FMHS Farmhouse Inc (QB)

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FARMHOUSE, INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Report, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “SEC”) on April 30, 2021. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based upon beliefs of, and information currently available to management as well as estimates and assumptions made by management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to our business, industry, and our operations and results of operations and the effects that the COVID-19 outbreak, or similar pandemics, could have on our business. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

The full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of COVID-19 within our financial statements, and although there is currently no major impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and

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assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Report.

Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our,” the “Company,” “our Company” or “Farmhouse” refer to Farmhouse Inc., a Nevada corporation, and our wholly owned subsidiaries, Farmhouse, Inc., a Washington corporation (“Farmhouse Washington”) and Farmhouse DTLA, Inc. (“DTLA”), a California corporation.

Corporate Overview

On August 13, 2019, the Company consummated an Agreement and Plan of Merger with Farmhouse Washington which became a wholly owned subsidiary. On this date, all of the issued and outstanding shares of common stock of Farmhouse Washington were exchanged for shares of common stock of the Company on a one share for one share basis (the “Acquisition”). Upon consummation of the Acquisition, the financial statements are the continuation of Farmhouse Washington with the adjustment to reflect the capital structure of the Company.

We are a holding company dedicated to connecting the cannabis industry through multiple divisions including WeedClub, the @420 Twitter handle and a 49% equity interest in a Los Angeles-based multi-licensed cannabis retail dispensary, grow, manufacturer and distributor.

WeedClub® Platform: Our WeedClub® Platform is a professional social networking platform for the regulated cannabis and hemp industries. It was founded in 2014 and has established a trusted brand by providing a private and secure way for members to network with fellow industry stakeholders through our WeedClub® Platform and in-person and virtual events.

@420: Our signature brand encompasses our @420 Twitter handle and our @420 pitch events. Our Twitter handle enables the Company to raise awareness, engage with and advertise to cannabis enthusiasts, businesses and consumers. With over 93,000 followers, our organic tweets consistently generate engagement rates of at least 2% and upwards of 10% while the industry average is 0.07% on Twitter according to Social Insider. In addition, our Twitter handle provides an approved paid advertising channel that many companies lack access to. This exclusive ability enables our members to drive traffic to their websites and deliver increased sales through approved paid advertising campaigns. The @420 pitch connects cannabis startups with investors in both in-person and virtual events. Our events have hosted over 100 startup pitches, led to more than $50M in funding raised and generated over 10 fully funded and exited startups.

LA Dispensary: In April 2021, the Judge overseeing an arbitration hearing in our ongoing lawsuit against a downtown Los Angeles retail dispensary issued a judgment in favor of DTLA. The judgment awarded 49% of this dispensary to DTLA. In addition to equity ownership, the judgment awarded DTLA a share of any profits of this dispensary from November 2017 to the present and going forward along with accrued interest on those profits and the costs of bringing

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litigation. The Court appointed a monitor, supervised by the Judge, to determine how much in past profits and interest we are entitled to be awarded and to ensure we are treated fairly by the counterparty going forward. Currently, no impact of the Judgment is reflected in our accompanying unaudited interim condensed consolidated financial statements as the amount of the Judgment has not been determined. See further discussion under Part II, Item 1. Legal Proceedings in this report.

Our WeedClub® Platform, @420 Twitter handle and @420 pitch events provide essential services that position the Company as a trusted brand and connector within the cannabis industry. Our recent award of 49% equity ownership in the Los Angeles retail dispensary provides an additional asset for our holding company. With our strong brand and far-reaching cannabis network, we believe we are uniquely positioned to scale in the current political climate and in the event of federal legalization.

Our principal executive office is located at 1355 Market Street, Suite 488, San Francisco, CA 94103 and our phone number is (888) 420-6856.

Current and Future Plan of Operations

Farmhouse is built on connection, brand and trust. These three pillars establish the foundation that drives value for our community across all our divisions. Through technology, we leverage these pillars to connect members to value-add products, services, capital, and consumers. Our commitment to developing cannabis-specific technology solutions firmly established us as a trusted connector in the cannabis industry.

