,000 in bank fees due to less wire transfers fees incurred during the nine months ended September
30, 2020; also a decrease of approximately $396,000 in Consulting fees during the nine months ended September 30, 2020 as the company
utilized internal resources instead of outside services and a reduction in our Board of Director fees by $56,000 during the nine
months ended September 30, 2020 versus the nine months ended September 30, 2019. These costs were higher during the nine months
ended September 30, 2019.
Loss on change in fair value of derivative
liabilities
During 2020 and 2019,
we issued convertible promissory notes and warrants with an embedded derivative, all requiring us to fair value the derivatives
each reporting period, and mark to market as a non-cash adjustment to our current period operations. This resulted in losses of
$312,631 and $2,148,262 change in fair value of derivative liabilities for the nine months ended September 30, 2020 and 2019, respectively.
Loss on equity investment
During the nine months
ended September 30, 2020 and 2019, we adjusted the carry value of our investment for our pro rata share of a gain and a loss for
our equity investment of $106,305 and $107,961, respectively.
Gain and loss on settlement of debt
During the nine months
ended September 30, 2020 and 2019, the company realized a gain and loss on settlement of debt of $386,930 and $612,034, respectively.
This was related to the payoff of a settlement agreements made in the ordinary course of its business during the nine months ended
September 30, 2020 and 2019.
Interest Expense
Interest expense during the nine months ended
September 30, 2020 was $2,460,185 as compared to $3,001,972 for the nine months ended September 30, 2019. Interest expense primarily
consists of interest incurred on our convertible and other debt. The debt discounts amortization incurred during the nine months
ended September 30, 2020 and 2019 was $1,458,158 and $2,172,936, respectively. In addition, we incurred a non-cash interest of
$0 and $1,886,837 non-cash interest in connection with convertible notes for the nine months ended September 30, 2020 and 2019,
respectively.
Net Loss
The Company’s net
loss for the nine months ended September 30, 2020 and 2019 was $4,177,391 and $10,878,622, respectively, a decrease of $6,701,231.
The net loss of $4,177,391 for the nine months ended September 30, 2020, represents 1,916 % of total revenues for the period. The
net loss of $10,878,622 for the nine months ended September 30, 2019 represents 1,968% of the total revenues for the period.
Liquidity and Capital Resources –
The Company has generated a net loss from continuing operations for the nine months ended September
30, 2020 of $4,177,391 and used $1,262,358 cash for operations. As of September 30, 2020, the Company had total assets of $2,013,287,
which included Short-term investments of $130,060, Accounts receivable of $8,563, Inventory of $145,523, Prepaid insurance of $66,131,
an Investment receivable of $54,940, Notes receivable of $75,000, Other current assets of $22,508, which represents advance payments,
Long-term investments of $1,343,915, Right-to-use-assets of $11,642 and a Security deposit of $2,500.
During the nine months ended September 30,
2020 and 2019, the Company has met its capital requirements through a combination of loans and convertible debt instruments. The
Company will need to secure additional external funding in order to continue its operations. Our primary internal sources of liquidity
were provided by an increase in proceeds from the issuance of note payables of $876,302 for the nine months ended September 30,
2020, as compared to $2,257,000 for the nine months ended September 30, 2019. During the nine months ended September 30, 2019,
we entered into several separate financing arrangements with St. George Investments, LLC, a Utah limited liability company. Our ability to rely upon external financing arrangements to fund operations is not certain, and this
may limit our ability to secure future funding from external sources without changes in terms requested by counterparties, changes
in the valuation of collateral, and associated risk, each of which is reasonably likely to result in our liquidity decreasing in
a material way. We intend to utilize cash on hand, loans and other forms of financing such as the sale of additional equity and
debt securities and other credit facilities to conduct our ongoing business, and to also conduct strategic business development
and implementation of our business plans generally.
Operating Activities - For the nine
months ended September 30, 2020, the Company used cash in operating activities of $1,262,358. For the nine months ended September
30, 2019, the Company used cash in operating activities of $1,884,004. This decrease is due primarily to loss for the period which
was offset by stock-based compensation and continued implementation of our business plans, operations, management, personnel and
professional services.
