Information included or incorporated by reference
in this prospectus may contain forward-looking statements. This information may involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or achievements to be materially different from the future results,
performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions
and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “should,”
“expect,” “anticipate,” “estimate,” “believe,” “intend” or “project”
or the negative of these words or other variations on these words or comparable terminology.
This prospectus contains forward-looking statements,
including statements regarding, among other things, (a) our projected sales and profitability, (b) our production and technology,
(c) the regulation to which we are subject, (d) anticipated trends in our industry and (e) our needs for working capital. These
statements may be found under “Management’s Discussion and Analysis or Plan of Operations” and “Business,”
as well as in this Prospectus generally. Actual events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and
matters described in this Prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this prospectus will in fact occur.
Except as otherwise required by applicable
laws, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in the
prospectus, whether as a result of new information, future events, changed circumstances or any other reason after the date of
this prospectus.
Just prior to the Offering there are 2,053,481,896
common shares outstanding. The 646,883,314 of the Company’s common shares being offered by the Company in the Offering represent
a dilution event to common stockholders that will result in a new total for outstanding and issued common shares of 2,723,303,396.
The following table, which
is based on the most recent balance sheet date, illustrates dilution to investors on an approximate dollar per share basis, depending
upon whether we sell 100%, 75%, 50%, or 25% of the Shares being offered in the Offering:
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER 31,
2019
NOTE 1 —
SIGNIFICANT ACCOUNTING POLICIES
A
summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:
Basis
and business presentation
Marijuana
Company of America, Inc. (The “Company”) was incorporated under the laws of the State of Utah in October 1985 under
the name Mormon Mint, Inc. The corporation was originally a startup company organized to manufacture and market commemorative
medallions related to the Church of Jesus Christ of Latter Day Saints. On January 5, 1999, Bekam Investments, Ltd. acquired one
hundred percent of the common shares of the Company and spun the Company off changing its name Converge Global, Inc. From August
13, 1999 until November 23, 2002, the Company focused on the development and implementation of Internet web content and e-commerce
applications. In October 2009, in a 30 for 1 exchange, the Company merged with Sparrowtech, Inc. for the purpose of exploration
and development of commercially viable mining properties. From 2009 to 2014, we operated primarily in the mining exploration business.
In
2015, the Company changed its business model to a marketing and distribution company for medical marijuana. In conjunction with
the change, the Company changed its name to Marijuana Company of America, Inc. At the time of the transition in 2015, there were
no remaining assets, liabilities or operating activities of the mining business.
On
September 21, 2015, the Company formed H Smart, Inc, a Delaware corporation as a wholly owned subsidiary for the purpose of operating
the hempSMART brand. H Smart, Inc. is also registered with the California Secretary of State as a foreign corporation.
On
February 1, 2016, the Company formed MCOA CA, Inc., a California corporation as a wholly owned subsidiary to facilitate mergers,
acquisitions and the offering of investments or loans to the Company.
On
May 3, 2017, the Company formed Hempsmart Limited, a United Kingdom corporation as a wholly owned subsidiary for the purpose of
future expansion into the European market.
On
May 23, 2018, the Company formed H Smart, LLC in Washington State. On January 21, 2019, the Company converted this entity into
a Washington State corporation named H Smart, Inc.
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: H Smart, Inc., H Smart,
LLC, Hempsmart Limited and MCOA CA, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Revenue
Recognition
For annual reporting
periods after December 15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue
from Contracts with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now
recognized in accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles
that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and
uncertainty of revenue and cash flows arising from a contract with a customer. The core principal is to recognize revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects
to be entitled in exchange for those goods or services. Two options were made available for implementation of the standard: the
full retrospective approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning
after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB
ASC Topic 606 for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic
606 effective in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement
FASB ASC Topic 606, with no restatement of the comparative periods presented. Using this transition method, we applied the new
standards to all new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts
we determine are subject to FASB ASC Topic 606 prospectively. For the year ended December 31, 2019, there were no incomplete contracts.
As is more fully discussed below, we are of the opinion that none of our contracts for services or products contain significant
financing components that require revenue adjustment under FASB ASC Topic 606.
Identification
of Our Contracts with Our Customers.
Contracts
included in our application of FASB ASC Topic 606, consist completely of sales contracts between us and our customers that create
enforceable rights and obligations. For the year ended December 31, 2019, our sales contracts included the following parties:
us, our sales associates and our customers. Our sales contracts were offered by us and our sales associates to our customers directly
through our web site. Our sales contracts, and those formalized by our sales associates, are represented by an electronic order
form, which contains the contractual elements of offer for sale, acceptance and the provision of consideration consisting of the
buyer’s payment, which is concurrent with our delivery of hempSMART™ product. Since our hempSMART™ product sales
contracts are consummated upon receipt of the customer’s acceptance of our offer; our concurrent receipt of our customers
payment; and, our delivery of the agreed to hempSMART™ product, all parties are equally committed to fulfilling their respective
obligations under the sales contracts. Further, the sales contracts specifically identify (1) parties; (2) quantity of hempSMART™
product ordered; (3) price; and, (4) subject, and so each respective party’s rights are identifiable and the payment terms
are defined. Since the sales contracts are consummated concurrent with offer, acceptance, payment and delivery of the hempSMART™
product ordered, we recognize revenue and cash flows as the principal from the respective sales contract transactions as they
complete. Further, because our sales contracts are offered, accepted and consummated concurrently, our ability to collect revenue
is immediate. We receive no payments for agreements that do not qualify as a contract. If customers agree to multiple sales contracts
when they are entered into at or near the same time, our policy is to combine those contracts if: (1) the sales contracts are
negotiated as a single package; (2) the payment amount of one sales contract is dependent upon another sales contract; (3) our
performance obligations of delivering multiple hempSMART™ products can be determined to be part of a single transaction.
Since the nature of the entry into and consummation of our sales contracts occur concurrently, there are no changes or modifications
to the terms of the sales contracts that would modify the enforceable rights and performance obligations of the parties and that
would materially alter the timing of our receipt of revenue from our sales contracts.
Identifying
the Performance Obligations in Our Sales Contracts.
In
analyzing our sales contracts, our policy is to identify the distinct performance obligations in a sales contract arrangement.
In determining our performance obligations under our sales contracts, we consider that the terms and conditions of sales are explicitly
outlined in our sales contracts and are so distinct and identifiable within the context of each sales contract, and so are not
integrated with other goods, or constitute a modification or customization of other goods in our contracts, or are highly dependent
or highly integrated with other goods in our sales contracts. Thus, our performance obligations are singularly related to our
promise to provide the hempSMART™ products upon receipt of payment. We offer an assurance warranty on our hempSMART™
products that allows a customer to return any hempSMART™ products within thirty days if not satisfied for any reason. Assurance
warranties are not identifiable performance obligations, since they are electable at the whim of the customer for any reason.
However, we do account for returns of purchase prices if made.
Determination
of the Price in Our Sales Contracts.
The
transaction prices in our sales contract is the amount of consideration we expect to be entitled to for transferring promised
hempSMART™ products. The consideration amount is fixed and not variable. The transaction price is allocated to the identified
performance obligations in the contract. These allocated amounts are recognized as revenue when or as the performance obligations
are fulfilled, which is concurrently upon receipt of payment. There are no future options for a contract when considering and
determining the transaction price. We exclude amounts third parties will eventually collect, such as sales tax, when determining
the transaction price. Since the timing between receiving consideration and transferring goods or services is immediate, our sales
contract do not have a significant financing component, i.e., recognizing revenue at the amount that reflects the cash payment
that the customer would have made at the time the goods or services were transferred to them (cash selling price), rather than
significantly before or after the goods or services are provided.
Allocation
of the Transaction Price of Our Sales Contracts.
Our
sales contracts are not considered multi-element arrangements which require the fulfillment of multiple performance obligations.
Rather, our sales contracts include one performance obligation in each contract. As such, from the outset, we allocate the total
consideration to each performance obligation based on the fixed and determinable standalone selling price, which we believe is
an accurate representation of what the price is in each transaction.
Recognition
of Revenue when the Performance Obligation is Satisfied.
A
performance obligation is satisfied when or as control of the good or service is transferred to the customer. The standard defines
control as “the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.”
(ASC 606-10-20). For performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of
the performance obligation. As noted above, our single performance obligation sales contracts are singularly related to our promise
to provide the hempSMART™ products to the customer upon receipt of payment, which occurs concurrently and when, upon completion,
allows us under our revenue recognition policy to realize revenue.
Regarding
our offered financial accounting, bookkeeping and/or real property management consulting services, to date no contracts have been
entered into, and thus no reportable revenues have resulted for the fiscal years ended 2019 and 2018.
Product
Sales
Revenue
from product sales, including delivery fees, FOB shipping point, is recognized when (1) an order is placed by the customer; (2)
the price is fixed and determinable when the order is placed; (3) the customer is required to and concurrently pays for the product
upon order; and, (4) the product is shipped. The evaluation of our recognition of revenue after the adoption of FASB ASC 606 did
not include any judgments or changes to judgments that affected our reporting of revenues, since our product sales, both pre and
post adoption of FASB ASC 606, were evaluated using the same standards as noted above, reflecting revenue recognition upon order,
payment and shipment, which all occurs concurrently when the order is placed and paid for by the customer, and the product is
shipped. Further, given the facts that (1) our customers exercise discretion in determining the timing of when they place their
product order; and, (2) the price negotiated in our product sales is fixed and determinable at the time the customer places the
order, and there is no delay in shipment, we are of the opinion that our product sales do not indicate or involve any significant
customer financing that would materially change the amount of revenue recognized under the sales transaction, or would otherwise
contain a significant financing component for us or the customer under FASB ASC Topic 606.
Consulting
Services
We
also offer professional services for financial accounting, bookkeeping or real property management consulting services based on
consulting agreements. As of the date of this filing, we have not entered into any contracts for any financial accounting, bookkeeping
and/or real property management consulting services that have generated reportable revenues as of the years ended 2019 and 2018.
We intend and expect these arrangements to be entered into on an hourly fixed fee basis.
For
hourly based fixed fee service contracts, we intend to utilize and rely upon the proportional performance method, which recognizes
revenue as services are performed. Under this method, in order to determine the amount of revenue to be recognized, we will calculate
the amount of completed work in comparison to the total services to be provided under the arrangement or deliverable. We only
recognize revenues as we incur and charge billable hours. Because our hourly fees for services are fixed and determinable and
are only earned and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator
of a vendor or customer based significant financing, that would materially change the amount of revenue we recognize under the
contract or would otherwise contain a significant financing component under FASB ASC Topic 606.
The
Company determined that upon adoption of ASC 606 there were no quantitative adjustments converting from ASC 605 to ASC 606 respecting
the timing of our revenue recognition because product sales revenue is recognized upon customer order, payment and shipment, which
occurs concurrently, and our consulting services offered are fixed and determinable and are only earned and recognized as revenue
upon actual performance.
Use
of Estimates
The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Significant estimates include the fair value of the
Company’s stock, stock-based compensation, fair values relating to derivative liabilities, debt discounts and the valuation
allowance related to deferred tax assets. Actual results may differ from these estimates.
Cash
The Company considers
cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible
into cash.
Concentrations
of credit risk
The Company’s
financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s
cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions
is periodically reviewed by senior management.
Accounts Receivable
Trade receivables
are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus, trade receivables
do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with
customers and their current financial condition.
Allowance for
Doubtful Accounts
Any charges to
the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain the
allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines
the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts
receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of December
31, 2019, and 2018, allowance for doubtful accounts was $0 and $0, respectively.
Inventories
Inventories are
stated at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down
its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs may be required. During the periods presented,
there were no inventory write-downs.
Cost of sales
Cost of sales is
comprised of cost of product sold, packaging, and shipping costs.
Stock Based
Compensation
The Company measures
the cost of services received in exchange for an award of equity instruments including stock, stock options and restricted stock
awards based on the fair value of the award. For employees and directors, the fair value of the award is measured on the grant
date and recognized over the period during which services are required to be provided in exchange for the award, usually the vesting
period. For non-employees, share-based compensation awards are recorded at either the fair value of the services rendered or the
fair value of the share-based payments, whichever is more readily determinable. Stock and restricted stock and option awards are
based on the closing price of the stock underlying the awards on the grant date. Stock-based compensation expense is recorded
by the Company in the same expense classifications in the statements of operations, as if such amounts were paid in cash. As of
December 31, 2019, and 2018, the number of outstanding stock options to purchase shares of common stock was 0 and 0 shares, respectively.
0 and 0 shares were vested as of December 31, 2019 and 2018, respectively.
On February 27,
2019, Charles Larsen and Donald Steinberg agreed to cancel all previously issued stock options to purchase an aggregate of 1,000,000,000
common shares.
Net Loss per
Common Share, basic and diluted
The Company computes
earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”).
Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise
or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if
converted” methods as applicable.
The computation
of basic and diluted income (loss) per share as of December 31, 2019 and 2018 excludes potentially dilutive securities when their
inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during
the period.
Potentially dilutive
securities excluded from the computation of basic and diluted net loss per share are as follows:
|
|
|
2019
|
(1)
|
|
|
2018
|
|
Convertible notes payable
|
|
|
137,219,847
|
|
|
|
137,219,847
|
|
Options to purchase common stock(1)
|
|
|
0
|
(1)
|
|
|
0
|
(1)
|
Warrants to purchase common
stock
|
|
|
110,846,817
|
|
|
|
110,846,817
|
|
Total
|
|
|
248,066,664
|
|
|
|
248,066,664
|
|
(1) On February 27, 2019, Donald Steinberg
and Charles Larsen cancelled previously issued options to purchase an aggregate of 1,000,000,000 shares at an average exercise
price of $0.0005 per share, representing 100% of all previously issued options.
Property and Equipment
Property and equipment
are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from
the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For financial
statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated
useful lives of 3 to 5 years.
Investments
The Company follows
Accounting Standards Codification subtopic 321-10, Investments-Equity Securities (“ASC 321-10) which requires the accounting
for equity security to be measured at fair value with changes in unrealized gains and losses are included in current period operations.
Where an equity security is without a readily determinable fair value, the Company may elect to estimate its fair value at cost
minus impairment plus or minus changes resulting from observable price changes (See Note 4).
Derivative
Financial Instruments
The Company
classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company with
a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that such
contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require
net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the
Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement
or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free standing derivatives
at each reporting date to determine whether a change in classification between equity and liabilities is required.
The Company’s
free-standing derivatives consisted of conversion options embedded within its issued convertible debt and warrants with anti-dilutive
(reset) provisions. The Company evaluated these derivatives to assess their proper classification in the balance sheet using
the applicable classification criteria enumerated under GAAP. The Company determined that certain conversion and exercise
options do not contain fixed settlement provisions. The convertible notes contain a conversion feature and warrants have
a reset provision such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion
demands.
As such, the Company
was required to record the conversion feature and the reset provision which does not have fixed settlement provisions as liabilities
and mark to market all such derivatives to fair value at the end of each reporting period.
The Company has
adopted a sequencing policy that reclassifies contracts (from equity to assets or liabilities) with the most recent inception
date first. Thus, any available shares are allocated first to contracts with the most recent inception dates.
Fair Value of Financial Instruments
Fair value estimates
discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31,
2019 and 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values.
These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash,
accounts payables and short-term notes because they are short term in nature.
Advertising
The Company follows
the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $540,474 and $569,832
for the year ended December 31, 2019 and 2018, respectively, as advertising costs.
Income Taxes
Deferred income
tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards
and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured
at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it
is not more likely than not that these deferred income tax assets will be realized.
The Company recognizes
a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination
by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial
statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized
upon ultimate settlement. As of December 31, 2019, and 2018, the Company has not recorded any unrecognized tax benefits.
Segment Information
Accounting Standards
Codification subtopic Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding
operating segments in annual financial statements and requires selected information for those segments to be presented in interim
financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services
and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how
to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information
related to the Company's only material principal operating segment.
Recent Accounting Pronouncements
There are various
updates recently issued, most of which represented technical corrections to the accounting literature or application to specific
industries and are not expected to a have a material impact on the Company’s financial position, results of operations or
cash flows.
Adoption
of Accounting Standards
In
May 2014, the Financial Accounting Standards Board (the “FASB”) issued ASU 2014-09 “Revenue from Contracts with
Customers” to supersede previous revenue recognition guidance under current U.S. GAAP. The guidance presents a single five-step
model for comprehensive revenue recognition that requires an entity to recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. Two options are available for implementation of the standard which is either the retrospective approach
or cumulative effect adjustment approach. The guidance becomes effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period, with early adoption permitted.
The
Company has determined that the adoption of ASU-2014-09 will not have a material impact on its financial statements.
COVID-19 Impacts on Accounting Policies
and Estimates
COVID-19 Impacts on Accounting Policies and Estimates In light of
the currently unknown ultimate duration and severity of COVID-19, we face a greater degree of uncertainty than normal in making
the judgments and estimates needed to apply our significant accounting policies. As COVID-19 continues to develop, we may make
changes to these estimates and judgments over time, which could result in meaningful impacts to our financial statements in future
periods.
As previously reported on Form 8-K filed on March 30, 2020, the Company was unable to file its Annual Report on Form 10-K
for the fiscal year ended December 31, 2019 by the original deadline of March 30, 2020, due to circumstances related to COVID-19
pandemic, specifically: (i) the Southern California area, including the location of the Company’s corporate headquarters,
was at one of the epicenters of the coronavirus outbreaks in the United States and the Governor of California had ordered
all residents to stay at home excepting only essential travel; and (ii) historically, the Company has relied on vendors in
China to manufacture certain of its principal products. The outbreak of COVID-19 caused different levels of delay in operations
of the Company, vendors, customers and professional service providers. As a result, the Company’s books and records
were not easily accessible from our Chinese manufacturer of our products, resulting in a delay in the preparation, audit and
completion of the Company’s financial statements for the Annual Report.
Subsequent Events
The Company evaluates
events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation,
the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure
in the financial statements, except as disclosed.
NOTE 2 –
GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
The accompanying
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying financial statements during year ended December
31, 2019, the Company incurred net losses of $20,180,318 and used cash in operations of $2,816,282. These factors among others
may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.
The Company's primary
source of operating funds in 2019 and 2018 has been from funds generated from proceeds from the sale of common stock and the issuance
of convertible and other debt. The Company has experienced net losses from operations since its inception, but expects these conditions
to improve in 2020 and beyond as it develops its business model. The Company has stockholders' deficiencies at December 31, 2019
and requires additional financing to fund future operations.
The Company’s
existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources.
There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of
the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the
Company be unable to continue as a going concern.
NOTE 3 – PROPERTY AND
EQUIPMENT
Property and equipment as of December
31, 2019 and 2018 is summarized as follows:
|
|
2019
|
|
2018
|
Computer equipment
|
|
$
|
16,358
|
|
|
$
|
15,207
|
|
Furniture and fixtures
|
|
|
5,140
|
|
|
|
5,140
|
|
Subtotal
|
|
|
21,498
|
|
|
|
20,347
|
|
Less accumulated depreciation
|
|
|
(13,986
|
)
|
|
|
(7,917
|
)
|
Property and equipment, net
|
|
$
|
7,512
|
|
|
$
|
12,430
|
|
Property and equipment
are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 years. When retired or
otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net
difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense
was $7,299 and $5,341 for the year ended December 31, 2019 and 2018.
NOTE 4 – INVESTMENTS
MoneyTrac
On March 13, 2017,
the Company entered into a stock purchase agreement to acquire up to 15,000,000 common shares of MoneyTrac Technology, Inc., a
corporation organized and operating under the laws of the state of California, for a total purchase price of $250,000 representing
approximately 15% ownership at the time of the agreement. As of December 31, 2017, the Company had acquired 15,000,000 common
shares for $250,000 representing approximately 15% ownership. In connection with the investment, Donald Steinberg, the Company’s
President and Chief Executive Officer and Director, was appointed as a board member to MoneyTrac.
The Company accounts
for its investment in MoneyTrac Technology, Inc. at estimated market fair value using the market price for the publicly traded
shares under the ticker symbol “PSYC” as listed on OTC Markets as an indicator of fair market value. MoneyTrac Technologies
changed its name to Global Trac Solutions Inc. on April 13, 2020. As of December 31, 2019, the balance of this investment was
$27,403 with 869,919 shares and was classified as a short-term investment for the period ended December 31, 2019.
Benihemp
On June 16,
2017, the Company entered into a Loan Agreement (“Agreement”) with Conveniant Hemp Mart, LLC (“Benihemp”),
a limited liability company formed and operating under the laws of the State of Wyoming. Pursuant to the Agreement, Benihemp executed
a promissory note for a principal loan amount of $50,000, accruing interest at the rate of 4% per annum and payable in one year,
subject to one-time six- month repayment extension. The Agreement also provided that the Company shall have the option to waive
repayment of the note and pay Benihemp an additional $50,000 payment in exchange for a 25% membership interest in Benihemp’s
limited liability company. On May 1, 2019, the Company and Conveniant agreed to cancel the Company’s 25% interest in Conveniant.
Conveniant issued to the Company a credit memo equal to the Company’s $100,000 investment, The Company determined that as
of September 30, 2019, approximately $41,000 of this credit was impaired.
Global Hemp Group Joint Ventures
We currently have one ongoing joint venture with Global Hemp Group,
Inc., a Canadian corporation – the Scio, Oregon Joint Venture. As of
September 30, 2019, we withdrew and fully impaired the Joint Venture with Global Hemp Group referred to as the “New
Brunswick” joint venture, because the research project failed to finalize
the research studies and render any tangible revenue to us. The decision to impair this joint venture did not have a material
impact on our reported operations, revenues or gross profits for the fiscal year ended December 31, 2019. This joint venture was
a related party transaction in that Global Hemp Group’s director and
CEO, Charles Larsen, is an owner of our common stock, and a former director of the Company. Further, our former President and
Chief Executive Officer Donald Steinberg is a shareholder in Global Hemp Group. What follows are summaries of both Global Hemp
Group Joint Ventures in 2019.
New Brunswick Canada
On September 5, 2017, we announced our
agreement to participate in a joint venture with Global Hemp Group Inc., a Canadian corporation, in a multi-phase industrial
hemp project on the Acadian peninsula of New Brunswick, Canada.The joint venture’s goal is to develop a “Hemp
Agro-Industrial Zone”, a concept that promotes and engages farmers, processors and manufacturers to collaboratively
produce and process 100% of the hemp plant into a number of wholesale materials that can be manufactured into healthy and
sustainable products. The “HAIZ” will be surrounded by hemp production thereby minimizing the cost of expensive
transportation to distant processing facilities. The “Hemp Agro-Industrial Zone” has a goal of producing social
and environmental benefits to the communities where they operate. These zones are envisioned to prospectively create jobs for
farmers, foster rural development, provide the opportunity to develop more sustainable products of superior quality and help
support Global Hemp Group’s commitment to creating a carbon free economy. The first phase of the project involved lab
testing in support of the trials. The Collège Communautaire du Nouveau Brunswick (CCNB) in Bathurst, New Brunswick
(“CCNB”) intends to assist Global Hemp Group in research on its ongoing industrial hemp trials in the region, and
to perform laboratory tests in support of these trials. These tests will provide information to validate agronomic and key
yield data in preparation of a large-scale industrial development project that will involve processing of the full plant:
grain, straw, flowers and leaves, scheduled to begin in 2018. The results of these tests will also be used in discussions
with farmers of the region to refine a hemp-based farming model, and to mobilize additional farmers for the next growing
season. Our participation included providing one-half, or $10,775 of the funding for the phase one work. On January 10, 2018,
phase-one was completed by successfully cultivating industrial hemp during the 2017 growing season for research purposes. The
objective of phase one was to re-introduce hemp into the area and ensure that it could be productive under New Brunswick
growing conditions prior to significantly increasing cultivation acreage and building a hemp processing facility in the
region, in future phases of the project. As a result of our participation in the joint venture, we will share in the
ownership of research and development of hemp and CBD related studies produced by the New Brunswick Project, and, in the
event Canadian laws governing the growing, harvesting, manufacturing and production of products containing hemp and CBD
change (as expected, but not guaranteed) in 2018, we would benefit from possible preferred pricing and terms for the purchase
of hemp and CBD that would enable us to further conduct its business and research and development into hemp and CBD products.
Our New Brunswick joint venture with Global Hemp Group, Inc. is a related party transaction insofar as its director, Charles
Larsen, is a former director of the Company.
The Company’s
costs incurred by the Company’s interest was $0 and $10,775 for the years ended December 31, 2019 and 2018 and was recorded
as other income/expense in the Company’s Statement of Operations in the appropriate periods. As of December 31, 2019, the
balance of the New Brunswick JV investment reported on the balance sheet for the year ended December 31, 2019 was $0 as a result
of the investment being deemed fully impaired and the Company withdrawing from the joint venture as of September 30, 2019. (See
Item 1, Business; Principal Products and their Markets; Joint Ventures and Investments).
Global Hemp
Group JV – Scio Oregon
Global
Hemp Group Joint Venture/Scio Oregon Hemp Project; On May 8, 2018, the Company, Global Hemp Group, Inc., a Canadian corporation,
and TTO Enterprises, Ltd., an Oregon corporation entered into a Joint Venture Agreement. The purpose of the joint venture is to
develop a project to commercialize the cultivation of industrial hemp on a 109 acre parcel of real property owned by the Company
and Global Hemp Group in Scio, Oregon, and operating under the Oregon corporation Covered Bridges, Ltd. The joint venture is in
the development stage. On May 30, 2018, the joint venture purchased TTO’s 15% interest in the joint venture for $30,000.