As our industry continues to grow, it faces the same problems due to the lack of federal legalization. For many cannabis brands, the lack of federal legalization leads to increased cost of expansion, lack of access to many proven digital marketing channels and lack of access to capital and banking. We addressed these problems by being early movers by creating the WeedClub® Platform, a professional social networking platform, and establishing the @420 brand including our @420 Twitter handle with over 93,000 followers.  

Over the past year, new technology centered around a decentralized future (web3) has emerged as a potentially more effective solution for all the core problems our industry faces. Decentralization and web3 eliminate the walled gardens created by the platform economy that cannabis companies lack access to due to the lack of federal legalization. Through web3, cannabis brands can connect directly with their consumers, build community and raise capital through new channels to better position themselves for potential federal legalization.

The key feature of this future is non-fungible tokens (NFTs). What started out as simple digital JPEGs has rapidly evolved in the past year into curated collectable art and the digital proof of ownership that unlocks holder-specific value such as community, product and services discounts and more.

Just as we were early movers when we created the WeedClub® Platform as a professional social network for the cannabis industry, we launched Super Strains in October 2021, a NFT project

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that connects cannabis brands directly to a community of cannabis and cryptocurrency enthusiasts. Super Strains is a joint venture with a member of the Bored Ape Yacht Club (BAYC) and a cybersecurity and smart contract auditor. This joint venture allows us to leverage our connections in the cannabis industry and NFT communities to create a unique community ideal for cannabis brands to interact with.

Super Strains is the first step that allows us to leverage our existing foundation to solve the problems of our industry through web3 solutions. As we build this new crypto native, cannabis enthusiast community, we will drive brand awareness and access an entirely new demographic of members to our ecosystem. Not only will this provide new opportunities for cannabis brands to engage with us, it will also expand our reach to younger demographics that care about engaging in a more instantaneous and genuine way.

We believe our entrance into web3 and NFTs adds a new layer into our current foundation and allows us to leverage what we have built to strengthen our ability to provide technological solutions that address the core problems our industry continues to face.

Liquidity and Capital Resources

Until such time we can raise additional capital or generate positive cash flow from operations, we will continue to be funded through short-term advances from the Company Officers. We estimate we will need $2,500,000 in capital, after satisfying our debt obligations, to cover our ongoing expenses and to successfully market and expand our product offerings. This is only an estimate and may change as we receive feedback from customers and have a better feel of the demand and revenues from our new products. Both of these factors may change and we may not be able to raise the necessary capital and if we are able to, that it may not be at favorable rates. We intend to meet our cash requirements for the next 12 months equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares.

For the nine months ended September 30, 2021 and 2020, we generated revenues of $12,045 and $7,940, respectively, and we reported net losses of $618,213 and $468,018, respectively. We had negative cash flow from operating activities of $154,032 and $74,869, respectively. As of September 30, 2021, we had an accumulated deficit of $4,944,551 and a stockholders’ deficit of $1,356,077.

Our auditors have raised substantial doubt regarding our ability to continue as a going concern as a result of our historical recurring losses and negative cash flows from operations as well as our dependence on private equity and financings. We anticipate that we will continue to report losses and negative cash flow. To date, we have financed our activities principally from the sale of common stock and loans from Company officers. We intend on financing our future working capital needs from these sources until such time that funds provided by our operations are sufficient to fund our working capital requirements. We believe that the loans from Company officers and funds raised from the sale of our common stock will allow us sufficient capital for operations and to continue as a going concern.

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In April 2021, we authorized an offering of up to 1,000,000 shares of common stock at $.51 per share, providing proceeds of up to $510,000, to be offered and sold only to investors that qualify as “accredited investors” as that term is defined in Regulation D. For the nine months ended September 30, 2021, we sold 238,236 shares of common stock under this offering for proceeds of $121,500. This offering was terminated on August 31, 2021.

