UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
|
☒
|
QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the
quarterly period ended June 30, 2020
OR
|
☐
|
TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For the
transition period from __________ to __________
Commission File
Number: 033-33263
|
Jacksam Corporation
|
|
(Exact name of
registrant as specified in its charter)
|
|
Nevada
|
|
46-3566284
|
|
(State or other
jurisdiction of
incorporation or
organization)
|
|
(IRS Employer
Identification No.)
|
|
|
|
|
30191 Avenida De
Las Banderas Suite B
Rancho Santa
Margarita, CA
|
|
92688
|
|
(Address of principal
executive offices)
|
|
(Zip Code)
|
Registrant’s telephone
number, including area code: (800)
605-3580
Indicate by check mark
whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark
whether the registrant has submitted electronically every
Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒
No ☐
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated
filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated
filer
|
☐
|
Accelerated filer
|
☐
|
|
Non-accelerated
filer
|
☒
|
Smaller reporting
company
|
☒
|
|
Emerging growth
company
|
☒
|
|
|
If an emerging growth
company, indicate by check mark if the registrant has elected not
to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. ☐
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes ☐ No ☒
As of July 13, 2020,
the registrant had 64,246,830 shares of common stock, $0.001 par
value per share, outstanding.
TABLE OF
CONTENTS
Forward-Looking
Statements
For purposes of this
report, unless otherwise indicated or the context otherwise
requires, all references herein to “Jacksam Corporation,” “the
Company,” “we,” “us,” and “our,” refer to Jacksam Corporation, a
Nevada corporation.
This Quarterly Report
on Form 10-Q, or this Report, contains forward-looking statements.
Any and all statements contained in this Report that are not
statements of historical fact may be deemed forward-looking
statements. Terms such as “may,” “might,” “would,” “should,”
“could,” “project,” “estimate,” “pro-forma,” “predict,”
“potential,” “strategy,” “anticipate,” “attempt,” “develop,”
“plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future”
and terms of similar import (including the negative of any of the
foregoing) may be intended to identify forward-looking statements.
However, not all forward-looking statements may contain one or more
of these identifying terms. Forward-looking statements in this
Report may include, without limitation, statements regarding (i)
the plans and objectives of management for future operations,
including plans or objectives relating to the development of our
cartridge filling machines, cartridge capping machines and
cartridges, (ii) a projection of income (including income/loss),
earnings (including earnings/loss) per share, capital expenditures,
dividends, capital structure or other financial items, (iii) our
future financial performance, including any such statement
contained in a discussion and analysis of financial condition by
management or in the results of operations included pursuant to the
rules and regulations of the Securities and Exchange Commission, or
the SEC, and (iv) the assumptions underlying or relating to any
statement described in points (i), (ii) or (iii) above.
The forward-looking
statements are not meant to predict or guarantee actual results,
performance, events or circumstances and may not be realized
because they are based upon our current projections, plans,
objectives, beliefs, expectations, estimates and assumptions and
are subject to a number of risks and uncertainties and other
influences, many of which we have no control over. Actual results
and the timing of certain events and circumstances may differ
materially from those described by the forward-looking statements
as a result of these risks and uncertainties.
|
Jacksam
Corporation
|
|
Consolidated Balance
Sheets
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
|
|
$ |
551,195 |
|
|
$ |
453,623 |
|
|
Accounts receivable,
net
|
|
|
236,995 |
|
|
|
105,510 |
|
|
Inventory, net
|
|
|
190,498 |
|
|
|
189,841 |
|
|
Prepaid expenses
|
|
|
98,418 |
|
|
|
251,539 |
|
|
Total Current
Assets
|
|
|
1,076,836 |
|
|
|
1,000,513 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net
|
|
|
4,356 |
|
|
|
13,280 |
|
|
Right of use asset -
operating lease
|
|
|
- |
|
|
|
9,299 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
1,081,192 |
|
|
$ |
1,023,092 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
$ |
632,231 |
|
|
$ |
696,633 |
|
|
Deferred revenue
|
|
|
938,893 |
|
|
|
1,343,983 |
|
|
Convertible notes
payable, current portion
|
|
|
657,068 |
|
|
|
1,067,983 |
|
|
Notes payable, current
portion
|
|
|
314,400 |
|
|
|
145,331 |
|
|
Right of use liability
- operating lease
|
|
|
- |
|
|
|
9,837 |
|
|
Derivative
liability
|
|
|
1,548,761 |
|
|
|
504,750 |
|
|
Accrued liabilities -
other
|
|
|
1,642,118 |
|
|
|
1,642,118 |
|
|
Total Current
Liabilities
|
|
|
5,733,471 |
|
|
|
5,410,635 |
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, net of
current portion
|
|
|
371,803 |
|
|
|
- |
|
|
Other long-term
liabilities
|
|
|
110,000 |
|
|
|
220,000 |
|
|
Total
Liabilities
|
|
|
6,215,274 |
|
|
|
5,630,635 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Deficit:
|
|
|
|
|
|
|
|
|
|
Preferred stock -
10,000,000 authorized, $0.001 par value, 0 shares issued and
outstanding
|
|
|
- |
|
|
|
- |
|
|
Common stock - 90,000,000 authorized, $0.001
par value, 64,246,830 and 62,871,972 shares issued and outstanding,
respectively
|
|
|
64,247 |
|
|
|
62,872 |
|
|
Additional paid-in
capital
|
|
|
4,240,745 |
|
|
|
3,396,369 |
|
|
Shares payable,
consisting of 10,069,435 and 0 shares of common stock,
respectively.