On May 8, 2018, the Company, Global Hemp Group,
Inc., a Canadian corporation, and TTO Enterprises, Ltd., an Oregon corporation entered into a Joint Venture Agreement. The purpose
of the joint venture is to develop a project to commercialize the cultivation of industrial hemp on a 109 acre parcel of real
property owned by the Company and Global Hemp Group in Scio, Oregon, and operating under the Oregon corporation Covered Bridges,
Ltd. The joint venture is in the development stage. On May 30, 2018, the joint venture
purchased TTO’s 15% interest in the joint venture for $30,000. The Company and Global Hemp Group, Inc. now have an
equal 50-50 interest in the joint venture. The joint venture agreement commits the Company to a cash contribution of $600,000
payable on the following funding schedule: $200,000 upon execution of the joint venture agreement; $238,780 by July 31, 2018;
$126,445 by October 31, 2018; and, $34,775 by January 31, 2019. The Company has complied with its payments. The 2018 crop of hemp
grown on the joint venture’s real property consisted of 33 acres of high yielding CBD hemp grown in an orchard style cultivation
on the property. The 2018 harvest consisted of approximately 37,000 high yielding CBD
hemp plants producing 24 tons of biomass that produced 48,000 pounds
of dried biomass. The joint venture partners prepared processing samples ranging in size from 100 to 2,000 lbs. for sample offers
to extraction companies. The biomass is being processed into CBD crude oil with the option to refine it further into isolate,
or full spectrum oil, in order to increase its value on the market. Our joint venture with Global Hemp Group regarding the Scio
Oregon project is a related party transaction insofar as its director, Charles Larsen, is a former director of the Company.
The Company and
Global Hemp Group, Inc. now have an equal 50% - 50% interest in the joint venture. The joint venture agreement commits the Company
to a cash contribution of $600,000 payable on the following funding schedule: $200,000 upon execution of the joint venture agreement;
$238,780 by July 31, 2018; $126,445 by October 31, 2018; and, $34,775 by January 31, 2019. The Company complied with its payment
obligations.
As of December
31, 2019, the combined balance of the Covered Bridge (SCIO) investment and related 41389 Farm investment was $0 as the investment
was written off as a loss for the period ended December 31, 2019. The debt obligation related to this JV of $262,414 was also
written off to $0 as of the year ended December 31, 2019.
Bougainville
Ventures, Inc. Joint Venture
On March 16, 2017,
we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture
was for the Company and Bougainville to (i) jointly engage in the development and promotion of products in the legalized cannabis
industry in Washington State; (ii) utilize Bougainville's high quality cannabis grow operations in the State of Washington, where
it claimed to have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s
agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services and resources
including, but not limited to: sales and marketing, agricultural procedures, operations, security and monitoring, processing and
delivery, branding, capital resources and financial management; and, (iv) optimize collaborative business opportunities. The Company
and Bougainville agreed to operate through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized
in the State of Washington on May 16, 2017.
As our contribution
to the joint venture, the Company committed to raise not less than $1,000,000 to fund joint venture operations, based upon a funding
schedule. The Company also committed to providing branding and systems for the representation of cannabis related products and
derivatives comprised of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.
The
Company and Bougainville's agreement provided that funding provided by the Company would contribute towards the joint venture’s
ultimate purchase of the land consisting of a one-acre parcel located in Okanogan County, Washington, for joint venture operations
As
disclosed on Form 8-K on December 11, 2017, the Company did not comply with the funding schedule for the joint venture. On November
6, 2017, the Company and Bougainville amended the joint venture agreement to reduce the amount of the Company's commitment from
$1,000,000 to $800,000, and also required the Company to issue Bougainville 15 million shares of the Company's restricted common
stock. The Company completed its payments pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued
to Bougainville 15 million shares of restricted common stock. The amended agreement provided that Bougainville would deed the
real property to the joint venture within thirty days of its receipt of payment.
Thereafter,
the Company determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party
to a purchase agreement for real property that was in breach of contract for non-payment. Bougainville also did not possess an
agreement with a Tier 3 I502 license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for
by the Company, Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the land, but did not deed
the real property to the joint venture. Bougainville failed to pay delinquent property taxes to Okanogan County and to date, the
property has not been deeded to the joint venture.
To
clarify the respective contributions and roles of the parties, the Company offered to enter into good faith negotiations to revise
and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville to
accomplish a revised and restated joint venture agreement, and efforts towards satisfying the conditions to complete the subdivision
of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the Company in good
faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding of the real
property to the joint venture.
On
August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or communicate with the Company
regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures of $800,000 contributed
by the Company in the joint venture agreement. Bougainville had a material obligation to do so under the joint venture agreement.
The Company believes that some of the funds it paid to Bougainville were misappropriated and that there was self-dealing with
respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts in the joint venture
agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had an ownership interest
in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502 cannabis license holder
to grow cannabis on the real property; and, (iii) that clear title to the real property associated with the Tier 3 # I502 license
would be deeded to the joint venture thirty days after the Company made its final funding contribution. As a result, on September
20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et
al. in Okanogan County Washington Superior Court, case number 18-2- 0045324. The Company’s complaint seeks legal and equitable
relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture agreement, an accounting,
quiet title to real property in the name of the Company, for the appointment of a receiver, the return to treasury of 15 million
shares issued to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington State. The registrant
has filed a lis pendens on the real property. The case is currently in litigation.
In
connection with the agreement, the Company recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was
comprised of 49.5% ownership of BV-MCOA Management LLC, and was accounted for using the equity method of accounting. The Company
recorded an annual impairment in 2017 of $792,500, reflecting the Company’s percentage of ownership of the net book value
of the investment. During 2018, the Company recorded equity losses of $37,673 and $11,043 for the first and second quarters respectively,
and recorded an annual impairment of $285,986 for the year ended December 31, 2018, at which time the Company determined the investment
to be fully impaired due to Bougainville’s breach of contract and resulting litigation, as discussed above.
GateC Joint
Venture
On March 17, 2017,
the Company and GateC Research, Inc. (“GateC”) entered into a Joint Venture Agreement (“Agreement”) whereby
the Company committed to raise up to one and one-half million dollars ($1,500,000) over a six-month period, with a minimum commitment
of five hundred thousand dollars ($500,000) within a three (3) month period; and, information establishing brands and systems
for the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary
methodologies, including but not limited to its affiliate marketing program, directly tailored to the cannabis industry.
GateC agreed to
contribute its management and control services and systems related to cannabis grow operations in Adelanto County, California,
and its permit to grow marijuana in an approved zone in Adelanto, California. GateC did not own a physical site for its operation
in Adelanto County, California, and GateC’s permit to grow cannabis did not contain a conditional use permit.
On or about November
28, 2017, GateC and the Registrant orally agreed to suspend the Company’s funding commitment, pending the finalization of
California State regulations governing the growth, cultivation and distribution of cannabis, which were expected to be completed
in 2018.
On March 19, 2018,
the Company and GateC rescinded the Agreement and concurrently released each other from any all any and all losses, claims, debts,
liabilities, demands, obligations, promises, acts, omissions, agreements, costs and expenses, damages, injuries, suits, actions
and causes of action, of whatever kind or nature, whether known or unknown, suspected or unsuspected, contingent or fixed, that
they may have against each other and their Affiliates, arising out of the Agreement.
The Registrant
incurred no termination penalties as the result of its entry into the Recession and Mutual Release Agreement.
In 2017, the Company
recorded a debt obligation of $1,500,000 to the Joint Venture and a corresponding impairment charge of $1,500,000 during for year
ended December 31, 2017. Upon termination of the material definitive agreement on March 19, 2018, the Company realized a gain
on settlement of debt obligation of $1,500,000 for the year ended December 31, 2018.
The following table
indicates the amount of impairments recorded by the Company quarter to quarter for investment activity related to its joint venture
investments:
MARIJUANA COMPANY
OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF DECEMBER
31, 2019
|
|
INVESTMENTS
|
|
|
|
|
|
SHORT-TERM
INVESTMENTS
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
TOTAL
|
|
|
|
|
TOTAL
|
|
Hemp
|
|
|
|
|
|
Bougainville
|
|
Gate
C
|
|
Plant
|
|
|
|
Short-Term
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Benihemp
|
|
MoneyTrac
|
|
Ventues,
Inc.
|
|
Research
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
MoneyTrac
|
Beginning
balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Investments
made during 2017
|
|
|
3,049,275
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
1,188,500
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
03-31-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
06-30-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
09-30-17 equity method Loss
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
12-31-17 equity method accounting
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
of Investment in 2017
|
|
|
(2,292,500
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
(792,500
|
)
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
Balances
as of 12/31/17
|
|
|
695,477
|
|
|
|
10,775
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
334,702
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
made during 2018
|
|
|
986,654
|
|
|
|
986,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
03-31-18 equity method Loss
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
06-30-18 equity method Loss
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
09-30-18 equity method Loss
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
12-31-18 equity method Loss
|
|
|
(31,721
|
)
|
|
|
(31,721
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moneytrac
investment reclassified to Short-Term investments
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains on trading securities - 2018
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560,000
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
of investment in 2018
|
|
|
(933,195
|
)
|
|
|
(557,631
|
)
|
|
|
(89,578
|
)
|
|
|
|
|
|
|
(285,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
Balance
@12-31-18
|
|
$
|
408,077
|
|
|
$
|
408,077
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
$
|
810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
made during quarter ended 03-31-19
|
|
|
129,040
|
|
|
|
129,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
03-31-19 equity method Loss
|
|
|
(59,541
|
)
|
|
|
(59,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,000
|
)
|
|
$
|
(135,000
|
)
|
Balance
@03-31-19
|
|
$
|
477,576
|
|
|
$
|
477,576
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
$
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
made during quarter ended 06-30-19
|
|
$
|
3,157,234
|
|
|
$
|
83,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,000,000
|
|
|
$
|
73,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
06-30-19 equity method Income (Loss)
|
|
$
|
(171,284
|
)
|
|
$
|
(141,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,291
|
)
|
|
$
|
(23,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains on trading securities - quarter ended 06-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
$
|
(150,000
|
)
|
Balance
@06-30-19
|
|
$
|
3,463,526
|
|
|
$
|
419,352
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
made during quarter ended 09-30-19
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
09-30-19 equity method Income (Loss)
|
|
$
|
122,863
|
|
|
$
|
262,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(94,987
|
)
|
|
$
|
(44,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of trading securities during quarter ended 09-30-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(41,667
|
)
|
|
$
|
(41,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains on trading securities - quarter ended 09-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,625
|
)
|
|
($
|
362,625
|
)
|
Balance
@09-30-19
|
|
$
|
3,772,652
|
|
|
$
|
682,141
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
120,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
made during quarter ended 12-31-19
|
|
$
|
392,226
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
12-31-19 equity method Income (Loss)
|
|
$
|
(178,164
|
)
|
|
($
|
(75,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(23,865
|
)
|
|
$
|
(79,079
|
)
|
|
|
|
|
|
|
|
|
Reversal
of Equity method Loss for 2019
|
|
$
|
272,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,143
|
|
|
$
|
147,142
|
|
|
|
|
|
|
|
|
|
Impairment
of investment in 2019
|
|
$
|
(3,175,420
|
)
|
|
$
|
(869,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,306,085
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
Loss
on disposition of investment
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
Sale
of trading securities during quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gains on trading securities - quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,545
|
)
|
|
$
|
(75,545
|
)
|
Balance
@12-31-19
|
|
$
|
693,915
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
$
|
27,403
|
|
The
following table indicates the amount of debt the Company recorded quarter to quarter as a result of its joint venture investments:
Loan Payable
|
|
|
|
|
|
|
|
Global
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
|
|
|
|
|
|
|
|
|
|
|
|
General
|
|
|
|
|
TOTAL
|
|
|
|
Hemp
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville
|
|
|
|
Gate C
|
|
|
|
Plant
|
|
|
|
Robert L
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
JV Debt
|
|
|
|
Group
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Ventues, Inc.
|
|
|
|
Research Inc.