Investing Activities - During the nine
months ended September 30, 2020, cash provided from investing activities was $123,759 which consisted of payments of $1,271 related
to equipment purchases and proceeds from investment in joint venture of $125,000. During the nine months ended September 30, 2019,
we spent $687,752, primarily on equipment purchases of $2,703 and investments of $685,049.
Financing Activities - During the nine months ended September
30, 2020 the Company had cash provided from financing of $1,076,342 consisting of funds from the issuance of notes payable of
$876,302, proceeds from the sale of common stock of $153,685, proceeds from the sale of trading securities of $10,854 and proceeds
from a government loan due to COVID-19 of $35,500. For the nine months ended September 30, 2019 the Company received proceeds
of $2,257,000 from the issuance of notes payable.
The Company’s business plans have not
generated significant revenues and as of the date of this filing are not sufficient to generate adequate amounts of cash to meet
its needs for cash. The Company's primary source of operating funds in 2020 and 2019 have been from revenue 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 inception, but expects these conditions to improve during the remainder of 2020 and beyond as it develops its affiliate marketing
program and other direct sales and marketing programs. The Company has stockholders' deficiencies at September 30, 2020 and requires
additional financing to fund future operations. As of the date of this filing, and due to the early stages of operations, the Company
has insufficient sales data to evaluate the amounts and certainties of cash flows, as well as whether there has been material variability
in historical cash flows.
We currently do not have sufficient cash and
liquidity to meet our anticipated working capital for the next twelve months. Historically, we have financed our operations primarily
through private sales of our common stock and. If our sales goals for our hempSMART™ products do not materialize as planned,
and we are not able to achieve profitable operations at some point in the future, we may have insufficient working capital to maintain
our operations as we presently intend to conduct them or to fund our expansion, marketing, and product development plans. There
can be no assurance that we will be able to obtain such financing on acceptable terms, or at all.
Off
Balance Sheet Arrangements
As of
September 30, 2020, and December 31, 2019, we did not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results
of operations, liquidity, capital expenditures or capital resources.
Recent
Government Decriminalization and Legalization of Hemp
On
December 20, 2018, President Donald J. Trump signed into law the Agriculture Improvement Act of 2018, otherwise known as the “Farm
Bill.” Prior to its passage, hemp, a member of the cannabis family, and hemp derived CBD, were classified as Schedule 1 controlled
substances, and so illegal under the Controlled Substances Act, 21 U.S.C. § 811 (hereafter referred to as the “CSA”).
With
the passage of the Farm Bill, hemp cultivation is now broadly permitted. The Farm Bill explicitly allows the transfer of hemp-derived
products across state lines for commercial or other purposes. It also puts no restrictions on the sale, transport, or possession
of hemp-derived products, so long as those items are produced in a manner consistent with the law.
Under
Section 10113 of the Farm Bill, hemp cannot contain more than 0.3 percent THC, the chemical compound found in cannabis that produces
the psychoactive “high” associated with cannabis. Any cannabis plant that contains more than 0.3 percent THC would
be considered non-hemp cannabis—or marijuana—illegal under the CSA.
Additionally,
there will be significant, shared state-federal regulatory power over hemp cultivation and production. Under Section 10113 of the
Farm Bill, state departments of agriculture must consult with the state’s governor and chief law enforcement officer to devise
a plan that must be submitted to the Secretary of the United States Department of Agriculture (hereafter referred to as the “USDA”).
A state’s plan to license and regulate hemp can only commence once the Secretary of USDA approves that state’s plan.
In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators
in those states must apply for licenses and comply with a federally-run program. This system of shared regulatory programming is
similar to options states had in other policy areas such as health insurance marketplaces under Affordable Care Act, or workplace
safety plans under Occupational Health and Safety Act—both of which had federally-run systems for states opting not to set
up their own systems.
The
Farm Bill outlines actions that are considered violations of federal hemp law (including such activities as cultivating without
a license or producing cannabis with more than 0.3 percent THC). The Farm Bill details possible punishments for such violations,
pathways for violators to become compliant, and even which activities qualify as felonies under the law, such as repeated offenses.