|
|
|
1,857,883 |
|
|
|
- |
|
|
Accumulated deficit
|
|
|
(11,296,957 |
) |
|
|
(8,066,784 |
) |
|
Total
Stockholders' Deficit
|
|
|
(5,134,082 |
) |
|
|
(4,607,543 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Deficit
|
|
$ |
1,081,192 |
|
|
$ |
1,023,092 |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of these unaudited condensed consolidated
financial statements
|
|
Jacksam
Corporation
|
|
Consolidated Statements
of Operations
|
|
For the Three and Six
Months Ended June 30, 2020 and 2019
|
|
(Unaudited)
|
|
|
|
Three
Months
Ended
|
|
|
Three
Months
Ended
|
|
|
Six
Months
Ended
|
|
|
Six
Months
Ended
|
|
|
|
|
June
30,
2020
|
|
|
June
30,
2019
|
|
|
June
30,
2020
|
|
|
June
30,
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ |
633,481 |
|
|
$ |
1,326,421 |
|
|
$ |
1,286,703 |
|
|
$ |
2,950,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Sales
|
|
|
239,756 |
|
|
|
1,392,021 |
|
|
|
547,774 |
|
|
|
2,522,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
393,725 |
|
|
|
(65,600 |
) |
|
|
738,929 |
|
|
|
428,034 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages
(including contractors)
|
|
|
226,568 |
|
|
|
1,159,077 |
|
|
|
479,697 |
|
|
|
1,703,995 |
|
|
Other selling, general
and administrative expenses
|
|
|
211,979 |
|
|
|
691,865 |
|
|
|
366,838 |
|
|
|
1,282,449 |
|
|
Total Operating
Expenses
|
|
|
438,547 |
|
|
|
1,850,942 |
|
|
|
846,535 |
|
|
|
2,986,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
Operations
|
|
|
(44,822 |
) |
|
|
(1,916,542 |
) |
|
|
(107,606 |
) |
|
|
(2,558,410 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
6,154 |
|
|
|
(11,818 |
) |
|
|
6,154 |
|
|
|
(14,366 |
) |
|
Derivative gain
(loss)
|
|
|
2,230,298 |
|
|
|
(134,813 |
) |
|
|
(1,511,809 |
) |
|
|
(134,813 |
) |
|
Interest expense
|
|
|
(159,268 |
) |
|
|
(42,950 |
) |
|
|
(1,616,912 |
) |
|
|
(67,777 |
) |
|
Total Other
Income (Expense)
|
|
|
2,077,184 |
|
|
|
(189,581 |
) |
|
|
(3,122,567 |
) |
|
|
(216,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss)
|
|
$ |
2,032,362 |
|
|
$ |
(2,106,123 |
) |
|
$ |
(3,230,173 |
) |
|
$ |
(2,775,366 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per
Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$ |
0.03 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
62,493,771 |
|
|
|
61,591,972 |
|
|
|
62,393,689 |
|
|
|
61,732,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of these unaudited condensed consolidated
financial statements
|
Jacksam
Corporation
Consolidated Statements
of Stockholders' Deficit
For the Three and Six
Months Ended June 30, 2020 and 2019
(Unaudited)
|
|
|
Common Stock,
$.001 Par Value
|
|
|
Paid-In
|
|
|
Shares
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Payable
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
|
|
48,272,311 |
|
|
$ |
48,272 |
|
|
$ |
10,661 |
|
|
$ |
- |
|
|
$ |
(4,519,497 |
) |
|
$ |
(4,460,564 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of
ASU 2016-02
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,407 |
) |
|
|
(2,407 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
debt conversion
|
|
|
10,579,661 |
|
|
|
10,580 |
|
|
|
3,192,920 |
|
|
|
- |
|
|
|
- |
|
|
|
3,203,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of common
stock warrants
|
|
|
2,000,000 |
|
|
|
2,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
imputed interest
|
|
|
- |
|
|
|
- |
|
|
|
22,945 |
|
|
|
- |
|
|
|
- |
|
|
|
22,945 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(669,243 |
) |
|
|
(669,243 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March
31, 2019
|
|
|
60,851,972 |
|
|
$ |
60,852 |
|
|
$ |
3,226,526 |
|
|
$ |
- |
|
|
$ |
(5,191,147 |
) |
|
$ |
(1,903,769 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of common
stock warrants
|
|
|
900,000 |
|
|
|
900 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
imputed interest
|
|
|
- |
|
|
|
- |
|
|
|
150 |
|
|
|
- |
|
|
|
- |
|
|
|
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,106,123 |
) |
|
|
(2,106,123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June
30, 2019
|
|
|
61,751,972 |
|
|
$ |
61,752 |
|
|
$ |
3,226,676 |
|
|
$ |
- |
|
|
$ |
(7,297,270 |
) |
|
$ |
(4,008,842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019
|
|
|
62,871,972 |
|
|
$ |
62,872 |
|
|
$ |
3,396,369 |
|
|
$ |
- |
|
|
$ |
(8,066,784 |
) |
|
$ |
(4,607,543 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
imputed interest
|
|
|
- |
|
|
|
- |
|
|
|
151 |
|
|
|
- |
|
|
|
- |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
debt conversion
|
|
|
476,191 |
|
|
|
476 |
|
|
|
166,191 |
|
|
|
1,333,333 |
|
|
|
- |
|
|
|
1,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
units
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
356,470 |
|
|
|
- |
|
|
|
356,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of
derivative liability due to conversion
|
|
|
- |
|
|
|
- |
|
|
|
606,048 |
|
|
|
- |
|
|
|
- |
|
|
|
606,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,262,535 |
) |
|
|
(5,262,535 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March
31, 2020
|
|
|
63,348,163 |
|
|
$ |
63,348 |
|
|
$ |
4,168,759 |
|
|
$ |
1,689,803 |
|
|
$ |
(13,329,319 |
) |
|
$ |
(7,407,409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt
imputed interest
|
|
|
- |
|
|
|
- |
|
|
|
151 |
|
|
|
- |
|
|
|
- |
|
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock
units
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
168,080 |
|
|
|
- |
|
|
|
168,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for
deferred finance costs
|
|
|
388,667 |
|
|
|
389 |
|
|
|
72,345 |
|
|
|
- |
|
|
|
- |
|
|
|
72,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued under
share-lending arrangement
|
|
|
1,443,333 |
|
|
|
1,443 |
|
|
|
(1,443 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares returned under
share-lending arrangement
|
|
|
(933,333 |
) |
|
|
(933 |
) |
|
|
933 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,032,362 |
|
|
|
2,032,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June
30, 2020
|
|
|
64,246,830 |
|
|
$ |
64,247 |
|
|
$ |
4,240,745 |
|
|
$ |
1,857,883 |
|
|
$ |
(11,296,957 |
) |
|
$ |
(5,134,082 |
) |
The accompanying notes
are an integral part of these unaudited condensed consolidated
financial statements
|
Jacksam
Corporation
|
|
Consolidated Statements
of Cash Flows
|
|
For the Six Months Ended
June 30, 2020 and 2019
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Cash Flows from
Operating Activities
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,230,173 |
) |
|
$ |
(2,775,366 |
) |
|
Adjustments to
reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
8,924 |
|
|
|
533 |
|
|
Imputed interest
|
|
|
302 |
|
|
|
23,095 |
|
|
Amortization of debt
discount
|
|
|
1,554,056 |
|
|
|
38,524 |
|
|
Derivative loss
|
|
|
1,511,809 |
|
|
|
134,813 |
|
|
Inventory impairment
|
|
|
- |
|
|
|
402,844 |
|
|
Net change in:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(131,485 |
) |
|
|
(76,739 |
) |
|
Inventory
|
|
|
(657 |
) |
|
|
213,929 |
|
|
Prepaid expenses
|
|
|
170,261 |
|
|
|
1,902 |
|
|
Right of use asset
|
|
|
9,299 |
|
|
|
- |
|
|
Other assets
|
|
|
- |
|
|
|
- |
|
|
Accounts payable and accrued
expenses
|
|
|
(62,752 |
) |
|
|
(27,327 |
) |
|
Right of use liability
|
|
|
(9,837 |
) |
|
|
- |
|
|
Other long-term liabilities
|
|
|
(110,000 |
) |
|
|
330,000 |
|
|
Deferred revenue
|
|
|
(405,090 |
) |
|
|
507,107 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating
activities
|
|
|
(695,343 |
) |
|
|
(1,226,685 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Investing Activities
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes
payable
|
|
|
273,600 |
|
|
|
1,583,333 |
|
|
Payments of debt issuance
cost
|
|
|
(30,600 |
) |
|
|
(132,848 |
) |
|
Payments on convertible notes
payable
|
|
|
(630,000 |
) |
|
|
- |
|
|
Proceeds from notes payable
|
|
|
591,900 |
|
|
|
- |
|
|
Payments on notes payable
|
|
|
(74,785 |
) |
|
|
(70,912 |
) |
|
Proceeds from sale of common
stock units
|
|
|
662,800 |
|
|
|
- |
|
|
Proceeds from exercise of common
stock warrants
|
|
|
- |
|
|
|
2,900 |
|
|
Net cash provided by financing
activities
|
|
|
792,915 |
|
|
|
1,382,473 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in
Cash
|
|
|
97,572 |
|
|
|
1,229,893 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Balance,
Beginning of Period
|
|
|
453,623 |
|
|
|
155,788 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash Balance,
End of Period
|
|
$ |
551,195 |
|
|
$ |
1,229,893 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
Interest
|
|
$ |
62,312 |
|
|
$ |
10,408 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
transactions:
|
|
|
|
|
|
|
|
|
|
Common stock issued to settle
convertible notes payable
|
|
$ |
1,500,000 |
|
|
$ |
3,203,500 |
|
|
Derivative liability recognized
at issuance of warrants
|
|
$ |
138,250 |
|
|
$ |
1,450,485 |
|
|
Extinguishment of derivative to
conversion and repayment
|
|
$ |
390,383 |
|
|
$ |
- |
|
|
Common stock issued for deferred
finance costs
|
|
$ |
72,733 |
|
|
$ |
- |
|
|
Capitalization of right of use
asset for operating lease
|
|
$ |
- |
|
|
$ |
44,138 |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of these unaudited condensed consolidated
financial statements
|
Jacksam
Corporation
Notes to
Unaudited Condensed Consolidated Financial Statements
Note 1:
Organization and Nature of Operations
Jacksam Corporation dba
Convectium is a technology company that designs and develops
high-performance automation machines and solutions for the medical
and recreational cannabis, hemp and CBD segments of the larger
e-cigarette and vaporizer markets.