|
|
|
|
Extract
|
|
|
|
Hymers III
|
|
|
|
Vivabuds
|
|
|
|
Expense
|
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 loan borrowings
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 loan activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 loan borrowings
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 loan repayments
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General operational expense
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,856
|
|
Balances as of 12/31/17 (a)
|
|
|
2,067,411
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 loan borrowings (payments)
|
|
|
376,472
|
|
|
|
447,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 cancellation of JV debt obligation
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 loan repayments
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 loan activity
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 loan borrowings
|
|
|
580,425
|
|
|
|
580,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-18 (b)
|
|
|
1,422,410
|
|
|
|
1,027,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
649,575
|
|
|
|
649,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(407,192
|
)
|
|
|
(407,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-19 ©
|
|
|
1,664,793
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan borrowings
|
|
|
3,836,220
|
|
|
$
|
161,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,000
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
1,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 debt conversion to equity
|
|
|
(1,572,971
|
)
|
|
$
|
(161,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(349,650
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(1,062,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-19 (d)
|
|
|
3,928,042
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 loan borrowings
|
|
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 debt conversion to equity
|
|
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-19 (e)
|
|
|
4,322,427
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,007,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 loan borrowings
|
|
|
2,989,378
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
596,784
|
|
|
$
|
4,221
|
|
|
|
|
|
|
$
|
2,125,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
|
(4,083,349
|
)
|
|
$
|
(1,532,652
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(394,555
|
)
|
|
|
|
|
|
$
|
(2,156,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt in 2019
|
|
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to reclassify amount to accrued liabilities
|
|
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-19 (f)
|
|
$
|
3,193,548
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
4,221
|
|
|
$
|
0
|
|
|
$
|
3,133,243
|
|
|
12-31-19
|
09-30-19
|
06-30-19
|
03-31-19
|
12-31-18
|
12-31-17
|
This
includes balances for:
|
Note
(f)
|
Note
(e)
|
Note
(d)
|
Note
(c)
|
Note
(b)
|
Note
(a)
|
-
Debt obligation of JV
|
0
|
1,633,872
|
1,778,872
|
128,522
|
289,742
|
1,500,000
|
-
Convertible NP, net of discount
|
3,193,548
|
2,688,555
|
2,149,170
|
1,536,271
|
1,132,668
|
394,555
|
-
Longterm debt
|
0
|
0
|
0
|
0
|
0
|
172,856
|
Total
Debt balance
|
3,193,548
|
4,322,427
|
3,928,042
|
1,664,793
|
1,422,410
|
2,067,411
|
NOTE
5 – CONVERTIBLE NOTES PAYABLE
During
the year ended December 31, 2019 and 2018, the Company issued an aggregate of 9,251,217 and 2,465,463 shares of its common stock
in settlement of the issued convertible notes payable and accrued interest.
For
the years ended December 31, 2019 and 2018, the Company recorded amortization of debt discounts of $2,906,843 and $732,463, respectively,
as a charge to interest expense.
Convertible
notes payable are comprised of the following:
|
|
2019
|
|
2018
|
Convertible note payable – John Fife – last
due October 27, 2018
|
|
$
|
—
|
|
|
$
|
150,959
|
|
Convertible note payable – Power Up Lending Group
|
|
$
|
294.000
|
|
|
$
|
0
|
|
Convertible note payable – Crown Bridge Partners
|
|
$
|
110,000
|
|
|
$
|
0
|
|
Convertible note payable – Odyssey Funding LLC
|
|
$
|
250,000
|
|
|
$
|
0
|
|
Convertible note payable – Paladin Advisors LLC
|
|
$
|
75,000
|
|
|
$
|
0
|
|
Convertible note payable- GS Capital Partners LLC
|
|
$
|
173,000
|
|
|
$
|
0
|
|
Convertible note payable – Natural Plant Extract
|
|
$
|
56,085
|
|
|
$
|
0
|
|
Convertible note payable – Robert Hymers III
|
|
$
|
96,553
|
|
|
$
|
0
|
|
Convertible notes payable-St George-due Dec 31,2019
|
|
$
|
2,947,890
|
|
|
$
|
1,877,889
|
|
Total
|
|
$
|
4,002,528
|
|
|
$
|
2,028,848
|
|
Less debt discounts
|
|
$
|
(808,980
|
)
|
|
$
|
(896,180
|
)
|
Net
|
|
$
|
3,193,548
|
|
|
$
|
1,132,668
|
|
Less current portion
|
|
$
|
(3,193,548
|
)
|
|
$
|
(1,132,668
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
Convertible
notes payable-Power Up Lending
From
July 1 through September 12, 2019, the Company issued four convertible promissory notes in the aggregate principal amount of $294,000
to Power Up Lending (“Power Up”). The promissory notes bear interest at 10% per annum, are due one year from the respective
issuance date and include an original issuance discount (“OID”) in aggregate of $12,000. Interest shall accrue from
the issuance date, but interest shall not become payable until the notes becomes payable. The notes are convertible at any time
at a conversion rate equal to 61% of the Market Price (defined as the lowest trading price during the 15-trading-day period prior
to the conversion date). Upon the issuance of these convertible notes, the Company determined that the features associated with
the embedded conversion option embedded in the debentures, should be accounted for at fair value, as a derivative liability, as
the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.
As of the funding date of each note, the Company determined the fair value of the embedded
derivative associated with the convertibility of each note. The fair value of the embedded derivative has been added to the debt
discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized
as interest expense. The aggregate debt discount of $169,202 is being amortized to interest expense over the respective terms
of the notes.
The
Company shall have the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance
(all principal and accrued interest) depending on the Prepayment Period (ranging from 1 to 180 days following the issuance date).
The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor,
together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock
outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note.
As
of December 31, 2019, the Company owed an aggregate of $294,000 of principal and $12,514 of accrued interest on these convertible
promissory notes.
Convertible
notes payable-Crown Bridge Partners
From
October 1 through December 31, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $225,000
to Crown Bridge Partners LLC (“Crown Bridge”). The promissory notes bear interest at 10% per annum, are due one year
from the respective issuance date and include an original issuance discount (“OID”) in aggregate of $22,500. Interest
shall accrue from the issuance date, but interest shall not become payable until the notes becomes payable. The notes are convertible
at any time at a conversion rate equal to 60% of the Market Price (defined as the lowest trading price during the 15-trading-day
period prior to the conversion date). Upon the issuance of these convertible notes, the Company determined that the features associated
with the embedded conversion option embedded in the debentures, should be accounted for at fair value, as a derivative liability,
as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion
transactions. As of the funding date of each note, the Company determined the fair value
of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been
added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability
recognized as interest expense. The aggregate debt discount of $88,674 is being amortized to interest expense over the respective
terms of the notes.
The
Company shall have the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance
(all principal and accrued interest) depending on the Prepayment Period (ranging from 1 to 180 days following the issuance date).
The Company is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor,
together with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock
outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the note.
As
of December 31, 2019, the Company owed an aggregate of $110,000 of principal and $2,138 of accrued interest on these convertible
promissory notes.
Convertible
notes payable-Odyssey Funding LLC
On
October 30, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $250,000 to Odyssey Funding
LLC (“Odyssey”). The promissory notes bear interest at 12% per annum, are due one year from the respective issuance
date and include an original issuance discount (“OID”) in aggregate of $12,500. Interest shall accrue from the issuance
date, but interest shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion
rate equal to 55% the average of the two lowest trading prices of the Common Stock as reported on the National Quotations Bureau
OTC market exchange which the Company's shares are traded or any exchange upon which the Common Stock may be traded in the future
("Exchange"), for the twenty prior trading days including the day upon which a Notice of Conversion is received by the
Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication
to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the
same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded.
Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days
of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional
shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded
to the nearest whole share. The Company agrees to honor all conversions submitted pending this increase. In the event the Company
experiences a DTC "Chill" on its shares, the conversion price shall be decreased to 45% instead of 55% while that "Chill"
is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of
Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common
Stock of the Company (which may be increased up to 9.9% upon 60 days' prior written notice by the Investor)
As
of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility
of each note. The fair value of the embedded derivative has been added to the debt discount (total
debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense.
The aggregate debt discount of $207,650 is being amortized to interest expense over the respective terms of the notes. As of December
31, 2019, the Company owed an aggregate of $250,000 of principal and $5,096 of accrued interest on these convertible promissory
notes.
Convertible
notes payable-Paladin Advisors LLC
On
October 23, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $75,000 to Paladin Advisors,
LLC (“Paladin”). The promissory notes bear interest at 8% per anum,and is due six months from the respective issuance
date of the note along with accrued and unpaid interest. Principal and interest to be payable as provided below on that date which
is six months from the date of issuance (the “Maturity Date”). All payments due hereunder (to the extent not converted
into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms of this agreement
and shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall
hereafter give to the Company by written notice made in accordance with the provisions of this Note. Whenever any amount expressed
to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding
day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in
full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest
due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or
a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain
closed.
For
so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid
principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”),
into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a
forty-five percent (45%) discount to the lowest closing bid of the previous ten (10) day trading period, ending on the business
day before a Notice of Conversion is delivered to the Company. The number of shares of Common Stock into which the Converted Amount
shall be convertible (the “Conversion Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the
Conversion Price. For the purposes of this Section 4(a), a conversion shall be deemed to occur on the date that the Company receives
an executed copy of the Conversion Notice.
The
aggregate debt discount of $46,721 is being amortized to interest expense over the respective terms of the notes. As of December
31, 2019, the Company owed an aggregate of $75,000 of principal and $0 of accrued interest on these convertible promissory notes.
Convertible
notes payable-GS Capital Partners LLC
On
December 19, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $173,000 to GS Capital
Partners LLC (“GS Capital”). The promissory notes bear interest at 10% per annum and is due one year from the respective
issuance date and include an original issuance discount (“OID”) in aggregate of $15,000.
The
interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration
and transfers of this Note. The principal of, and interest on, this Note are payable at 30 Broad Street, Suite 1201, New York,
NY 10004, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof
from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the
Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer
addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer
shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this
Note to the extent of the sum represented by such check or wire transfer.
The
Holder of this Note is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price
("Conversion Price") for each share of Common Stock equal to 62% of the lowest trading price of the Common Stock as
reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s shares are traded or any exchange
upon which the Common Stock may be traded in the future ("Exchange"), for the twenty prior trading days including the
day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is
delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but
unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price
of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit
the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all
conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the
Conversion Price shall be decreased to 52% instead of 62% while that “Chill” is in effect. In no event shall the Holder
be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by
the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased
up to 9.9% upon 60 days’ prior written notice by the Investor).
As
of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility
of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to
the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount
of $166,193 is being amortized to interest expense over the respective terms of the notes. As of December 31, 2019, the Company
owed an aggregate of $173,000 of principal and $569 of accrued interest on these convertible promissory notes.
Convertible
notes payable-St George Investments
Effective
November 1, 2017, the Company issued a secured convertible promissory note in aggregate of $601,420 to St George Investments LLC
(“St George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on September 10,
2018 and includes an original issue discount (“OID”) of $59,220. The promissory note was funded on November 11, 2017
for $542,200, net of OID and transaction costs. As of September 30, 2019, the Company owed $417,890 of principal and $38,378 of
accrued interest on this convertible promissory note. As of September 30, 2019, this note was in default, but the lender has not
enforced the default interest rate. Effective December 20, 2017, the Company issued a secured convertible promissory note in aggregate
of $1,655,000 to St George Investments LLC (“St George”). The promissory note bears interest at 10% compounded daily,
was due upon maturity on October 27, 2018 and includes an original issue discount (“OID”) of $155,000. In addition,
the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. The promissory note was funded
in nine tranches of $300,000; $200,000; $200,000; $400,000; $75,000; $150,000; $85,000; $120,000 and $70,000, resulting in aggregate
net proceeds of $1,500,000. The Company received aggregate net proceeds of $1,200,000 and $300,000 during the years ended December
31, 2018 and 2017, respectively. As an investment incentive, the Company issued 1,100,000 five-year warrants, exercisable at $2.40
per share, with certain reset provisions.
The
promissory notes are convertible, at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s
market capitalization (as defined) falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due
the 20 trading days immediately preceding date of conversion, subject to additional adjustments, as defined. In addition, the
promissory note includes certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents
at an effective price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 20%
prepayment premium and is secured by a trust deed of certain assets of the Company.
On
November 5, 2018, $250,000 of principal and accrued interest was assigned to John Fife as an individual with all the terms and
conditions of the original note issued to St George. On March 21, 2019, $150,959 of principal and $4,963 of accrued interest along
with $160,454 of derivative liabilities valued as of the respective conversion date were converted into 394,460 shares of common
stock.
During
the nine months ended September 30, 2019, $550,000 of principal, $122,694 of accrued interest and $441,394 of derivative liabilities
valued as of the respective conversion dates were converted into 1,710,897 shares of common stock, resulting in a gain on debt
settlement of $21,586. As of September 30, 2019, the Company owed $0 of principal and $0 of accrued interest on this convertible
promissory note. Although this note was in default until it was repaid, the lender did not enforce the default interest rate.