Results of Operations

Nine months Ended September 30, 2021, compared to the nine months Ended September 30, 2020

For the nine months ended September 30, 2021 and 2020, we generated revenues of $12,045 and $7,940. We generate five types of revenue, which generally consist of fees from subscriptions, affiliate advertising, event sales, referrals and consulting. Our revenues for the nine months ended September 30, 2021 and 2020 were as follows:

In June, we launched a new Membership Benefits Program under the WeedClub® Platform, where subscribers can connect to ‘exclusive deals’ on essential products and services necessary to scale their business. Our special pricing of $149 for an annual subscription makes access to our WeedClub® Platform available to all. Affiliate advertising, through our advertising deal with Twitter, generated $8,850 of revenues for the nine months ended September 30, 2021. In 2020, we entered into an advertising deal with Twitter which provides us a revenue stream and growth opportunity due to our ability to post approved hemp social media ads. We generate referral fees when a business transaction is consummated between us and the potential target company.

For the nine months ended September 30, 2021 and 2020, general and administrative expenses were $286,204 and $273,928, respectively, an overall increase of approximately $12,400. Contributing factors to this increase were:

·public company related costs, including OTC filing fees, press releases and transfer agent costs increased by approximately $13,400, 

·overall general and administrative expenses increased by approximately $27,300, and 

·labor-related expenses decreased by approximately $28,300. Labor-related expenses included recognizing approximately $61,100 in stock-based fees in the current nine-month period. 

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For the nine months ended September 30, 2021 and 2020, professional fees were $347,544 and $161,756, respectively, an increase of approximately $185,800. Our professional fees for the nine months ended September 30, 2021 and 2020 were comprised of the following:

Legal expenses increased overall by approximately $33,500 for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Contributing factors to this increase were:

·our current securities counsel fees increased by approximately $15,300, 

·fees incurred by Judicate West and Planet Depot related to our litigation against LAFI increased by approximately $70,400. Reference is made to Note 9, Litigation, to the Condensed Consolidated Financial Statements included under Item 1 in this Report,  

·fees to our patent and trademark counsel increased by approximately $1,100, and  

·fees to litigation counsel in connection with our litigation against LAFI decreased by approximately $53,300. 

Accounting and audit expenses increased by approximately $49,300 for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Contributing factors to this increase were:

·fees to our independent public accounting firm increased by approximately $4,800 for our annual fiscal year audit and quarterly reviews, 

·fees for our contracted CFO services increased by approximately $54,300, which included $60,800 of stock-based fees recognized in the current nine-month period, and  

·fees to our outside bookkeeping services decreased by approximately $9,800 for the costs of filing our corporate federal income tax returns in the prior year comparable period. 

Professional fees increased by approximately $64,900 for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to an increase in fees to our contracted software engineers and developers of our software technology platforms. Professional fees included recognizing approximately $92,000 in stock-based fees in the current nine-month period.

Consulting fees increased by approximately $38,100 for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to an increase in fees to an outside strategic business consultant. Consulting fees included recognizing approximately $38,100 in stock-based fees in the current nine-month period.

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For the nine months ended September 30, 2021 and 2020 interest expense was $32,229 and $38,653, respectively, a decrease of approximately $6,400. Interest charged by our former litigation counsel on their unpaid balance decreased by approximately $7,300 while interest expense on our other debt obligations increased by approximately $900 in the current nine-month period.

Overall, for the nine months ended September 30, 2021, we reported a net loss of $618,213 compared to a net loss of $468,018 for the nine months ended September 30, 2020, an overall increase of approximately $150,200 from the prior year comparable period. Not including stock-based fees recorded for services rendered by consultants and professionals, which totaled approximately $254,600 and $98,000 for the nine months ended September 30, 2021 and 2020, respectively (as discussed above), our net loss actually decreased by approximately $6,400 from the prior year comparable period, as shown in the following table:

Three Months Ended September 30, 2021, compared to the three Months Ended September 30, 2020

For the three months ended September 30, 2021 and 2020, we generated revenues of $149 and $5,000, respectively. We generate five types of revenue, which generally consist of fees from subscriptions, affiliate advertising, event sales, referrals and consulting. Our revenues for the three months ended September 30, 2021 and 2020 were as follows:

In June, we launched a new Membership Benefits Program under the WeedClub® Platform, where subscribers can connect to ‘exclusive deals’ on essential products and services necessary to scale their business. Our special pricing of $149 for an annual subscription makes access to our WeedClub® Platform available to all. We generate referral fees when a business transaction is consummated between us and potential target company.