Prior to July 2019, the
Company’s product line primarily consisted of the 710 Shark
cartridge filling machine, the 710 Captain cartridge capping
machine, and proprietary cartridges. Since July 2019, the Company
has added the eShark cartridge filling machine into its product
line and discontinued the sales of proprietary cartridges.
During the fourth
quarter of 2019, the Company entered into a strategic partnership
with Jupiter Research, LLC. The partnership highlights the leverage
of existing customer base and sales force of both companies to
distribute the Company’s automation machines and pre-rack solution,
and Jupiter Research’s C-Cell cartridges under a profit-sharing
agreement.
During the second
quarter of 2020, the Company entered into a strategic partnership
with 14th Round Inc. The partnership highlights the
sales force collaboration, equipment R&D collaboration, and
marketing collaborations.
The Company’s customers
are primarily businesses operating in jurisdictions that have some
form of cannabis legalization. These businesses include medical and
recreational dispensaries, large and small-scale processors and
growers, multi-state operators, and distributors. The Company
utilizes its direct sales force, website, strategic partners’ sales
force, independent sales representatives, and a wide range of
referral network to sell its products.
The Company was
originally organized under the laws of the State of Nevada on
September 21, 1989 under the name of Fulton Ventures, Inc.
Effective November 16, 2009, management at that time changed the
name of Fulton Ventures, Inc. to China Grand Resorts, Inc. After
the September 30, 2014 10-Q filing, the management of China Grand
Resorts, Inc. abandoned the Company and its subsidiaries were taken
back by Chinese national companies in China who owned them. The
remaining parent company, China Grand Resorts, Inc., became a
dormant company until 2016 when a new shareholder Bryan Glass
became the majority shareholder and owner of the Company.
On September 14, 2018,
the Company’s wholly owned subsidiary, Jacksam Acquisition Corp., a
corporation formed in the State of Nevada on September 11, 2018, or
the Acquisition Sub, merged with and into Jacksam, a corporation
incorporated in the State of Delaware in August 2013.
On November 5, 2018,
current management merged Jacksam into the parent Company, China
Grand Resorts, Inc. In connection with the transaction, current
management amended our articles of incorporation to change the
Company’s name from China Grand Resorts, Inc. to Jacksam
Corporation dba Convectium.
Since the Merger, the
Company has been operated under the control of current management
and continued to operate the business of Jacksam Corporation,
described herein, as our sole business.
In accordance with the
terms of the Exchange Agreement, and in connection with the
completion of the acquisition, on the Closing Date, the Company
issued 45,000,000 shares of common stock at par value $0.001 per
share to the Jacksam shareholders in exchange for all of the issued
and outstanding shares of Jacksam. In addition, the previous owners
of China Grand Resorts, Inc. returned 30,000,000 shares of common
stock to the treasury of the Company. Following the acquisition,
there was a total of 48,272,311 shares of common stock issued and
outstanding, of which 3,272,311 were held by shareholders of the
Company prior to the Merger. In connection with the above
transaction, $340,000 was paid to the former controlling
shareholder related to the return of 30,000,000 shares of common
stock.
In accordance with
“reverse merger” or “reverse acquisition” accounting treatment, the
historical financial statements of China Grand Resorts, Inc., as of
period ends and for periods ended prior to the Merger, will be
replaced with the historical financial statements of Jacksam, prior
to the Merger, in all future filings with the SEC.
Note 2:
Significant Accounting Policies
Basis of
Preparation
The interim unaudited
consolidated financial statements as of June 30, 2020, and for the
three and six months ended June 30, 2020 and 2019, have been
prepared in accordance with accounting principles generally
accepted in the United States for interim financial information on
the same basis as the annual financial statements and in the
opinion of management, reflect all adjustments, which include only
normal recurring adjustments, necessary to present fairly the
Company’s financial position, results of operations and cash flows
for the periods shown. The results of operations for such periods
are not necessarily indicative of the results expected for a full
year or for any future period. They do not include all of the
information and footnotes required by GAAP for complete financial
statements. Therefore, these financial statements should be read in
conjunction with the Company’s audited financial statements and
notes filed with the SEC for the year ended December 31, 2019.
Inventory
Inventories are stated
at the lower of cost, determined on the first-in, first-out (FIFO)
method or net realizable value. Cost principally consists of the
purchase price (adjusted for lower of cost or market), customs,
duties, and freight. The Company periodically reviews historical
sales activity to determine potentially obsolete items and
evaluates the impact of any anticipated changes in future
demand.
The June 30, 2020 and
December 31, 2019 inventory consisted entirely of finished goods.
The Company will maintain an allowance based on specific inventory
items that have shown no activity over a 24-month period. The
Company tracks inventory as it is disposed, scrapped or sold at
below cost to determine whether additional items on hand should be
reduced in value through an allowance method. As of June 30, 2020
and December 31, 2019, the Company has determined that no allowance
is required.
Revenue
Recognition
The Company derives
revenues from the sale of machines and consumable products.
Pursuant to ASC 606, revenues are recognized when control of the
promised goods or services is transferred to the customer in an
amount that reflects the consideration the Company expects to be
entitled to in exchange for transferring those goods or
services.
Revenue is recognized
based on the following five step model:
|
|
•
|
Identification of the
contract with a customer
|
|
|
•
|
Identification of the
performance obligations in the contract
|
|
|
•
|
Determination of the
transaction price
|
|
|
•
|
Allocation of the
transaction price to the performance obligations in the
contract
|
|
|
•
|
Recognition of revenue
when, or as, the Company satisfies a performance obligation
|
Performance
Obligations
Sales of machines and
consumable products are recognized when all the following criteria
are satisfied: (i) a contract with an end user exists which has
commercial substance; (ii) it is probable the Company will collect
the amount charged to the end user; and (iii) the Company has
completed its performance obligation whereby the end user has
obtained control of the product. A contract with commercial
substance exists once the Company receives and accepts a purchase
order or once it enters into a contract with an end user. If
collectability is not probable, the sale is deferred and not
recognized until collection is probable or payment is received.
Control of products typically transfers when title and risk of
ownership of the product has transferred to the customer. The
customer has a 10-day period to inspect the equipment and may
return the product if it does not meet the agreed-upon
specifications. For contracts with multiple performance
obligations, the Company allocates the total transaction price to
each performance obligation in an amount based on the estimated
relative standalone selling prices of the promised goods or
services underlying each performance obligation. The Company uses
an observable price to determine the stand-alone selling price for
separate performance obligations or a cost-plus margin approach
when one is not available. Historically, the Company’s contracts
have not had multiple performance obligations. Most the Company’s
performance obligations are recognized at a point in time related
to the sale of machines and consumable products.
Sales, value add, and
other taxes collected concurrent with revenue-producing activities
are excluded from revenue. Incidental items that are immaterial in
the context of the contract are recognized as expense. Payment
terms between invoicing and when payment is due is less than one
year. As of June 30, 2020, none of the Company’s contracts
contained a significant financing component.
The Company elected the
practical expedient to not adjust the amount of revenue to be
recognized under a contract with an end user for the effects of
time value of money when the timing difference between receipt of
payment and recognition of revenue is less than one year.
The majority of the
Company’s contracts offer an assurance-type warranty of the
products at no additional cost for a period of 3 years.
Assurance-type warranties provide a customer with assurance that
the related product will function as the parties intended because
it complies with agreed-upon specifications. Such warranties do not
represent a separate performance obligation. At the time a sale is
recognized, the Company estimated future warranty costs, which were
trivial.