Effective
August 28, 2018, the Company issued a secured convertible promissory note in aggregate of $1,128,518 (includes overfunding of
$23,518) to St George Investments LLC (“St George”). The promissory note bears interest at 10% compounded daily, was
due upon maturity on June 30, 2019 and includes an original issue discount (“OID”) of $100,000. In addition, the Company
agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During the year ended December 31, 2018,
the Company received aggregate net proceeds of $825,000. During the nine months ended September 30, 2019, an additional $218,518
was funded under this note resulting in net proceeds of $198,518.
As
an investment incentive, the Company issued 750,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions.
The aggregate fair value of the issued warrants was $1,588,493. The face value of the debt was then allocated, on a relative fair
value basis, between the debt and the warrants. The portion allocated to warrants has been added to the debt discount with a resulting
increase in additional paid-in capital. As of the funding date of each tranche of this note, the Company determined the fair value
of the embedded derivative associated with the convertibility of this note. The fair value of the embedded derivative has been
added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability
recognized as interest expense. As of the aggregate debt discount of $1,114,698 is being amortized to interest expense over the
respective term of each tranche.
The
promissory notes are convertible, at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s
market capitalization (as defined) falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due
the 20 trading days immediately preceding date of conversion, subject to additional adjustments, as defined. In addition, the
promissory note includes certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents
at an effective price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 15%
prepayment premium and is secured by a trust deed of certain assets of the Company.
During
the nine months ended September 30, 2019, $1,000,859 of principal and $840,299 of derivative liabilities valued as of the respective
conversion dates were converted into 4,475,543 shares of common stock, resulting in a loss on debt settlement of $612,034. As
of September 30, 2019, the Company owed $828,518 of principal and $28,138 of accrued interest on this convertible promissory note.
As of September 30, 2019, this note was in default, but the lender has not enforced the default interest rate.
Effective
January 29, 2019, the Company issued a secured convertible promissory note in aggregate of $2,205,000 to St George Investments
LLC (“St George”). The promissory note bears interest at 10% compounded daily, is due upon maturity on December 5,
2019 and includes an original issue discount (“OID”) of $200,000. In addition, the Company agreed to pay $5,000 for
legal, accounting and other transaction costs of the lender. During the nine months ended September 30, 2019, the promissory note
was funded in eight tranches totaling $1,406,482 resulting in aggregate net proceeds of $1,276,482 under this note. As an investment
incentive, the Company issued 1,500,000 5-year warrants, exercisable at $2.40 per share, with certain reset provisions. The aggregate
fair value of the issued warrants was $999,838. The face value of the debt was then allocated, on a relative fair value basis,
between the debt and the warrants. The portion allocated to warrants has been added to the debt discount with a resulting increase
in additional paid-in capital. As of the funding date of each tranche of this note, the Company determined the fair value of the
embedded derivative associated with the convertibility of this note. The fair value of the embedded derivative has been added
to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability
recognized as interest expense.
The
promissory notes are convertible, at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s
market capitalization (as defined) falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due
the 20 trading days immediately preceding date of conversion, subject to additional adjustments, as defined. In addition, the
promissory note includes certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents
at an effective price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 15%
prepayment premium and is secured by a trust deed of certain assets of the Company.
Effective
March 25, 2019, the Company issued a secured convertible promissory note in the amount of $580,000 to St George Investments LLC
(“St George”). The promissory note bears interest at 10% compounded daily, is due upon maturity on January 24, 2020
and includes an original issue discount (“OID”) of $75,000. In addition, the Company agreed to pay $5,000 for legal,
accounting and other transaction costs of the lender. During the nine months ended September 30, 2019, the promissory note was
funded in the amount of $580,000 resulting in net proceeds of $500,000 under this note. As an investment incentive, the Company
issued 375,000 five-year warrants, exercisable at $2.40 per share, with certain reset provisions. The aggregate fair value of
the issued warrants was $258,701. The face value of the debt was then allocated, on a relative fair value basis, between the debt
and the warrants. The portion allocated to warrants has been added to the debt discount with a resulting increase in additional
paid-in capital. As of the funding date of this note, the Company determined the fair value of the embedded derivative associated
with the convertibility of this note. The fair value of the embedded derivative has been added to the debt discount (total debt
discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense.
The aggregate debt discount of $483,966 is being amortized to interest expense over the term of the note.
The
promissory notes are convertible, at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s
market capitalization (as defined) falls below $30,000,000, the conversion rate is 60% of the 3 lowest closing trade prices due
the 20 trading days immediately preceding date of conversion, subject to additional adjustments, as defined. In addition, the
promissory note includes certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents
at an effective price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 15%
prepayment premium and is secured by a trust deed of certain assets of the Company. As of December 31, 2019, the Company owed
$2,947,890 of principal and $314,547 of accrued interest on this convertible promissory note.
Convertible
notes payable - Robert L. Hymers III
On
December 23, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $96,552.70 to Robert L.
Hymers III (“Hymers”) in satisfaction of funds owed to Mr. Hymers from his consulting contract with the Company for
past services rendered and completed. The promissory notes bear interest at 10% per anum, and is due six months from the respective
issuance date of the note along with accrued and unpaid interest. Principal and interest to be payable as provided below on that
date which is six months from the date of issuance (the “Maturity Date”). All payments due hereunder (to the extent
not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms of this
agreement and shall be made in lawful money of the United States of America. All payments shall be made at such address as the
Holder shall hereafter give to the Company by written notice made in accordance with the provisions of this Note. Whenever any
amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be
due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed.
For
so long as there remains any amount due hereunder, the Holder shall have the option to convert all or any portion of the unpaid
principal amount of this Note, plus accrued interest (together with the unpaid principal amount, the “Converted Amount”),
into shares of the Company’s common stock. The conversion price (the “Conversion Price”) shall be equal to a
fifty percent (50%) discount to the lowest closing bid of the previous fifteen (15) day trading period, ending on the business
day before a Notice of Conversion is delivered to the Company. The number of shares of Common Stock into which the Converted Amount
shall be convertible (the “Conversion Shares”) shall be determined by dividing (i) the Converted Amount by (ii) the
Conversion Price. A conversion shall be deemed to occur on the date that the Company receives an executed copy of the Conversion
Notice.
The
aggregate debt discount of $92,332 is being amortized to interest expense over the respective terms of the notes. As of December
31, 2019, the Company owed an aggregate of $96,552.70 of principal and $212 of accrued interest on these convertible promissory
notes. The derivative liability at December 31, 2019 associated with this convertible note was $158,307.
Convertible
notes payable – Natural Plant Extract
On
April 15, 2019, we entered into a joint venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a
licensed psychoactive cannabis distribution service in California. California legalized THC psychoactive cannabis for medicinal
and recreational use on January 1, 2018. On February 3, 2020, we terminated the joint venture.
The
Original Material Definitive Agreement
Pursuant
to the original material definitive agreement, we agreed to acquire twenty percent (equal to 200,000) of NPE’s authorized
shares in exchange for our payment of $2,000,000 and $1,000,000 worth of our restricted common stock. We agreed to form a joint
venture with NPE incorporated in California under the name “Viva Buds, Inc.” (“Viva Buds”) for the purpose
of operating a California licensed cannabis distribution business pursuant to California law legalizing THC psychoactive cannabis
for recreational and medicinal use.
Our
payment obligations were governed by a stock purchase agreement which required us to make the following payments:
a.
Deposit of $350,000 within 5 days of the execution of the material definitive agreement;
b.
Deposit of $250,000 payable within 30 days;
c.
Deposit of $400,000 within 60 days;
d.
Deposit of $500,000 within 75 days;
e.
Deposit of $500,000 within 90 days
We
made our initial payment pursuant to this schedule, but otherwise failed to comply with the payment schedule and we were in breach
of contract.
Settlement
and Release of All Claims Agreement
On
February 3, 2020, the Company and NPE entered into a settlement and release of all claims agreement. In exchange for a complete
release of all claims, the Company and NPE (1) agreed to reduce our interest in NPE from 20% to 5%; (2) we agreed to pay NPE a
total of $85,000 as follows: $35,000 concurrent with the execution of the Settlement and Release of All Claims Agreement, and
$25,000 no later than the 5th calendar day for each of the two months following execution of Settlement and Release of All Claims
Agreement; and, (3) to retire the balance of our original valuation obligation from the material definitive agreement, representing
a shortfall of $56,085.15, in a convertible promissory note, with terms allowing NPE to convert the note into common stock of
MCOA at a 50% discount to the closing price of MCOA’s common stock as of the maturity date.
Of
the total amount due and payable by us as of the date of this filing, we owe $75,000, and we are in breach of the settlement agreement.
On February 3, 2020, we executed a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of
our settlement agreement with NPE, we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the
City of Lynwood and the State of California to transfer the cannabis licenses back to NPE. To date, we have not paid this amount
and it is due and owing.
Summary:
The Company has identified the embedded derivatives
related to the above described notes and warrants. These embedded derivatives included certain conversion and reset features. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the note and to fair value as of each subsequent reporting date.
At December 31, 2018, the Company determined
the aggregate fair values of $2,256,631 of embedded derivatives. The fair values were determined using the Binomial Option Pricing
Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 112.98% to 240.62%, (3) weighted
average risk-free interest rate of
1.59% to 2.56%, (4) expected life of 0.083
to 1 year, and (5) estimated fair value of the Company's common stock from $0.0203 per share.
For the year ended December 31, 2019, the Company
recorded a loss on the change in fair value of derivative liabilities of $2,123,570, while for the year ended December 31, 2018,
the Company recorded a gain on the change in fair value of derivative liabilities of $1,443,249. For the years ended December 31,
2019 and 2018, the Company recorded amortization of debt discounts of $2,906,843 and $1,146,549, respectively, as a charge to interest
expense, respectively.
NOTE
6 – DERIVATIVE LIABILITIES
As
described in Notes 4 and 7, the Company issued convertible notes and warrants that contained conversion features and a reset provisions.
The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as
of the inception date and to fair value as of each subsequent reporting date.
If
an embedded conversion option in a convertible debt instrument no longer meets the bifurcation criteria in this Subtopic, an issuer
shall account for the previously bifurcated conversion option by reclassifying the carrying amount of the liability for the conversion
option (that is, its fair value on the date of reclassification) to shareholders' equity. Any debt discount recognized when the
conversion option was bifurcated from the convertible debt instrument shall continue to be amortized.
NOTE
7 – STOCKHOLDERS’ DEFICIT
Preferred
stock
The
Company is authorized to issue 10,000,000 shares of $0.001 par value preferred stock as of December 31, 2019 and December 31,
2018. As of December 31, 2019, and 2018, the Company has designated and issued 10,000,000 shares of Class A Preferred Stock.
Each
share of Class A Preferred Stock is entitled to 100 votes on all matters submitted to a vote to the stockholders of the Company,
does not have conversion, dividend or distribution upon liquidation rights.
Common
stock
The
Company is authorized to issue 5,000,000,000 shares of $0.001 par value common stock as of December 31, 2019 and 2018. As of December
31, 2019, and 2018, the Company had 77,958,081 and 42,687,301, respectively, common shares issued and outstanding.
On September 3, 2019, the Company completed
a 1 for 60 reverse stock-split of its common stock.
In
2019, the Company issued an aggregate of 141,669 shares of its common stock in settled amounts previously accrued with an estimated
fair value of $193,800
In
2019, the Company issued an aggregate of 18,510,381 shares of its common stock for services rendered with an estimated fair value
of $3,293,688.
In
2019, the Company issued an aggregate of 9,251,217 shares of its common stock in settlement of convertible notes payable and accrued
interest with an estimated fair value of $3,388,774.
In
2019, the Company issued an aggregate of 1,000,000 shares of its common stock in issuance of warrants and BCF with convertible
debt with an estimated fair value of $856,717.
In
2019, the Company issued an aggregate of 1,220,856 shares of its common stock in conversion of related party notes payable with
an estimated fair value of $1,182,415.
In
2019, the Company issued an aggregate of 1,653,175 common shares of its common stock in exchange for exercise of warrants on a
cashless basis.
In
2019, the Company sold shares 222,221 shares of its common stock with an estimated value of $65,000.
In
2019, the Company issued an aggregate of 2,082,398 common shares in settlement of a legal cases with an estimated fair value of
$541,424.
In
2019, the Company issued an aggregate of 2,222,047 common shares in settlement of a for investments in joint ventures with an
estimated fair value of $1,219,040.
During
the year ended December 31, 2018, the Company issued an aggregate of 31,000,794 shares of its common stock for services rendered
with an estimated fair value of $718,099.
During
the year ended December 31, 2018, the Company sold an aggregate of 18,693,636 shares of its common stock for net proceeds of $152,000.
During
the year ended December 31, 2018, the Company issued an aggregate of 80,428,246 shares of its common stock in settlement of $804,279
related party notes payable and accrued interest.
During
the year ended December 31, 2018, the Company issued 147,927,794 shares of its common stock in part settlement of $5,466,333 convertible
notes payable, accrued interest and penalties.