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For the three months ended September 30, 2021 and 2020, general and administrative expenses were $116,234 and $107,831, respectively, an overall increase of approximately $8,400. Contributing factors to this increase were:

·public company related costs, including OTC filing fees, press releases and transfer agent costs increased by approximately $10,800, 

·overall general and administrative expenses increased by approximately $20,800, and 

·labor-related expenses decreased by approximately $23,200. Labor-related expenses included recognizing approximately $26,400 in stock-based fees in the current three-month period. 

For the three months ended September 30, 2021 and 2020, professional fees were $132,107 and $48,470, respectively, an increase of approximately $83,600. Our professional fees for the three months ended September 30, 2021 and 2020 were comprised of the following:

Legal expenses increased overall by approximately $13,000 for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Contributing factors to this increase were:

·our current securities counsel fees increased by approximately $10,400, 

·fees incurred by Judicate West and Planet Depot related to our litigation against LAFI increased by approximately $16,700. Reference is made to Note 9, Litigation, to the Condensed Consolidated Financial Statements included under Item 1 in this Report, 

·fees to our patent and trademark counsel increased by approximately $1,600, and  

·fees to litigation counsel in connection with our litigation against LAFI decreased by approximately $15,700. 

Accounting and audit expenses increased by approximately $35,000 for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. Contributing factors to this increase were:

·fees to our independent public accounting firm decreased by approximately $2,000 for our annual fiscal year audit and quarterly reviews, 

·fees for our contracted CFO services increased by approximately $37,500, which included $25,500 of stock-based fees recognized in the current nine-month period, and  

·fees to our outside bookkeeping services decreased by approximately $500. 

Professional fees increased by approximately $21,500 for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 due to an increase in fees to our

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contracted software engineers and developers of our software technology platforms. Professional fees included recognizing approximately $35,300 in stock-based fees in the current three-month period.

Consulting fees increased $14,100 for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 due to an increase in fees to an outside strategic business consultant.  Consulting fees included recognizing approximately $14,100 in stock-based fees in the current three-month period.

For the three months ended September 30, 2021 and 2020 interest expense was $12,836 and $2,309, respectively, a decrease of approximately $10,500. Interest charged by our former litigation counsel on their unpaid balance increased by approximately $10,000 while interest expense on our other debt obligations increased by approximately $500 in the current three-month period.

Overall, for the three months ended September 30, 2021, we reported a net loss of $224,721 compared to a net loss of $154,007 for the three months ended September 30, 2020, an overall increase of approximately $70,700 from the prior year comparable period. Not including stock-based fees recorded for services rendered by consultants and professionals, which totaled approximately $104,000 and $56,574 for the three months ended September 30, 2021 and 2020, respectively (as discussed above), our net loss increased by approximately $23,300 from the prior year comparable period, as shown in the following table:

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Nine months Ended September 30, 2021

Operating activities used $154,032 of cash, primarily resulting from our net loss for the nine months ended September 30, 2021 of $618,213, offset by non-cash stock issued for services of $229,068 and to settle liabilities of $15,780 (net of gain on settlement of debt of $14,220) and increases in liabilities across all categories: accounts payable, accrued legal fees, accrued payroll and other accrued liabilities. There was no use of cash for investing activities for the nine months ended September 30, 2021. Financing activities provided $195,120 of cash for the nine months ended September 30, 2021, consisting of $127,500 in proceeds from the sale of common stock and $60,000 of borrowings on two loan obligations, one for $50,000 (senior) and one for $10,000, from unrelated lenders. Borrowings under the $50,000 loan obligation shall remain senior with respect to priority lien and right of payment to any indebtedness later acquired. As a condition of this loan agreement, our Company’s Chief Executive Officer personally and unconditionally guaranteed the timely repayment of the loan. In addition to these cash increases, short-term advances from Company officers, net of repayments provided of $7,620 of cash for the nine months ended September 30, 2021.