Transaction Price
Allocated to the Remaining Performance Obligations
At a given point in
time, the Company may have collected payment for future sales of
product to begin production. These transactions are deferred until
the product transfers to the customer and the performance
obligation is considered complete. As of June 30, 2020, $938,893 in
revenue is expected to be recognized in the future related to
performance obligations that are unsatisfied (or partially
unsatisfied) at the end of the reporting period. The Company
expects to recognize all of our unsatisfied (or partially
unsatisfied) performance obligations as revenue in the next twelve
months.
Contract
Costs
Costs incurred to
obtain a customer contract are not material to the Company. The
Company elected to apply the practical expedient to not capitalize
contract costs to obtain contracts with a duration of one year or
less, which are expensed and included within cost of goods and
services.
Critical Accounting
Estimates
Estimates are used to
determine the amount of variable consideration in contracts, the
standalone selling price among separate performance obligations and
the measure of progress for contracts where revenue is recognized
over time. The Company reviews and updates these estimates
regularly.
Disaggregation of
Revenue
All machine sales and
most consumable products sales are completed in North America.
|
|
|
Three
Months
Ended
June
30,
2020
|
|
|
Three
Months
Ended
June
30,
2019
|
|
|
Six
Months
Ended
June
30,
2020
|
|
|
Six
Months
Ended
June
30,
2019
|
|
|
Machine sales
|
|
$ |
548,466 |
|
|
$ |
578,451 |
|
|
$ |
1,116,670 |
|
|
$ |
1,162,346 |
|
|
Consumable product
sales
|
|
|
85,015 |
|
|
|
747,970 |
|
|
|
170,033 |
|
|
|
1,788,329 |
|
|
Total sales
|
|
$ |
633,481 |
|
|
$ |
1,326,421 |
|
|
$ |
1,286,703 |
|
|
$ |
2,950,675 |
|
Net Loss Per
Common Share
Basic net loss per
common share is computed by dividing net loss by the
weighted-average number of common shares outstanding during the
period. Potential common stock equivalents are determined using the
treasury stock method. For diluted net loss per share purposes, the
Company excludes stock options and other stock-based awards,
including shares issued as a result of option exercises that are
subject to repurchase by the Company, whose effect would be
anti-dilutive from the calculation. During the six months ended
June 30, 2020 and 2019, common stock equivalents were excluded from
the calculation of diluted net loss per common share, as their
effect was anti-dilutive due to the net loss incurred. Therefore,
basic and diluted net loss per share was the same in all periods
presented.
The Company had
13,461,883 and 11,388,887 potentially dilutive securities that have
been excluded from the computation of diluted weighted-average
shares outstanding as of June 30, 2020 and 2019, respectively, as
they would be anti-dilutive. Additionally, as of June 30, 2020
there were a total of 10,069,435 shares to be issued related to
conversions of debt and stock unit sales during the six months
ended June 30, 2020 that were excluded from the computation of
weighted average shares outstanding.
Going
Concern
The Company’s financial
statements are prepared using accounting principles generally
accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company has negative working capital, recurring
losses, and does not have a source of revenues sufficient to cover
its operating costs. These factors raise substantial doubt about
the Company’s ability to continue as a going concern.
The ability of the
Company to continue as a going concern is dependent upon its
ability to successfully execute the business plan and attain
profitable operations. The accompanying financial statements do not
include any adjustments that may be necessary if the Company is
unable to continue as a going concern.
In the coming year, the
Company’s foreseeable cash requirements will relate to continual
development of the operations of its business, maintaining its good
standing and making the requisite filings with the SEC, and the
payment of expenses associated with operations and business
developments. The Company may experience a cash shortfall and be
required to raise additional capital.
Historically, it has
mostly relied upon convertible notes payable from private investors
and cash flows from operations to finance its operations and
growth. Management may raise additional capital by retaining net
earnings or through future private offerings of the Company’s stock
or through loans from private investors, although there can be no
assurance that it will be able to obtain such financing. The
Company’s failure to do so could have a material and adverse effect
upon it and its shareholders.
Recently Issued
Accounting Pronouncements
From time to time, new
accounting pronouncements are issued by the FASB or other standard
setting bodies that are adopted by the Company as of the specified
effective date. Unless otherwise discussed, the Company believes
that the effect of recently issued standards that are not yet
effective and will not have a material effect on its consolidated
financial position or results of operations upon
adoption.
Note 3:
Property and Equipment
Property and equipment
consist of the following:
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
Furniture and
fixtures
|
|
$ |
10,425 |
|
|
$ |
10,425 |
|
|
Equipment
|
|
|
7,579 |
|
|
|
7,579 |
|
|
Trade show display
|
|
|
2,640 |
|
|
|
2,640 |
|
|
Total
|
|
|
20,644 |
|
|
|
20,644 |
|
|
Less: Accumulated
depreciation
|
|
|
(16,288 |
) |
|
|
(7,364 |
) |
|
Property and equipment
net
|
|
$ |
4,356 |
|
|
$ |
13,280 |
|
Depreciation expense
amounted to $8,659 and $8,924 for the three and six months ended
June 30, 2020, respectively, and $268 and $533 for the three and
six months ended June 30, 2019, respectively.
Note 4:
Accounts Payable and Accrued Expenses
Accounts payable and
accrued expenses consist of the following:
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
272,445 |
|
|
$ |
347,850 |
|
|
Credit cards
payable
|
|
|
49,462 |
|
|
|
48,743 |
|
|
Accrued interest
|
|
|
5,021 |
|
|
|
4,778 |
|
|
Sales tax payable
|
|
|
140,303 |
|
|
|
130,262 |
|
|
Accrued officer
consulting cost
|
|
|
165,000 |
|
|
|
165,000 |
|
|
Total Accounts payable
and accrued expenses
|
|
$ |
632,231 |
|
|
$ |
696,633 |
|
Note 5:
Notes Payable
A summary of Notes
Payable is as follows:
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
Notes payable dated
December 31, 2019, bearing interest at 3% monthly, maturing
February 29, 2020 (amended on April 22, 2020)
|
|
|
- |
|
|
$ |
164,835 |
|
|
Notes payable dated
February 6, 2020, bearing interest at 3% monthly, maturing May 27,
2022 (amended on April 22, 2020)
|
|
|
137,303 |
|
|
|
- |
|
|
SBA PPP loan dated
April 17, 2020, bearing interest at 1%, maturing April 17, 2022
|
|
|
399,000 |
|
|
|
- |
|
|
SBA EIDL loan dated May
26, 2020, bearing interest at 3.75%, maturing May 26, 2050
|
|
|
149,900 |
|
|
|
- |
|
|
Total notes payable
|
|
|
686,203 |
|
|
|
164,835 |
|
|
Less: unamortized
discount and deferred financing costs
|
|
|
- |
|
|
|
(19,504 |
) |
|
Less: current
portion
|
|
|
(314,400 |
) |
|
|
(145,331 |
) |
|
Long-term portion of
notes payable
|
|
$ |
371,803 |
|
|
$ |
- |
|
On December 31, 2019,
the Company entered into an inventory financing arrangement with a
single lender, whereby $150,000 was paid by the lender directly to
a vendor to secure inventory for the sales to customers in January
2020. The Company shall pay $164,835 of principal and interest by
February 29, 2020. The interest and fees of $14,835 were recorded
as debt discount and were amortized through the maturity date. The
Company also paid a deferred finance cost of $5,000 which was
amortized through the maturity date. The Company entered into a
second agreement on February 6, 2020 with the same lander for an
additional $43,000 of funding. The Company will repay $47,253 at
maturity on April 6, 2020. On April 22, 2020, these two notes
payable were refinanced with the lender into a single agreement
whereby the Company will make an initial repayment of $74,231 and
24 monthly payments of $7,467, for total payments of $253,439. This
amendment was accounted for as a modification of the debt.