One
of the goals of the previous 2014 Farm Bill was to generate and protect research into hemp. The 2018 Farm Bill continues this effort.
Section 7605 re-extends the protections for hemp research and the conditions under which such research can and should be conducted.
Further, section 7501
of the Farm Bill extends hemp research by including hemp under the Critical Agricultural Materials Act. This provision recognizes
the importance, diversity, and opportunity of the plant and the products that can be derived from it, but also recognizes that
there is a still a lot to learn about hemp and its products from commercial and market perspectives.
We
currently operate two divisions within the regulated hemp industry: (i) the development, manufacturing, marketing and sale of our
hempSMART™ consumer products that include non-psychoactive industrial hemp-based CBD as an ingredient; and, (ii) professional
financial consulting and property management services.
The
United States Food & Drug Administration (“FDA”) is generally responsible for protecting the public health by ensuring
the safety, efficacy, and security of (1) prescription and over the counter drugs; (2) biologics including vaccines, blood &
blood products, and cellular and gene therapies; (3) foodstuffs including dietary supplements, bottled water, and baby formula;
and, (4) medical devices including heart pacemakers, surgical implants, prosthetics, and dental devices.
Regarding
its regulation of drugs, the FDA process requires a review that begins with the filing of an “Investigational New Drug”
(IND) application, with follow on clinical studies and clinical trials that the FDA uses to determine whether a drug is safe and
effective, and therefore subject to approval for human use by the FDA.
Aside
from the FDA’s mandate to regulate drugs, the FDA also regulates dietary supplement products and dietary ingredients under
the Dietary Supplement Health and Education Act of 1994. This law prohibits manufacturers and distributors of dietary supplements
and dietary ingredients from marketing products that are adulterated or misbranded. This means that these firms are responsible
for evaluating the safety and labeling of their products before marketing to ensure that they meet all the requirements of the
law and FDA regulations, including, but not limited to the following labeling requirements: (1) identifying the supplement; (2)
nutrition labeling; (3) ingredient labeling; (4) claims; and, (5) daily use information.
The
FDA has not approved cannabis, hemp or CBD derived from industrial hemp as a safe and effective drug for any indication. As of
the date of this filing, we have not, and do not intend to file an IND with the FDA, concerning any of our consumer products that
contain CBD derived from industrial hemp.
The
FDA has concluded that products containing industrial hemp derived CBD are excluded from the dietary supplement definition under
sections 201(ff)(3)(B)(i) and (ii) of the U.S. Food, Drug & Cosmetic Act, respectively. The FDA’s position is that products
containing industrial hemp derived CBD are Schedule 1 drugs under the Controlled Substances Act, and so are illegal drugs that
are under the purview of the U.S. Drug Enforcement Agency and U.S. Justice Dept., who are charged with enforcing the Controlled
Substances Act. However, at some indeterminate future time, the FDA may choose to change its position concerning cannabis generally,
and specifically products containing industrial hemp derived CBD, and may choose to enact regulations that are applicable to such
products as either drugs or supplements. In this event, our industrial hemp-based products containing CBD may be subject to regulation
(See Risk Factors, Item IA).
Critical
Accounting Policies - The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Note 1 to the Consolidated Financial Statements describes the significant
accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not
limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting
policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial
Statements.
Stock-Based
Compensation - The Company also issues restricted shares of its common stock for share-based compensation programs to employees
and non-employees. The Company measures the compensation cost with respect to restricted shares to employees based upon the estimated
fair value at the date of the grant, and is recognized as expense over the period which an employee is required to provide services
in exchange for the award. For non- employees, the Company measures the compensation cost with respect to restricted shares
based upon the estimated fair value at measurement date which is either a) the date at which a performance commitment is reached,
or b) at the date at which the necessary performance to earn the equity instruments is complete.
Recent
Accounting Pronouncements - See Note 3 of the condensed consolidated financial statements for discussion of recent accounting
pronouncements.