Nine months Ended September 30, 2020

Operating activities used $74,869 of cash, primarily resulting from our net loss for the nine months ended September 30, 2020 of $468,018, offset by non-cash stock issued for services of $97,986 and increases in liabilities across all categories: accounts payable, accrued legal fees, accrued payroll and other accrued liabilities. There was no use of cash for investing activities for the nine months ended September 30, 2020. Financing activities provided $68,419 of cash for the nine months ended September 30, 2020, consisting of $39,501 in proceeds from the sale of common stock and $28,918 of short-term advances from Company officers, net of repayments, for the nine months ended September 30, 2020.

Contractual Obligations

We qualify as a smaller reporting company, as defined by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.

Off Balance Sheet Arrangements

We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents were $44,994 and $3,906 as of September 30, 2021 and December 31, 2020, respectively.

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Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our accounting policies that are critical or most important to understanding our financial condition and results of operations and that require management to make the most difficult judgments are described in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed on April 30, 2021. There have been no material changes in these critical accounting policies.

Recently Adopted Accounting Pronouncements

Reference is made to Note 2, Summary of Significant Accounting Policies, to the Condensed Consolidated Financial Statements included under Item 1 in this Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2021.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting subsequent to September 30, 2021, which were identified in connection with our management’s evaluation

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required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations of the Effectiveness of Disclosure Controls and Internal Controls

Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.

The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II – OTHER INFORMATION

None.

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

The Company is a party to legal proceedings by the Company’s subsidiary, Farmhouse DTLA.

In August 2017, the Company’s subsidiary, DTLA. entered into a Strategic Consulting Agreement (the “SCA”) with Absolute Herbal Pain Solutions, Inc., a medical marijuana growing and retail company based in Los Angeles that now goes by the name Los Angeles Farmers, Inc. (“LAFI”). The SCA provided for DTLA to invest substantial sums of money into LAFI and also to provide management services for LAFI going forward. In exchange, LAFI agreed to provide

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DTLA with a share in any future profits and a 49% equity stake in LAFI. Following the SCA, in excess of $700,000 was spent by DTLA to stabilize LAFI’s finances and pay critical bills. In addition, DTLA brought in an outside management company with expertise in running grow and retail operations. Subsequent to DTLA providing funding and management resources to LAFI, DTLA and its management team were locked out of the LAFI facility in late October 2017.

On October 25, 2017, DTLA commenced litigation in Los Angeles County Superior Court (Case #BC681251) against LAFI and David and Irina Vayntrub, who were the sole officers, directors, and members of LAFI, seeking to enforce its contract rights under the SCA. On March 27, 2018, the litigation was stayed so that the parties could pursue the claims by way of arbitration at Judicate West. In January 2020, following more than a year of discovery, DTLA entered into a confidential settlement with the Vayntrubs, however, the case continued against LAFI.

In February 2021, a four-day arbitration hearing was held at Judicate West. On April 8, 2021, the Judge overseeing the arbitration hearing issued a judgment in favor of DTLA and against LAFI (the “DLTA Judgment”). The DLTA Judgment awarded 49% of LAFI to DTLA as of the change of control in November 2017, along with a share of any profits from November 2017 to the present and going forward, accrued interest on those profits, and costs of bringing the litigation. The DLTA Judgment also appointed a monitor, to be supervised by the Judge, to determine how much in past profits and interest DTLA is entitled to be awarded and that DTLA is treated fairly by LAFI on a going forward basis. The impact of the DLTA Judgment has not been reflected in the accompanying unaudited interim condensed consolidated financial statements since the amount of the DLTA Judgment has not been determined. The Company is also reviewing the accounting treatment going forward.

Following the issuance of DTLA Judgment, DTLA filed a motion for reimbursement of costs in the amount of $22,382. No objection was filed by LAFI and on June 1, 2021, the amount was confirmed by the Los Angeles County Superior Court as a Judgment. In July 2021, DTLA received reimbursement costs in the amount of $22,382, which is recorded as other income for the three and nine-month periods ended September 30, 2021. A court-appointed Monitor is undertaking the process of determining the value of the 49% of profits and proceeds from 2017 forward that DTLA is entitled to, in addition to the 10% prejudgment interest. The Monitor’s report is expected to be completed by the end of Q4 2021.