In April 2020, the
Company received $399,000 under the Small Business Administration’s
Payroll Protection Program. The loan bears interest at a fixed rate
of 1%, and matures on April 17, 2022, payable monthly with payments
beginning six months after issuance. In accordance with the terms
of the Payroll Protection Program, a portion of this loan may be
forgiven if the loan proceeds are used for payroll, mortgage, rent
and utility costs, but no more than 25% of the forgiveness amount
can be related to nonpayroll costs. The Company recognized the
$399,000 as a debt instrument, pursuant to ASC 470.
On June 2, 2020, the
Company received $150,000 under the Small Business Administration’s
Economic Injury Disaster Loan. The loan bears interest at a fixed
rate of 3.75%, and matures on May 26, 2050, payable monthly with
payments of $731 beginning twelve months after issuance. The loan
gives the Small Business Administration a security interest in all
assets of the Company.
The Company amortized
$23,757 of debt discount and deferred finance costs to interest
expense related to notes payable.
Note 6:
Convertible Notes Payable
The following table
summarizes outstanding convertible notes as of June 30, 2020 and
December 31, 2019:
|
|
|
June
30,
2020
|
|
|
December
31,
2019
|
|
|
2017 Notes, maturing December 2020, currently
past due
|
|
$ |
15,000 |
|
|
$ |
15,000 |
|
|
June 2019 Notes, maturing March 25, 2020,
currently past due
|
|
|
448,888 |
|
|
|
2,018,889 |
|
|
December 2019 Notes, maturing June 10,
2020
|
|
|
- |
|
|
|
560,000 |
|
|
June 2020 Notes 1, maturing June 4, 2021
|
|
|
175,000 |
|
|
|
- |
|
|
June 2020 Notes 2, maturing June 24, 2021
|
|
|
129,000 |
|
|
|
- |
|
|
Total
|
|
|
767,888 |
|
|
|
2,593,889 |
|
|
Less: Debt discount and deferred finance
costs on short-term convertible notes
|
|
|
(110,820 |
) |
|
|
(1,525,906 |
) |
|
Less: Current convertible notes payable, net
of discount
|
|
|
(657,068 |
) |
|
|
(1,067,983 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total long-term convertible notes payable,
net
|
|
$ |
- |
|
|
$ |
- |
|
In June and July 2019,
the Company issued convertible notes to 10 investors with a
principal amount of $2,388,889, receiving $1,583,333 in net cash
proceeds (the “June 2019 Notes”). The June 2019 Notes had an
original issue discount of $238,889, and the Company incurred an
interest charge deducted from the gross proceeds of $358,333, based
on a 15% stated rate. The total of $597,222 was recorded as debt
discount. Additionally, the Company paid $132,848 of financing
costs, which were recorded as a reduction of the carrying value of
the debt. The deferred financing costs and debt discounts are being
amortized using the effective interest method through the maturity
of the June 2019 Notes. The June 2019 Notes matured on March 25,
2020 and are convertible into the Company’s common stock at a per
share price of $0.35 at any time subsequent to the issuance date.
The June 2019 Notes contain a down round feature, whereby any sale
of common stock or common stock equivalent at a price per share
lower than the conversion price of the June 2019 Notes will result
in the conversion price being lowered to the new price. The
warrants contain the same down round feature as the notes. As a
result of a dilutive issuance during the six months ended June 30,
2020, the exercise price of the remaining notes payable and the
warrants is currently $0.18 per share. The convertible debt
outstanding as of June 30, 2020 was convertible into 2,493,827
shares of common stock.
During the six months
ended June 30, 2020, $1,500,000 of the principal on the June 2019
Notes was converted into 7,142,852 shares of common stock, of which
476,191 were issued by June 30, 2020. On May 19, 2020, the holder
of $444,444 of the notes agreed to extend the repayment period to
December 31, 2020. There were no other changes to terms of the
convertible notes payable, and the amendment was accounted for as a
debt modification.
In December 2019, the
Company issued convertible notes to an institutional investor with
a principal amount of $560,000 (the “December 2019 Notes”) with an
original issue discount of $56,000 and a maturity date of June 10,
2020. The Company paid $44,000 of deferred finance costs. The
Company also issued 186,667 shares of common stock to the lender of
the December 2019 Notes as deferred finance costs, valued at
$81,200 based on the closing price of the stock at the date of
borrowing. This lender also received 933,333 shares of common stock
valued at $406,000 as a share lending arrangement, which the
company recorded as contra-equity. The shares were returned to the
Company when the debt was repaid in full in June 2020, by the
maturity date.
On June 4, 2020, the
Company issued a convertible note to an institutional investor with
a principal amount of $175,000 (the “June 2020 Notes 1”) bearing
interest at 15% with an original issue discount of $17,500 and a
maturity date of June 4, 2021. The Company paid $17,100 of deferred
finance costs. The Company also issued 116,667 shares of common
stock to the lender of the June 2020 Notes 1 as deferred finance
costs, valued at $23,333 based on the closing price of the stock at
the date of borrowing. In May 2020, the Company issued 100,000
shares of common stock to an investment bank that were recorded as
a deferred finance costs, valued at $15,000 based on the closing
price of the stock at the date of issuances. This lender also
received 583,333 shares of common stock valued at $116,667 under a
share lending arrangement, which the company recorded as
contra-equity. The shares may be returned to the Company if the
debt is satisfied in full by the maturity date. If the debt is not
repaid by the maturity date or an event of default occurs, the
shares are concerned fully earned, and the fair value of the shares
will be amortized in full to expense.
On June 24, 2020, the
Company issued convertible notes to an institutional investor with
a principal amount of $129,000 (the “June 2020 Notes 2”) bearing
interest at 15% with an original issue discount of $12,900 and a
maturity date of June 24, 2021. The Company paid $13,500 of
deferred finance costs. The Company also issued 86,000 shares of
common stock to the lender of the June 2020 Notes 2 as deferred
finance costs, valued at $17,200 based on the closing price of the
stock at the date of borrowing. This lender also received 430,000
shares of common stock valued at $86,000 as a share lending
arrangement, which the company recorded as contra-equity. The
shares may be returned to the Company if the debt is satisfied in
full by the maturity date. If the debt is not repaid by the
maturity date or an event of default occurs, the shares are
concerned fully earned, and the fair value of the shares will be
amortized in full to expense.
On June 24, 2020, the
Company entered into a convertible note agreement with an
institutional investor for a principal amount of $129,000 (the
“June 2020 Notes 3”) bearing interest at 15% with an original issue
discount of $12,900 and a maturity date of June 24, 2021. The
proceeds of this loan were received in July 2020, and therefore no
principal balance is reflected on the Company’s balance sheet as of
June 30, 2020. The Company will pay $13,500 of deferred finance
costs. In June 2020 the Company issued 86,000 shares of common
stock of the June 2020 Notes 2 as deferred finance costs, valued at
$17,200 based on the closing price of the stock at the date of
borrowing, which were recorded as a prepaid expense. This lender
also received 430,000 shares of common stock valued at $86,000 as a
share lending arrangement, which the company recorded as
contra-equity. The shares may be returned to the Company if the
debt is satisfied in full by the maturity date. If the debt is not
repaid by the maturity date or an event of default occurs, the
shares are concerned fully earned, and the fair value of the shares
will be amortized in full to expense.
The Company amortized
$1,531,618 and $38,524 of debt discount and deferred finance costs
to interest expense related to convertible notes payable during the
six months ended June 30, 2020 and 2019, respectively. Accrued
interest on notes payable and convertible notes payable was $5,021
and $4,776 as of June 30, 2020 and December 31, 2019,
respectively.