During
the year ended December 31, 2018, the Company issued 57,676,810 shares of its common stock in settlement of a legal case at a
cost of $1,701,466.
During
the year ended December 31, 2018, the company issued 122,046,796 shares of its common stock in exchange for exercise of warrants
on a cashless basis.
During
the year ended December 31, 2018, the company received proceeds from common stock subscriptions for $90,000.
Options
Option
valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated
using the Binomial Option Pricing Model with a volatility figure derived from using the Company’s historical stock prices.
Management determined this assumption to be a more accurate indicator of value. The Company accounts for the expected life of
options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life
of options in accordance with the “simplified” method, which is used for “plain-vanilla" options, as defined
in the accounting standards codification.
The
risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent
with the expected term of the options.
In
addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected
to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining
lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s
actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future,
the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.
The
following table summarizes the stock option activity for the years ended December 31, 2019 and 2018:
|
|
Shares
|
|
|
Weighted-Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic
Value
|
Outstanding at December 31, 2017
|
|
|
16,666,667
|
|
|
$
|
0.30
|
|
|
|
7.76
|
|
$
|
15,400,000
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Forfeitures
or expirations
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2018
|
|
|
16,666,667
|
|
|
$
|
0.30
|
|
|
|
6.76
|
|
$
|
|
15,296,667
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeitures or expirations
|
|
|
(16,666,667)
|
|
|
|
0.30
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
0(1)
|
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
Exercisable
at December 31, 2019
|
|
|
0(1)
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
(1)
On February 27, 2019, Donald Steinberg and Charles Larsen cancelled previously issued options to purchase an aggregate of 16,666,667
shares at an average exercise price of $0.30 per share, representing 100% of all previously issued option.
The
aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise
price less than the Company’s stock price of $0 and $1.22 as of December 31, 2019 and 2018, respectively, which would have
been received by the option holders had those option holders exercised their options as of that date.
The
following table presents information related to stock options at December 31, 2019(1):
Options
Outstanding(1)
|
|
|
Options
Exercisable
|
|
Exercise
Price
|
|
|
Number
of
Options
|
|
|
Weighted
Average
Remaining
Life
In
Years
|
|
|
Exercisable
Number
of
Options
|
|
$
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
The
stock-based compensation expense related to option grants was $0 and $450,000 during the years ended December 31, 2019 and 2018,
respectively.
(1)
On February 27, 2019, Donald Steinberg and Charles Larsen cancelled previously issued options to purchase an aggregate of 16,666,667
shares at an average exercise price of $0.30 per share, representing 100% of all previously issued options.
Warrants
The
following table summarizes the stock warrant activity for the two years ended December 31, 2019:
|
|
Shares
|
|
|
Weighted-Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2017
|
|
|
186,550
|
|
|
$
|
2.40
|
|
|
|
|
|
$
|
1,873,492
|
|
Granted
|
|
|
1,827,564
|
|
|
|
2.34
|
|
|
|
|
|
|
|
|
Forfeitures
or expirations
|
|
|
(166,667
|
)
|
|
$
|
1.50-
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2018
|
|
|
1,847,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,370,298
|
|
|
|
1.98
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(192,521
|
)
|
|
|
1.78
|
|
|
|
|
|
|
|
|
|
Forfeitures or expirations
|
|
|
(14,113)
|
|
|
|
1.80
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
|
|
4,011,111
|
|
|
$
|
2.15
|
|
|
|
3.60
|
|
|
$
|
-
|
|
Exercisable
at December 31, 2019
|
|
|
4,011,111
|
|
|
$
|
2.15
|
|
|
|
3.60
|
|
|
$
|
-
|
|
The
aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on warrants with an exercise
price less than the Company’s stock price of $0.07 and $1.22 as of December 31, 2019 and 2018, respectively, which would
have been received by the warrant holders had those option holders exercised their warrants as of that date.
The
following table presents information related to warrants at December 31, 2019:
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
Exercise
Price
|
|
|
Number
of
Warrants
|
|
|
Weighted
Average
Remaining
Life
In
Years
|
|
|
Exercisable
Number
of
Warrants
|
|
$
|
0.01
- $1.00
|
|
|
|
484,187
|
|
|
2.70
|
|
|
|
484,187
|
|
$
|
1.01
- $2.00
|
|
|
|
27,778
|
|
|
2.50
|
|
|
|
27,778
|
|
$
|
2.01
- $3.00
|
|
|
|
3,499,146
|
|
|
3.74
|
|
|
|
3,499,146
|
|
In
connection with the issuance of convertible notes payable, the Company issued an aggregate of 2,370,298 warrants to purchase the
Company’s common stock from $0.26 to $2.40, vesting immediately and expiring 5 years from the date of issuance. (See Note
7)
NOTE
8 — FAIR VALUE MEASUREMENT
The
Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”)
on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements
for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous
market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability,
such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
825-10 establishes three levels of inputs that may be used to measure fair value:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant
inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level
3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or
liabilities.
All
items required to be recorded or measured on a recurring basis are based upon level 3 inputs.
To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair
value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon
adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial
statements.
The
carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings
(including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term
maturity.
As
of December 31, 2019, and 2018, the Company did not have any items that would be classified as level 1 or 2 disclosures.
The
Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed in note 6. While
the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that
the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in
a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values
using the methods discussed in Notes 4 and 5 are that of volatility and market price of the underlying common stock of the Company.
As
of December 31, 2019, and 2018, the Company did not have any derivative instruments that were designated as hedges.
The
combined derivative and warrant liability as of December 31, 2019 and 2018, in the amounts of $5,222,186 and $2,256,631, respectively,
have a level 3 classification.
The
following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the two years
ended December 31, 2019:
The
derivative liabilities as of December 31, 2019 and 2018, in the amount of $5,693,071 and $2,256,631, respectively, have a level
3 classification.
The
following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the year
ended December 31, 2019:
|
|
|
Debt
Derivative
|
|
|
Balance, December 31, 2018
|
|
$
|
2,256,631
|
|
Increase resulting from initial issuances of additional
convertible notes payable
|
|
|
2,895,717
|
|
Decreases resulting from conversion or payoff of
convertible notes payable
|
|
|
(1,582,847
|
)
|
Mark-to-market at December 31, 2019
|
|
|
2,123,570
|
|
Balance, December 31, 2019
|
|
$
|
5,693,071
|
|
|
|
|
|
|
Net change in fair value included
in earnings related to derivative liabilities during the year ended December 31, 2019
|
|
$
|
2,123,570
|
|
Fluctuations
in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period.
During the year ended December 31, 2019, the Company’s stock price decreased significantly from initial valuations. As the
stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally decreases.
Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative
instruments.
NOTE
9 — RELATED PARTY TRANSACTIONS
The
Company’s current officers and stockholders advanced funds to the Company for travel related and working capital purposes.
As of December 31, 2019, and 2018, there were no related party advances outstanding.
As
of December 31, 2019, and 2018, accrued compensation due officers and executives included as accrued compensation was $4,875 and
$454,316, respectively.
For
the years ended December 31, 2019 and 2018, the Company had sales to related parties of $21,157 and $11,683, respectively.
NOTE
10 — COMMITMENTS AND CONTINGENCIES
Employment
contracts
On
February 3, 2020, we entered into an executive employment agreement with Jesus Quintero, our CEO and CFO providing for gross salary
of $15,000 monthly, consisting of $12,000 in cash and $3,000 worth of our common stock valued on the closing price of our common
stock on the last trading day of each month.
On
February 28, 2020, the Company entered into executive contracts with its directors Edward Manolos and Themistocles Psomiadis .
The agreements are for a term lasting from the effective date until the earlier of the date of the next annual or special
stockholders meeting called for the purposes of electing directors, and the earliest of the following to occur: (a) the death
of the Director; (b) the termination of the Director from his membership on the Board by the mutual agreement of the Company and
the Director; (c) the removal of the Director from the Board by the majority stockholders of the Company; and (d) the resignation
by the Director from the Board. Mr. Psomiadis and Mr. Manolos’s 2020 contracts provide for payments of $5,000 quarterly.
Operating
lease
On
July 1, 2019, the Company entered into a lease extension agreement, whereby the Company leased for office space in Escondido,
California, commencing June 30, 2020 and expiring on June 30, 2021 at a base monthly lease rate of $1,308.88 per month through
June 30, 2020, and $1,348.14 to June 30, 2021.
To
evaluate the impact on adoption of ASC842 – Leases, on the accounting treatment for leasing of real office property referred
to as the “Premises”. The premises is located in Escondido, CA.
On
July 1, 2019, the Company entered into a lease extension agreement for its single operating lease, whereby the Company extended
its office lease Escondido, California, in for two year. The extension period commenced on June 30, 2020 and will expire
on June 30, 2021 at a base monthly lease rate of $1,308.88 per month through June 30, 2020, and $1,348.14 to June 30, 2021.
To
evaluate the impact on adoption of ASC842 – Leases, on the accounting treatment for leasing of real office property referred
to as the “Premises”. The premises is located in Escondido, CA.
The
Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is
readily determinable. The Company used an estimated incremental borrowing rate of 10% to estimate the present value of the right
of use liability.
The
Company has right-of-use assets of $22,101 and operating lease liabilities of $22,219 as of December 31, 2019. Operating lease
expense for the year ended December 31, 2019 was $30,048.76. The Company had cash used in operating activities related to leases
of $29,930.76 during the year ended December 31, 2019. The lease has a remaining term of eighteen months.
The
following table provides the maturities of lease liabilities at December 31, 2019:
|
|
|
|
Maturity of Lease Liabilities at December
31, 2019
|
2020
|
$
|
15,942
|
|
2021
|
|
8,089
|
|
2021
and thereafter
|
|
-
|
|
|
|
-
|
|
Total future undiscounted lease payments
|
|
24,031
|
|
Less: Interest
|
|
(1,812)
|
|
Present value of lease liabilities
|
$
|
22,219
|
|
Minimum
lease payments under the Company’s operating lease under ASC 840 as of for 2020 and 2021 are $15,942 and $8,089, respectively.
Litigation
The
Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business. Although
occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should
not have a material adverse effect on its financial position, results of operations or liquidity.
Bougainville
Ventures
On September 20, 2018, the Company filed suit against Bougainville Ventures,
Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number
18-2- 0045324.
Background.
On March 16, 2017, we entered into a joint venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose
of the joint venture was for the Company and Bougainville to jointly engage in the development and promotion of products in the
legalized cannabis industry in Washington State; (ii) utilize Bougainville’s high quality cannabis grow operations in the
State of Washington, where it claimed to have an ownership interest in real property for use within the legalized cannabis industry;
(iii) leverage Bougainville’s agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical
and management services and resources including, but not limited to: sales and marketing, agricultural procedures, operations
security and monitoring, processing and delivery, branding, capital resources and financial management; and, (iv) optimize collaborative
business opportunities. The Company and Bougainville agreed to operate through a Washington State Limited Liability Company, and
BV-MCOA Management, LLC was organized in the State of Washington on May 16, 2017.
As
our contribution to the joint venture, the Company committed to raise not less than $1 million dollars to fund joint venture operations
based upon a funding schedule. The Company also committed to providing branding and systems for the representation of cannabis
related products and derivatives comprised of management, marketing and various proprietary methodologies directly tailored to
the cannabis industry. The Company and Bougainville's agreement provided that funding provided by the Company would go, in part,
towards the joint venture’s ultimate purchase of the land consisting of a one-acre parcel located in Okanogan County, Washington,
for joint venture operations.
As
disclosed on Form 8-K on December 11, 2017, the Company did not comply with the funding schedule for the joint venture. On November
6, 2017, the Company and Bougainville amended the joint venture agreement to reduce the amount of the Company's commitment to
$800,000 and also required the Company to issue Bougainville 15 million shares of the Company's restricted common stock. The Company
completed its payments pursuant to the amended agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville
15 million shares of restricted common stock. The amended agreement provided that Bougainville would deed the real property to
the joint venture within thirty days of its receipt of payment.
Thereafter,
the Company determined that Bougainville had no ownership interest in the property in Washington State, but rather was a party
to a purchase agreement for real property that was in breach for non-payment. Bougainville also did not possess an agreement with
a Tier 3 I502 license holder to grow Marijuana on the property. Nonetheless, as a result of funding arranged for by the Company,
Bougainville and an unrelated third party, Green Ventures Capital Corp., purchased the land. The land is currently pending the
payment of delinquent property taxes that would allow for the Okanogan County Assessor to sub-divide the property, so that the
appropriate portion could be deeded to the joint venture. Although Bougainville represented it would pay the delinquent taxes,
it has not. To date, the property has not been deeded to the joint venture.