ITEM 1A. RISK FACTORS

The Company qualifies as a smaller reporting company, as defined by Item 10 of Regulation S-K and, thus, are not required to provide the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Common Stock Offering

In April 2021, the Board authorized an offering of up to 1,000,000 shares of common stock at $0.51 per share (the “Offering Price”), providing proceeds of up to $510,000 (the “Offering”). The Offering terminated on August 21, 2020. In connection with the Offering, the Board also

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approved a one-time, limited anti-dilution protection to certain investors who, in the last 12 months, invested at a per share price higher than the Offering Price.

Unless otherwise indicated, all of the following sales or issuances of Company securities were conducted under the exemption from registration as provided under Section 4(2) of the Securities Act of 1933 (and also qualified for exemption under 4(5), formerly 4(6) of the Securities Act of 1933, except as noted below). All of the shares issued were issued in transactions not involving a public offering, are considered to be restricted stock as defined in Rule 144 promulgated under the Securities Act of 1933 and stock certificates issued with respect thereto bear legends to that effect.

Common Stock Issuances

A summary of the Company’s common stock transactions for the nine months ended September 30, 2021 is as follows:

·The Company sold 8,000 shares of common stock for cash proceeds of $6,000. 

·The Company issued 246,178 shares of common stock for services rendered. The Company recorded an expense of $229,068 for the nine months ended September 30, 2021 based on the closing price of the Company’s common stock on the OTC Pink market. 

·The Company sold 238,236 shares of common stock under the Offering for proceeds of $121,500. See “Common Stock Offering” above. 

·The Company issued 39,844 shares of common stock for anti-dilution protection to five investors who invested at a per share price higher than the Offering Price in the last 12 months. See “Common Stock Offering” above. 

·The Company issued 30,000 shares of common stock in settlement of $30,000 of liabilities and recognized a gain on extinguishment of debt in connection with this settlement. which is recorded as other income for the three and nine-month periods ended September 30, 2021. 

·The Company granted a Restricted Stock Award of 200,000 shares of common stock under the Company’s 2021 Omnibus Incentive Plan to a Company office. See Note 8. 

As a result of these transactions, the Company has 15,618,050 shares of common stock outstanding as of September 30, 2021.

A summary of the Company’s common stock transactions for the nine months ended September 30, 2020 is as follows:

·The Company sold 50,000 shares of common stock for cash proceeds of $37,500. 

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·The Company issued 105,995 shares of common stock for services rendered. The shares of common stock were valued at various prices, based on the closing price of the Company’s common stock on the OTC Pink market, and resulted in an expense of $97,986 for the nine months ended September 30, 2020. 

·The Company issued 125,000 shares of common stock for the acquisition of the domain blunt.com. The shares of common stock were valued at $125,000, based on the closing price of the Company’s common stock on the OTC Pink market. 

As a result of these transactions, the Company has 14,778,838 shares of common stock outstanding as of September 30, 2020.

A summary of the Company’s common stock transactions subsequent to September 30, 2021 is as follows:

·The Company issued 21,500 shares of common stock for services rendered. 

As a result of these transactions, the Company has 15,639,550 shares of common stock outstanding as of the date of this Report.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES 

There have been no events which are required to be reported under this item.

ITEM 4.MINE SAFETY DISCLOSURES 

Not applicable.

ITEM 5.OTHER INFORMATION 

None.

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* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, City of San Francisco, State of California, on November 12, 2021.

By:  /s/ Evan Horowitz  

EVAN HOROWITZ 

Chief Executive Officer, Director 

Pursuant to the requirements of the Securities Act of 1933, this registrant statement has been signed by the following persons in the capacities and on the dates indicated.

By:  /s/ Evan Horowitz  

EVAN HOROWITZ 

Chief Executive Officer, Director 

By:  /s/ Lanny R. Lang  

LANNY R. LANG 

Chief Financial Officer, Chief Accounting Officer 

(Principal Financial and Accounting Officer)

By:  /c/ Michael Landau  

MICHAEL LANDAU 

Chief Technology Officer, Treasurer, Director 

By:  /s/ Scott Bostick  

SCOTT BOSTICK 

Director 

35