The Company evaluated
the embedded conversion features of the convertible debt
instruments and the warrants discussed above and determined that
the conversion options and the warrants should be accounted for as
derivative liabilities. The fair values of the conversion option
and the attached warrants were estimated using a binomial model
with the following assumptions:
|
|
|
As of June 30,
2020
|
|
|
|
|
Conversion
Option
|
|
|
Warrants
|
|
|
Volatility
|
|
|
126.86 |
% |
|
87.8-93.9
|
%
|
|
Dividend Yield
|
|
|
0 |
% |
|
|
0 |
% |
|
Risk-free rate
|
|
|
0.18 |
% |
|
|
0.18 |
% |
|
Expected term
|
|
0.50 years
|
|
|
3-4 years
|
|
|
Stock price
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
|
Exercise price
|
|
$ |
0.18 |
|
|
$0.18-0.30
|
|
|
Derivative liability
fair value
|
|
$ |
246,687 |
|
|
$ |
1,302,074 |
|
All fair value
measurements related to the derivative liabilities are considered
significant unobservable inputs (Level 3) under the fair value
hierarchy of ASC 820. The table below presents the change in the
fair value of the derivative liability during the six months ended
June 30, 2020:
|
Fair value as of
December 31, 2019
|
|
$ |
504,750 |
|
|
Fair value
on the date of issuance related to warrants issued
|
|
|
138,250 |
|
|
Extinguishment due to repayment of debt
|
|
|
(356,007 |
) |
|
Extinguishment due to conversion of debt
|
|
|
(606,048 |
) |
|
Loss on
change in fair value of derivatives
|
|
|
1,867,816 |
|
|
Fair value as of June
30, 2020
|
|
$ |
1,548,761 |
|
Note 7:
Equity
Common
Stock
As of June 30, 2020,
the authorized capital stock of the Company consists of 100,000,000
shares, of which 90,000,000 shares are designated as common stock
and 10,000,000 shares of preferred stock.
During the six months
ended June 30, 2020, the Company issued 476,191 shares of common
stock related to the conversion of $166,667 of Convertible Notes
Payable. Additionally, principal of $1,333,333 was converted into
6,666,661 shares of common stock that have not yet been issued.
During the six months
ended June 30, 2020, the Company received $662,800 of cash proceeds
related to sale of 2,525,000 common stock units at $0.20 per unit
and 876,664 common stock units at $0.18 per unit. Each $0.20 unit
and $0.18 unit consists of a share of common stock and a warrant to
purchase half a share of common stock at an exercise price of $0.30
and $0.27, respectively, for a period of three years from issuance.
The common shares related to these unit sales have not yet been
issued as of June 30, 2020. As a result of the down round provision
in the convertible debt described above, the fair value of the
warrants was estimated using a binomial model and were accounted
for as a derivative liability, due to the potentially unlimited
number of shares that can be issued upon conversion of the debt
instruments.
During the six months
ended June 30, 2020, the Company issued a total of 388,667 shares
of common stock to an investment banker and the various lenders in
connection with the convertible notes payable issued during the
period. These shares had a fair value of $72,733 and were recorded
as deferred finance costs. Additionally, 1,443,333 shares of common
stock with a fair value of $288,667 were issued to the convertible
note lenders under a share lending arrangement, which the company
recorded as contra-equity. The shares may be returned to the
Company if the debt is satisfied in full by the maturity date. If
the debt is not repaid by the maturity date or an event of default
occurs, the shares are concerned fully earned, and the fair value
of the shares will be amortized in full to expense. In connection
with the repayment of the December 2019 Notes in June 2020, the
lender returned 933,333 shares previously issued under the share
lending arrangement, which were cancelled.
Stock
Warrants
A summary of stock
warrant information is as follows:
|
|
|
Aggregate
Number
|
|
|
Aggregate
Exercise
Price
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Outstanding at December
31, 2019
|
|
|
5,785,714 |
|
|
$ |
1,292,100 |
|
|
$ |
0.22 |
|
|
Warrants issued due to
reset provisions
|
|
|
3,480,953 |
|
|
|
626,572 |
|
|
|
0.18 |
|
|
Warrants issued with
common stock units
|
|
|
1,701,389 |
|
|
|
493,500 |
|
|
|
0.29 |
|
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Forfeited and
cancelled
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Outstanding at June 30,
2020
|
|
|
10,968,056 |
|
|
$ |
1,785,600 |
|
|
$ |
0.16 |
|
The weighted average
remaining contractual life is approximately 2.7 years for stock
warrants outstanding with a total intrinsic value of $839,233 on
June 30, 2020. All of the above warrants were fully vested. During
the six months ended June 30, 2020, a total of 3,685,714 warrants
associated with the June 2019 Notes had their exercise price reset
to $0.18 as a result of the sale of common stock units described
above.
Note 8:
Related Party
Mark Adams, CEO, and
David Hall, EVP of Sales invested in the June 2019 Notes. Mr. Adams
and Mr. Hall contributed $250,000 and $100,000 respectively, and
converted their debt during the six months ended June 30, 2020 into
shares of common stock of 1,388,885 and 555,555, respectively, that
have not yet to be issued.
Note 9:
Commitments
Employment
Agreement
In December 2017, the
Company entered into an employment agreement with Daniel Davis and
Mark Adams. As of the Effective Date, and for one year of the date
therefrom, the Executive’s annual salary shall be equal to $180,000
and $120,000, respectively, per annum (the “Annual Salary”). The
Annual Salary shall be paid to the Executive in equal installments
in accordance with the Company’s usual payroll practices.
Executive’s Annual
Salary shall increase automatically at the rate of five percent
(5%) per year for four years, beginning on the anniversary date of
the Effective Date. In addition to the automatic raises set forth
above, the Annual Salary may also be increased from time to time by
merit and general increases in amounts determined by the Board.
Performance Bonus. In
addition to the Annual Salary, the Executive is eligible to earn an
annual bonus of up to thirty percent (30%) of Executive’s Annual
Salary (the “Performance Bonus”). The amount of the Performance
Bonus will be determined in good faith by the Board, based upon the
following factors:
|
(a)
|
Fifty percent (50%) of
the Performance Bonus shall be based upon the achievement of the
Executive’s individual objectives, as defined in writing and
presented to Executive annually by the Board.
|
|
|
|
|
(b)
|
Fifty percent (50%) of
the Performance Bonus shall be based upon the achievement of
Company objectives, which shall include specifically, meeting or
exceeding the revenue targets and other objectives as determined by
the Board.
|
The initial set of
performance objectives, both for Executive individually and for the
Company, will be reasonably established by the Board within sixty
(60) days of the Effective Date of this Agreement. Subsequent
performance objectives, both for Executive individually and for the
Company, will be reasonably established by the Board within sixty
(60) days of the beginning of the calendar year to which the
Performance Bonus relates. The Performance Bonus shall be paid to
Executive in the first regular payroll period after the Board makes
a good faith determination that such Performance Bonus has been
earned, but in no event shall the Performance Bonus be paid later
than March 1 of the calendar year immediately following the
calendar year in which the bonus was earned.
In addition to salary,
the agreement provided for the option of 1,000,000 common shares of
the Company, which shall vest at a rate of 28,000 share for each
full one-month period worked from the Effective Date. If this
Agreement is terminated pursuant to written notice by the Company
to the Executive on or before the date that is one year after the
Effective Date, all the options shall vest and the Executive shall
retain the options subject to their terms and the terms hereof. The
options may contain terms providing the issuer the right to
accelerate vesting and/or require the exercise of options prior to
the initial public offering and listing of the issuer. The Company
may arrange for the grant of additional options to the Executive
from time to time based on the Executive’s performance and other
relevant factors as the Board may determine in its discretion.
All options to purchase
Holdings Shares granted to the Executive shall be subject to the
terms of the stock option agreement pursuant to which they are
granted and the terms of the stock option plan under which they are
granted in effect from time to time. Shares issuable on exercise of
the options shall be subject to any escrow, trading restriction, or
other requirement imposed by any stock exchange or securities
regulatory authority upon initial public offering or listing of the
shares. The Executive shall take such steps and execute and deliver
such documents as may be required to affect the foregoing.