To
clarify the respective contributions and roles of the parties, the Company also offered to enter into good faith negotiations
to revise and restate the joint venture agreement with Bougainville. The Company diligently attempted to communicate with Bougainville
in good faith to accomplish a revised and restated joint venture agreement, and efforts towards satisfying the conditions to complete
the subdivision of the land by the Okanogan County Assessor. However, Bougainville failed to cooperate or communicate with the
Company in good faith, and failed to pay the delinquent taxes on the real property that would allow for sub-division and the deeding
of the real property to the joint venture.
Company
Determines to File Suit. On August 10, 2018, the Company advised its independent auditor that Bougainville did not cooperate or
communicate with the Company regarding its requests for information concerning the audit of Bougainville’s receipt and expenditures
of funds contributed by the Company in the joint venture agreement. Bougainville had a material obligation to do so under the
joint venture agreement. The Company believes that some of the funds it paid to Bougainville were misappropriated and that there
was self-dealing with respect to those funds. Additionally, the Company believes that Bougainville misrepresented material facts
in the joint venture agreement, as amended, including, but not limited to, Bougainville’s representations that: (i) it had
an ownership interest in real property that was to be deeded to the joint venture; (ii) it had an agreement with a Tier 3 # I502
cannabis license holder to grow cannabis on the real property; and, (iii) that clear title to the real property associated with
the Tier 3 # I502 license would be deeded to the joint venture thirty days after the Company made its final funding contribution.
As a result, on September 20, 2018, the Company filed suit against Bougainville Ventures, Inc., BV-MCOA Management, LLC, Andy
Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2- 0045324. The Company’s complaint
seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty, conversion, recession of the joint venture
agreement, an accounting, quiet title to real property in the name of the Company, for the appointment of a receiver, the return
to treasury of 15 million shares issued to Bougainville, and, for treble damages pursuant to the Consumer Protection Act in Washington
State. The registrant has filed a lis pendens on the real property. The case is currently in litigation. Trial is set for January
26-28, 2021.
Caren
Glasser
On
March 2, 2020, Caren Glasser filed a request for arbitration against the Company alleging non-payment for past due compensation.
The case was filed in the in the American Arbitration Association under Case no. 01-20-0000-6290. The Company and Ms. Glasser
agreed to settle her dispute on May 7, 2020. The settlement agreement obligates the Company to pay Ms. Glasser $24,000 thirty
days of Ms. Glasser’s review and execution, consistent with the Older Workers Benefit Protection Act (29 U.S.C. § 626(f).
NOTE
11 – INCOME TAXES
At
December 31, 2019, the Company has available for federal income tax purposes a net operating loss carry forward of approximately
$74,164,213, expiring in the year 2038, that may be used to offset future taxable income, but could be limited under Section 382.
The Company has provided a valuation reserve against the full amount of the net operating loss benefit, since in the opinion of
management based upon the earnings history of the Company; it is more likely than not that the benefits will not be realized.
Due to possible significant changes in the Company's ownership, the future use of its existing net operating losses may be limited. All
or portion of the remaining valuation allowance may be reduced in future years based on an assessment of earnings sufficient to
fully utilize these potential tax benefits.
We
have adopted the provisions of ASC 740-10-25, which provides recognition criteria and a related measurement model for uncertain
tax positions taken or expected to be taken in income tax returns. ASC 740-10-25 requires that a position taken or
expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position
would be sustained upon examination by tax authorities.
Tax
position that meet the more likely than not threshold is then measured using a probability weighted approach recognizing the largest
amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company had no
tax positions relating to open income tax returns that were considered to be uncertain. We
file income tax returns in the U.S. and in the state of California and Utah with varying statutes of limitations.
The
Company is required to file income tax returns in the U.S. Federal jurisdiction and in California. The Company is no longer subject
to income tax examinations by tax authorities for tax years ending before December 31, 2016.
The
Company’s deferred taxes as of December 31, 2019 and 2018 consist of the following:
|
|
2019
|
|
2018
|
Non-Current deferred tax asset:
|
|
|
|
|
|
|
|
|
Net operating loss carry-forwards
|
|
$
|
74,164,213
|
|
|
$
|
53,983,895
|
|
Valuation allowance
|
|
|
(74,164,213
|
)
|
|
|
(53,983,895
|
)
|
Net non-current deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE
12 – SUBSEQUENT EVENTS
On
April 15, 2019, we entered into a joint venture with Natural Plant Extract of California, Inc., and subsidiaries, to operate a
licensed psychoactive cannabis distribution service in California. California legalized THC psychoactive cannabis for medicinal
and recreational use on January 1, 2018. On February 3, 2020, we terminated the joint venture.
The
Original Material Definitive Agreement
Pursuant
to the original material definitive agreement, we agreed to acquire twenty percent (equal to 200,000) of NPE’s authorized
shares in exchange for our payment of $2,000,000 and $1,000,000 worth of our restricted common stock. We agreed to form a joint
venture with NPE incorporated in California under the name “Viva Buds, Inc.” (“Viva Buds”) for the purpose
of operating a California licensed cannabis distribution business pursuant to California law legalizing THC psychoactive cannabis
for recreational and medicinal use.
Our
payment obligations were governed by a stock purchase agreement which required us to make the following payments:
a.
Deposit of $350,000 within 5 days of the execution of the material definitive agreement;
b.
Deposit of $250,000 payable within 30 days;
c.
Deposit of $400,000 within 60 days;
d.
Deposit of $500,000 within 75 days;
e.
Deposit of $500,000 within 90 days
We
made our initial payment pursuant to this schedule, but otherwise failed to comply with the payment schedule and we were in breach
of contract.
Settlement
and Release of All Claims Agreement
On
February 3, 2020, the Company and NPE entered into a settlement and release of all claims agreement. In exchange for a complete
release of all claims, the Company and NPE (1) agreed to reduce our interest in NPE from 20% to 5%; (2) we agreed to pay NPE a
total of $85,000 as follows: $35,000 concurrent with the execution of the Settlement and Release of All Claims Agreement, and
$25,000 no later than the 5th calendar day for each of the two months following execution of Settlement and Release of All Claims
Agreement; and, (3) to retire the balance of our original valuation obligation from the material definitive agreement, representing
a shortfall of $56,085.15, in a convertible promissory note, with terms allowing NPE to convert the note into common stock of
MCOA at a 50% discount to the closing price of MCOA’s common stock as of the maturity date.
Of
the total amount due and payable by us as of the date of this filing, we owe $75,000, and we are in breach of the settlement agreement.
On February 3, 2020, we executed a convertible promissory note in the amount of $56,085.15 to NPE. Additionally, as a result of
our settlement agreement with NPE, we became liable to pay NPE our 5% portion equal to $25,902 of the regulatory charges to the
City of Lynwood and the State of California to transfer the cannabis licenses back to NPE. To date, we have not paid this amount
and it is due and owing. As of the date of this filing, there is no pending legal action by NPE against us for these matters.
On February 3,
2020, the Company entered into an executive employment agreement with Jesus Quintero, our CEO and CFO providing for a gross salary
of $15,000 monthly, consisting of $12,000 in cash and $3,000 worth of our common stock valued on the closing price of our common
stock on the last trading day of each month.
On
February 28, 2020, Themistocles Psomiadis was appointed as an independent member to the board of directors.
On
February 28, 2020, the Company entered into executive contracts with its directors Edward Manolos and Themistocles Psomiadis.
The agreements are for a term lasting from the effective date until the earlier of the date of the next annual or special stockholders
meeting called for the purposes of electing directors, and the earliest of the following to occur: (a) the death of the Director;
(b) the termination of the Director from his membership on the Board by the mutual agreement of the Company and the Director;
(c) the removal of the Director from the Board by the majority stockholders of the Company; and (d) the resignation by the Director
from the Board. Mr. Psomiadis and Mr. Manolos’s 2020 contracts provide for payments of $5,000 quarterly.’
On
March 30, 2019, Robert Coale resigned as a member of the board of directors.
MARIJUANA COMPANY
OF AMERICA, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED
BALANCE SHEETS
|
|
Sept 30, 2020
|
|
Dec 31, 2019
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
149,477
|
|
|
$
|
211,765
|
|
Short-term Investments
|
|
|
130,060
|
|
|
|
27,403
|
|
Accounts receivable, net
|
|
|
8,563
|
|
|
|
18,317
|
|
Inventory
|
|
|
145,523
|
|
|
|
149,175
|
|
Prepaid Insurance
|
|
|
66,131
|
|
|
|
—
|
|
Investment receivable
|
|
|
54,940
|
|
|
|
—
|
|
Notes receivable
|
|
|
75,000
|
|
|
|
—
|
|
Other current assets
|
|
|
22,508
|
|
|
|
11,034
|
|
Total current assets
|
|
|
652,202
|
|
|
|
417,694
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
3,028
|
|
|
|
7,512
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Long-term Investments
|
|
|
1,343,915
|
|
|
|
693,915
|
|
Right-of-use-assets
|
|
|
11,642
|
|
|
|
22,101
|
|
Security deposit
|
|
|
2,500
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
2,013,287
|
|
|
|
1,143,722
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
696,010
|
|
|
|
797,789
|
|
Accrued compensation
|
|
|
125,738
|
|
|
|
4,875
|
|
Accrued liabilities
|
|
|
522,014
|
|
|
|
522,258
|
|
Notes payable, related parties
|
|
|
40,000
|
|
|
|
40,000
|
|
Loans payable PPP Stimulus
|
|
|
35,500
|
|
|
|
—
|
|
Convertible notes payable, net of debt discount of $334,980 and $808,980, respectively
|
|
|
2,181,571
|
|
|
|
3,193,548
|
|
Right-of-use liabilities - current portion
|
|
|
3,784
|
|
|
|
14,361
|
|
Warrant liability to be settled
|
|
|
—
|
|
|
|
192,115
|
|
Contingency Liability
|
|
|
—
|
|
|
|
956,251
|
|
Subscriptions payable
|
|
|
650,000
|
|
|
|
330,797
|
|
Derivative liability
|
|
|
3,426,888
|
|
|
|
5,693,071
|
|
Total current liabilities
|
|
|
7,681,505
|
|
|
|
11,745,065
|
|
|
|
|
|
|
|
|
|
|
Non-Current Liabilities
|
|
|
|
|
|
|
|
|
Right-of-use liabilities
|
|
|
7,858
|
|
|
|
7,858
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
7,689,363
|
|
|
|
11,752,923
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 50,000,000 shares authorized
|
|
|
|
|
|
|
|
|
Class A preferred stock, $0.001 par value, 10,000,000 shares designated, 10,000,000 shares issued and outstanding as of September 30, 2020 and December 31, 2019
|
|
|
10,000
|
|
|
|
10,000
|
|
Class B preferred stock, $0.001 par value, 5,000,000 shares designated, 0 shares issued and outstanding as of September 30, 2020 and December 31, 2019
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.001 par value; 5,000,000,000 shares authorized; 1,913,880,887 and 77,958,081 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
|
|
|
1,913,881
|
|
|
|
77,958
|
|
Common stock to be issued, 1,000,000 and 0 shares, respectively
|
|
|
1,000
|
|
|
|
—
|
|
Additional paid in capital
|
|
|
70,740,648
|
|
|
|
63,467,054
|
|
Accumulated deficit
|
|
|
(78,341,604
|
)
|
|
|
(74,164,213
|
)
|
Total stockholders' deficit
|
|
|
(5,676,075
|
)
|
|
|
(10,609,201
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
2,013,287
|
|
|
$
|
1,143,722
|
|
See the accompanying notes to these unaudited condensed consolidated financial statements
MARIJUANA COMPANY
OF AMERICA, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2020 and 2019
(UNAUDITED)
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
REVENUES:
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
49,933
|
|
|
$
|
225,356
|
|
|
$
|
206,407
|
|
|
$
|
540,398
|
|
Related party Sales
|
|
|
3,262
|
|
|
|
4,015
|
|
|
|
11,565
|
|
|
|
12,363
|
|
Total Revenues
|
|
|
53,195
|
|
|
|
229,371
|
|
|
|
217,972
|
|
|
|
552,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
37,170
|
|
|
|
90,843
|
|
|
|
110,563
|
|
|
|
159,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
16,025
|
|
|
|
138,528
|
|
|
|
107,409
|
|
|
|
392,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,374
|
|
|
|
1,696
|
|
|
|
4,702
|
|
|
|
5,087
|
|
Selling and marketing
|
|
|
125,942
|
|
|