The Company may
terminate Executive’s employment for Cause immediately upon Notice
from the Company to Executive. For purposes of this Agreement,
“Cause” shall mean the occurrence of any of the following: (i)
Executive’s conviction of or plea of nolo contendere to any felony
crime involving fraud, dishonesty, or moral turpitude; (ii)
Executive’s commission of, or participation in, a fraud against the
Company. In the event Executive’s employment is terminated for
Cause, the Company shall have no further obligations to the
Executive other than to pay all compensation and expense
reimbursements owing for services rendered and reasonable business
expenses incurred by Executive prior to the effective date of such
termination.
Upon termination of
this agreement pursuant, the Company shall provide to the
Executive:
|
|
(a)
|
A lump sum payment
equal to the greater of (i) twelve (12) months’ Annual Salary at
the Executive’s then- current rate, or (ii) Executive’s Annual
Salary for the remainder of the Term;
|
|
|
|
|
|
|
(b)
|
if applicable, to the
extent permitted by the Company’s group insurance carrier and
applicable law, continued group insurance benefits coverage,
together with reimbursement of the individual life insurance
premium for the period of time equal to the number of months in
respect of which payment is due pursuant and;
|
|
|
|
|
|
|
(c)
|
any other amounts
(including but not limited to any earned Performance Bonus during
the Executive’s active employment that may be payable pursuant to
this Agreement) accrued and earned by the Executive prior to the
effective date of termination.
|
If a Change of Control
occurs and the Executive is not offered continued employment on a
comparable basis after the Change of Control, the Executive shall
be entitled to receive, within thirty (30) days after the Change of
Control, a sum equivalent to twelve (12) months’ Annual Salary,
plus an additional 4% of Annual Salary in lieu of benefits, and any
Performance Bonus that has been earned by Executive prior to the
effective date of the Executive’s termination from the Company.
Thereafter, the Company shall have no further obligations to the
Executive under this Agreement other than payment of any other
amounts accrued as owing to the Executive under this Agreement as
of the date the Change of Control occurs.
On May 31, 2019, the
Company entered into a consulting agreement with Daniel Davis
related to his departure from employment with the Company. The
agreement requires Daniel Davis to provide limited consulting
services to the Company for a period of up to three years beginning
May 1, 2019 in exchange for $165,000 per year. During the three
months ended June 30, 2020, the Company and Daniel Davis agreed to
accelerate the payment of a portion of the consulting agreement,
with the maturity period ending three months earlier than the
original agreement. The Company made payments of $110,000 during
the six months ended June 30, 2020, leaving a balance of $165,000,
included in accounts payable and accrued expenses and $110,000 in
other long-term liabilities on the consolidated balance sheet. In
addition, the Company entered into a lock up agreement with Daniel
Davis that restricts the number of shares Daniel Davis can
otherwise publicly sell for a period of up to three years to one
third of the volume limits set forth under SEC Rule 144. Daniel
Davis also agreed to a standstill agreement that provides that for
a period of up to three years Daniel Davis will not seek to
influence the governance of the Company, including by participation
in any solicitation of other shareholders, promotion of any
extraordinary transaction, nomination of any candidate to the Board
or by seeking the removal of any existing directors.
Leases
The Company has a
single operating lease for an office lease in Rancho Santa
Margarita, California with an initial term of 37 months. Base
monthly rent was approximately $3,200 per month plus net operating
expenses. The office lease expired in February 2020, and the
Company is currently continuing the lease on a month to month
basis.
The Company also
maintains short-term rental agreements for certain storage
facilities. Total rent expense for these rentals was $18,542 and
$21,913 for the six months ended June 30, 2020 and 2019,
respectively.
Note 10:
Accrued Liabilities – Other
Prior to the Merger,
China Grand Resorts, Inc. recorded various liabilities that were
incurred by former related parties. The current management team is
not aware of any written agreements in place governing the terms of
the loans nor have they been in contact with the debt holders
however recognizes that China Grand Resorts, Inc. previously
reported these amounts as liabilities of the Company. In accordance
with ASC 405-20-40, the liabilities may only be removed from the
Company’s financial statements if they are paid, formally settled
or judicially released. Management believes the relevant statute of
limitations has passed and that no enforceable legal claim exists
in relation to these liabilities of $1,642,118, but does not
believes that is sufficient to remove the liability from the
financial statements. Management does not intend to remove these
liabilities of $1,642,118 from the Company’s financial statements
until such time that the liability is formally settled or
judicially released in accordance with ASC 405-20-40. Due to the
lack of written agreements and other factors noted above,
management concluded to no longer accrue interest on these
loans.
Note 11:
Subsequent Events
In July 2020, the
Company received net proceeds of $102,600 from the lender of the
June 2020 Notes 3 convertible notes payable, after original issue
discount of $12,900 and $13,500 of deferred finance costs. See Note
6.
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.
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 include several 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 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 SEC.
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 of our products, and
competition.
The following
discussion provides information that management believes is
relevant to an assessment and understanding of our past financial
condition and plan of operations. The discussion below should be
read in conjunction with the consolidated financial statements and
related notes thereto included elsewhere in this report.
Overview
The Company was
originally incorporated in the State of Nevada on September 21,
1989 under the name of Fulton Ventures, Inc. Since incorporated,
the Company has engaged in a variety of businesses, but has been
inactive since late 2014 through the Merger that closed on
September 14, 2018. Since the Merger, the Company has been operated
under the control of current management and continued to operate
the business of Jacksam Corporation, described herein, as our sole
business. Our sole business has been the design, manufacturing and
sale of vaporizer cartridge filling machines, capping machines, and
cartridges to customers in the medical and recreational cannabis,
hemp, and CBD industries.
Basis of
Presentation
The unaudited condensed
consolidated financial statements of Jacksam Corporation as of June
30, 2020, and for the three and six months ended June 30, 2020 and
2019, include a summary of our significant accounting policies and
should be read in conjunction with the discussion below. In the
opinion of management, all material adjustments necessary to
present fairly the results of operations for such unaudited interim
periods have been included in these unaudited financial statements.
All such adjustments are of a normal recurring nature.
Components of
Statements of Operations
Revenue
Product revenue
consists of sales of our eShark cartridge filling machine, 710
Shark cartridge filling machine, 710 Captain cartridge capping
machine, cartridges, accessories, warranty, service and freight
charges, net of returns, discounts and allowances. Once a sales
order is negotiated and received by a sales representative, we
generally collect a 50% deposit from the customer. When the product
is ready to be shipped, the customer will generally pay the
remaining balance. We recognize the revenue when the product leaves
the warehouse on the way to the customer.
For the filling and
capping machines, training is coordinated with the customers in
accordance with their availability but generally completed within a
week or two of the shipment. Standard warranties are offered at no
cost to customers to cover parts for three years, and labor and
maintenance are offered for one year for product defects.
Cost of
Revenue
Cost of goods sold
represents costs directly related to supplies and materials,
machines, freight and delivery, commissions, printing, packaging
and other costs.
We expect our cost of
goods sold per unit to decrease as we continue to scale our
operations, improve product designs and work with our third-party
suppliers to lower costs.
Operating
Expenses
Sales and
Marketing. Sales and marketing expenses consist
primarily of compensation, benefits, travel and other costs for our
direct sales force and project managers. Sales and marketing
expenses also include costs associated with our business
development efforts with our distributors and partners and costs
related to trade shows and other marketing programs. We expense
sales and marketing costs as incurred. We expect sales and
marketing expenses to increase in future periods as we expand our
sales and marketing teams and increase our participation in global
trade shows and other marketing programs.
General and
Administrative. Our general and administrative
expenses consist primarily of compensation, benefits, travel and
other costs for employees with non-sales roles. In addition,
general and administrative expenses include third-party consulting,
legal, audit, accounting services, and allocations of overhead
costs, such as rent, facilities and information technology. In the
near term, we expect general and administrative expenses to
decrease driven by our cost reduction initiatives. In the long
term, we expect general and administrative expenses to increase as
we grow our business.
Interest
Expense
Interest expense
consists primarily of interest from notes due to debtholders.
Results of
Operations – Three Month Periods
Comparison for the
three-month periods ended June 30, 2020 and 2019:
Revenue
Total revenue during
the three months ended June 30, 2020 decreased to $633,481
(comprised of machine sales of $548,466 and consumable product
sales of $85,015), compared to the three months ended June 30, 2019
that generated sales of $1,326,421 (comprised of machine sales of
$578,451 and consumable product sales of $747,970).
The decrease in sales
was mainly due to the Company strategically phased out selling
proprietary cartridge products and now focused on providing
automation solutions with our filling and capping machines and
pre-racked cartridges.
Cost of
Revenue
Total cost of revenue
decreased to $239,756 during the three months ended June 30, 2020,
compared to the three months ended June 30, 2019 that had costs of
revenues of $1,392,021. The decrease in cost of revenue was mainly
due to the Company strategically phased out selling proprietary
cartridge products.
During the three months
ended June 30, 2019, we recognized an inventory write down of
$402,844. The inventory write down consisted of mainly old
proprietary cartridges that were sold at low margin.
Under the Company’s
current and new business model, we focus on selling high-margin
automation machines. As a result, our gross margin percentage
increased from -5% for the three months ended June 30, 2019 to 62%
for the three months ended June 30, 2020.
Operating
Expenses
Sales,
Marketing and General and Administrative. Sales,
Marketing and General and Administrative expenses during the three
months ended June 30, 2020 decreased to $438,547 (comprised of
Salaries of $226,568 and other SG&A expenses of $211,979),
compared to the three months ended June 30, 2019 that produced
$1,850,942 in expenses (comprised of $1,159,077 in salaries and
other SG&A expenses of $691,865).
During the three months
ended June 30, 2019, we recognized one-time charges of the
following: settlement fees with the founder and another former
employee of approximately $600,000, legal fees associated with the
settlement of approximately $100,000, and R&D fees for the
eShark cartridge filling machine and new cartridge products of
approximately $100,000.
Excluding these
one-time charges, the decrease in salaries was related to a less
amount of commission paid to sales representatives as the Company
phased out proprietary cartridge products. And the decrease in
other SG&A expenses was comprised primarily of the following:
decreased travel and trade show spending due to the COVID-19 and
other operating cost disciplines.
Income
(loss) from Operations
Total loss from
operations was $44,822 during the three months ended June 30, 2020,
compared to $1,916,542 for the three months ended June 30,
2019.
The decreased loss from
operations was primarily the result of the gross margin improvement
and operating cost disciplines.
Derivative
Gain (loss)
Derivative gain, a
non-cash expense, was $2,230,298 during the three months ended June
30, 2020, due to the fair value change of the debt and warrants of
the June 2019 Notes driven by the stock price decrease between
March 30, 2020 and June 30, 2020, compared to a $134,813 derivative
loss for the three months ended June 30, 2019.
Interest
Expense
Interest expense
increased to $159,268 during the three months ended June 30, 2020,
compared to $42,950 for the three months ended June 30, 2019,
primarily due to the amortization of debt discount of the June 2019
Notes and December 2019 Notes as a non-cash expense.
Results of
Operations – Six Month Periods
Comparison for the
six-month periods ended June 30, 2020 and 2019:
Revenue
Total revenue during
the six months ended June 30, 2020 decreased to $1,286,703
(comprised of machine sales of $1,116,670 and consumable product
sales of $170,033), compared to the six months ended June 30, 2019
that generated sales of $2,950,675 (comprised of machine sales of
$1,162,346 and consumable product sales of $1,788,329).
As described above, the
decrease in sales was mainly due to the Company phased out selling
proprietary cartridge products and now focused on providing
automation solutions.
In addition, the
outbreak of COVID-19 in China since January 2020 caused a pause of
shipment from China to the U.S for certain of our products
manufactured in China. And the later outbreak of COVID-19 in the
U.S. caused different levels of delay in the operation of the
Company, vendors, and customers. These factors adversely impacted
the financial performance of the Company for the six months ended
June 30, 2020.
Cost of
Revenue
Total cost of revenue
decreased to $547,774 during the six months ended June 30, 2020,
compared to the six months ended June 30, 2019 that had costs of
revenues of $2,522,641.
As described above, the
decrease in cost of revenue was mainly due to the Company
strategically phased out selling proprietary cartridge
products.
Under the Company’s
current and new business model, our gross margin percentage
increased from 15% for the six months ended June 30, 2019 to 57%
for the six months ended June 30, 2020.
Operating
Expenses
Sales,
Marketing and General and Administrative. Sales,
Marketing and General and Administrative expenses during the six
months ended June 30, 2020 decreased to $846,535 (comprised of
Salaries of $479,697 and other SG&A expenses of $366,838),
compared to the six months ended June 30, 2019 that produced
$2,986,444 in expenses (comprised of $1,703,995 in salaries and
other SG&A expenses of $1,282,449).
Excluding the one-time
charges described above, the decrease in salaries was related to a
less amount of commission paid to sales representatives as the
Company phased out proprietary cartridge products. And the decrease
in other SG&A expenses was comprised primarily of the
following: decreased travel and trade show spending due to the
COVID-19 and other operating cost disciplines.
Income
(loss) from Operations
Total loss from
operations was $107,606 during the six months ended June 30, 2020,
compared to $2,558,410 for the six months ended June 30, 2019.
The decreased loss from
operations was primarily the result of the gross margin improvement
and operating cost disciplines.
Derivative
Loss
Derivative loss, a
non-cash expense, was $1,511,809 during the six months ended June
30, 2020, due to the fair value change of the debt and warrants of
the June 2019 Notes driven by the stock price increase between
December 31, 2019 and June 30, 2020, compared to $134,813 for the
six months ended June 30, 2019.
Interest
Expense
Interest expense
increased to $1,616,912 during the six months ended June 30, 2020,
compared to $67,777 for the six months ended June 30, 2019,
primarily due to the amortization of debt discount of the June 2019
Notes and December 2019 Notes as a non-cash expense.
Item 3. Quantitative and
Qualitative Disclosure About Market Risk
We do not use
derivative financial instruments in our investment portfolio and
have no foreign exchange contracts. Our financial instruments
consist of cash and cash equivalents. We consider investments that,
when purchased, have a remaining maturity of ninety (90) days or
less to be cash equivalents. We do not believe that a notional or
hypothetical 10% change in interest rates would have a material
impact on our interest income.
Item 4. Controls and
Procedures
Management’s
Evaluation of Disclosure Controls and Procedures
Under the supervision
and with the participation of our Chief Executive Officer and Chief
Financial Officer, after evaluating the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered
by this Form 10-Q, we have concluded that, based on such
evaluation, our disclosure controls and procedures were effective
to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and is accumulated and
communicated to our management, including our principal executive
and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure.
PART II — OTHER
INFORMATION
Item 1. Legal
Proceedings
There are presently no material pending legal proceedings to which
the Company is a party or as to which any of its property is
subject, and no such proceedings are known to the Company to be
threatened or contemplated against it.
Item 1A. Risk
Factors
As a
“smaller reporting company” as defined by Item 10 of Regulation
S-K, the Company is not required to provide this information.
Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon
Senior Securities
Not
applicable.
Item 4. Mine Safety
Disclosures
Not
applicable.
Item 5. Other
Information
None.
Item 6.
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
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JACKSAM
CORPORATION
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Dated: August 14,
2020
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By:
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/s/ Mark
Adams
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Mark Adams
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Chief Executive
Officer
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Dated: August 14,
2020
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By:
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/s/ Michael
Sakala
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Michael Sakala
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Chief Financial
Officer
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