|
376,342
|
|
|
|
326,608
|
|
|
|
1,462,104
|
|
Payroll and related
|
|
|
62,000
|
|
|
|
90,000
|
|
|
|
258,842
|
|
|
|
310,000
|
|
Stock-based compensation
|
|
|
123,000
|
|
|
|
—
|
|
|
|
665,767
|
|
|
|
100,350
|
|
General and administrative
|
|
|
294,921
|
|
|
|
295,113
|
|
|
|
710,094
|
|
|
|
1,353,757
|
|
Total operating expenses
|
|
|
607,237
|
|
|
|
763,151
|
|
|
|
1,966,013
|
|
|
|
3,231,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from operations
|
|
|
(591,212
|
)
|
|
|
(624,623
|
)
|
|
|
(1,858,604
|
)
|
|
|
(2,838,396
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(688,090
|
)
|
|
|
(1,559,720
|
)
|
|
|
(2,460,185
|
)
|
|
|
(3,001,972
|
)
|
Legal Contingency expense
|
|
|
—
|
|
|
|
(1,497,674
|
)
|
|
|
—
|
|
|
|
(1,497,674
|
)
|
Gain (Loss) on joint venture
|
|
|
238,296
|
|
|
|
—
|
|
|
|
(22,658
|
)
|
|
|
—
|
|
Gain (Loss) on equity investment
|
|
|
240,198
|
|
|
|
122,864
|
|
|
|
106,305
|
|
|
|
(107,961
|
)
|
Loss on change in fair value of derivative liabilities
|
|
|
(1,454,903
|
)
|
|
|
(1,668,112
|
)
|
|
|
(312,631
|
)
|
|
|
(2,148,262
|
)
|
Unrealized Loss on trading securities
|
|
|
—
|
|
|
|
(362,625
|
)
|
|
|
(13,945
|
)
|
|
|
(647,625
|
)
|
Loss on sale of trading securities
|
|
|
—
|
|
|
|
(24,698
|
)
|
|
|
(2,603
|
)
|
|
|
(24,698
|
)
|
Gain on settlement of joint venture
|
|
|
383,440
|
|
|
|
—
|
|
|
|
386,930
|
|
|
|
—
|
|
Loss on settlement of debt
|
|
|
—
|
|
|
|
(612,034
|
)
|
|
|
—
|
|
|
|
(612,034
|
)
|
Total other income (expense)
|
|
|
(1,281,059
|
)
|
|
|
(5,601,999
|
)
|
|
|
(2,318,787
|
)
|
|
|
(8,040,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss before income taxes
|
|
|
(1,872,271
|
)
|
|
|
(6,226,622
|
)
|
|
|
(4,177,391
|
)
|
|
|
(10,878,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes (benefit)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
$
|
(1,872,271
|
)
|
|
$
|
(6,226,622
|
)
|
|
$
|
(4,177,391
|
)
|
|
($
|
10,878,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.13
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.26
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding, basic and diluted (after stock-split)
|
|
|
1,178,860,134
|
|
|
|
49,686,994
|
|
|
|
518,261,567
|
|
|
|
41,726,239
|
|
See the accompanying notes to these unaudited condensed consolidated financial statements
MARIJUANA COMPANY
OF AMERICA, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS SEPTEMBER 30, 2020 AND 2019 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Preferred Stock
|
|
Class
B Preferred Stock
|
|
Common
Stock
|
|
Common
Stock to be issued
|
|
Common
Stock
|
|
Additional
Paid
In
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Subscriptions
|
|
Capital
|
|
Deficit
|
|
Total
|
Balance, December 31, 2018
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
42,687,301
|
|
|
$
|
42,687
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
90,000
|
|
|
$
|
50,707,103
|
|
|
$
|
(53,983,895
|
)
|
|
$
|
(3,134,105
|
)
|
Common stock issued for services rendered
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
552,054
|
|
|
|
552
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
553,815
|
|
|
|
—
|
|
|
|
554,367
|
|
Common stock issued in settlement of convertible notes payable and
accrued interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,208,063
|
|
|
|
5,208
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,551,615
|
|
|
|
—
|
|
|
|
3,556,823
|
|
Reclassification of derivative liabilities to additional paid in capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
462,714
|
|
|
|
—
|
|
|
|
462,714
|
|
Conversion of related party notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,394,565
|
|
|
|
2,395
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,730,119
|
|
|
|
—
|
|
|
|
1,732,514
|
|
Common stock issued in exchange for exercise of warrants on a cashless
basis
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
655,556
|
|
|
|
656
|
|
|
|
27,778
|
|
|
|
28
|
|
|
|
(40,000
|
)
|
|
|
95,139
|
|
|
|
—
|
|
|
|
55,823
|
|
Sale of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
531,699
|
|
|
|
532
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(50,000
|
)
|
|
|
203,522
|
|
|
|
—
|
|
|
|
154,054
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(10,878,622
|
)
|
|
|
(10,878,622
|
)
|
Balance, September 30, 2019
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
52,029,238
|
|
|
$
|
52,029
|
|
|
|
27,778
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
57,304,027
|
|
|
$
|
(64,862,517
|
)
|
|
$
|
(7,496,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A Preferred Stock
|
|
Class
B Preferred Stock
|
|
Common
Stock
|
|
Common
Stock to be issued
|
|
Common
Stock
|
|
Additional
Paid
In
|
|
Accumulated
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Subscriptions
|
|
Capital
|
|
Deficit
|
|
Total
|
Balance, December 31, 2019
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
77,958,081
|
|
|
$
|
77,958
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63,467,054
|
|
|
$
|
(74,164,213
|
)
|
|
$
|
(10,609,201
|
)
|
Common stock issued to settle amounts previously
accrued
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,333
|
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,692
|
|
|
|
—
|
|
|
|
6,700
|
|
Common stock issued for services rendered
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
156,444,047
|
|
|
|
156,444
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
509,323
|
|
|
|
—
|
|
|
|
665,767
|
|
Common stock issued in settlement of convertible notes payable and
accrued interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,469,725,298
|
|
|
|
1,469,725
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,165,922
|
|
|
|
—
|
|
|
|
2,635,647
|
|
Conversion of related party notes payable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,384,103
|
|
|
|
21,384
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
29,229
|
|
|
|
—
|
|
|
|
50,613
|
|
Common stock issued in exchange for exercise of warrants on a cashless
basis
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
51,054,214
|
|
|
|
51,054
|
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
375,446
|
|
|
|
—
|
|
|
|
427,500
|
|
Sale of common stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
127,012,847
|
|
|
|
127,013
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,673
|
|
|
|
—
|
|
|
|
153,686
|
|
Common shares issued in settlement of legal case
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,293,843
|
|
|
|
10,294
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,273,338
|
|
|
|
—
|
|
|
|
1,283,632
|
|
Reclassification of derivative liabilities to additional paid in
capital
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,886,971
|
|
|
|
—
|
|
|
|
3,886,971
|
|
Net Loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,177,391
|
)
|
|
|
(4,177,391
|
)
|
Balance, September 30, 2020
|
|
|
10,000,000
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
1,913,880,766
|
|
|
$
|
1,913,881
|
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
$
|
—
|
|
|
$
|
70,740,648
|
|
|
$
|
(78,341,604
|
)
|
|
$
|
(5,676,075
|
)
|
See the accompanying notes to these unaudited condensed consolidated financial statements
MARIJUANA COMPANY
OF AMERICA, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2020 AND 2019
(UNAUDITED)
|
|
2020
|
|
2019
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(4,177,391
|
)
|
|
$
|
(10,878,622
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization of debt discount
|
|
|
1,373,575
|
|
|
|
2,172,936
|
|
Depreciation and amortization
|
|
|
4,702
|
|
|
|
5,087
|
|
Bad debt expense
|
|
|
—
|
|
|
|
15,000
|
|
Non cash interest
|
|
|
—
|
|
|
|
1,886,837
|
|
Impairment Loss on equity method investee
|
|
|
22,658
|
|
|
|
|
|
(Gain) Loss on equity investment, net of debt
settlement
|
|
|
(106,305
|
)
|
|
|
107,961
|
|
Loss on change in fair value of derivative liability
|
|
|
312,631
|
|
|
|
2,148,262
|
|
Loss on share inducement and settlement of warrant liability
|
|
|
427,500
|
|
|
|
—
|
|
Stock-based compensation
|
|
|
665,767
|
|
|
|
100,350
|
|
Unrealized Loss on trading securities
|
|
|
13,945
|
|
|
|
647,625
|
|
Realized Loss on trading securities
|
|
|
—
|
|
|
|
41,667
|
|
Gain on settlement of joint venture
|
|
|
(386,930
|
)
|
|
|
|
|
Loss on settlement of debt
|
|
|
—
|
|
|
|
612,034
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
9,754
|
|
|
|
(31,597
|
)
|
Inventories
|
|
|
3,652
|
|
|
|
(17,052
|
)
|
Prepaid expenses and other current assets
|
|
|
(77,605
|
)
|
|
|
(17,707
|
)
|
Accounts payable
|
|
|
205,061
|
|
|
|
206,926
|
|
Accrued expenses and other current liabilities
|
|
|
325,883
|
|
|
|
(348
|
)
|
Right-of-use assets
|
|
|
10,459
|
|
|
|
—
|
|
Right-of-use liabilities
|
|
|
(10,577
|
)
|
|
|
—
|
|
Accrued compensation
|
|
|
120,863
|
|
|
|
(381,038
|
)
|
Contingency liability
|
|
|
—
|
|
|
|
1,497,675
|
|
Net cash provided by (used in) operating activities
|
|
|
(1,262,358
|
)
|
|
|
(1,884,004
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(1,271
|
)
|
|
|
(2,703
|
)
|
Investment in joint venture
|
|
|
125,000
|
|
|
|
(685,049
|
)
|
Net cash provided by (used in) investing activities
|
|
|
123,729
|
|
|
|
(687,752
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of notes payable
|
|
|
876,302
|
|
|
|
2,257,000
|
|
Proceeds from PPP loan payable
|
|
|
35,500
|
|
|
|
—
|
|
Proceeds from sales of trading securities
|
|
|
10,854
|
|
|
|
—
|
|
Proceeds from sale of common stock
|
|
|
153,685
|
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
|
|
1,076,342
|
|
|
|
2,257,000
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(62,288
|
)
|
|
|
(314,756
|
)
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
211,765
|
|
|
|
359,577
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
149,477
|
|
|
$
|
44,821
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
—
|
|
|
|
—
|
|
Cash paid for taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Non cash transactions:
|
|
|
|
|
|
|
|
|
Common stock issued in settlement of convertible notes payable
|
|
$
|
2,635,647
|
|
|
$
|
3,556,823
|
|
Common stock issued in settlement of related party notes payable and accrued compensation
|
|
$
|
50,613
|
|
|
$
|
1,732,514
|
|
Reclassification of derivative liabilities to additional paid-in capital
|
|
$
|
3,886,971
|
|
|
$
|
462,714
|
|
Investment in joint venture
|
|
$
|
—
|
|
|
$
|
2,650,000
|
|
Gain on settlement of JV investment
|
|
|
386,930
|
|
|
|
—
|
|
Common shares issued in settlement of legal case
|
|
$
|
1,283,632
|
|
|
$
|
—
|
|
See the accompanying notes to these unaudited condensed consolidated financial statements
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Marijuana
Company of America, Inc. (The “Company”) was incorporated under the laws of the State of Utah in October 1985 under
the name Mormon Mint, Inc. The corporation was originally a startup company organized to manufacture and market commemorative medallions
related to the Church of Jesus Christ of Latter Day Saints. On January 5, 1999, Bekam Investments, Ltd. acquired one hundred percent
of the common shares of the Company and spun the Company off changing its name Converge Global, Inc. From August 13, 1999 until
November 23, 2002, the Company focused on the development and implementation of Internet web content and e-commerce applications.
In October 2009, in a 30 for 1 exchange, the Company merged with Sparrowtech, Inc. for the purpose of exploration and development
of commercially viable mining properties. From 2009 to 2014, we operated primarily in the mining exploration business.
In 2015,
the Company changed its business model to a marketing and distribution company for medical marijuana. In conjunction with the change,
the Company changed its name to Marijuana Company of America, Inc. At the time of the transition in 2015, there were no remaining
assets, liabilities or operating activities of the mining business.
On September
21, 2015, the Company formed H Smart, Inc., a Delaware corporation as a wholly owned subsidiary for the purpose of operating the
hempSMART™ brand.
On February
1, 2016, the Company formed MCOA CA, Inc., a California corporation as a wholly owned subsidiary to facilitate mergers, acquisitions
and the offering of investments or loans to the Company.
On
May 3, 2017, the Company formed Hempsmart Limited, a United Kingdom corporation as a wholly owned subsidiary for the purpose of
future expansion into the European market.
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: H Smart, Inc., Hempsmart
Limited and MCOA CA, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
The unaudited condensed interim financial statements
of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)
for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been included.
The condensed balance sheet as of December
31, 2019 has been derived from audited financial statements.
Operating results for the three and nine months
ended September 30, 2020 are not necessarily indicative of results that may be expected for the year ending December 31, 2020.
These condensed financial statements should be read in conjunction with the audited financial statements for the year ended December
31, 2019.
NOTE
2 – GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS
The accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the
normal course of business. As shown in the accompanying financial statements for nine months ended September 30, 2020, the Company
had a net loss of $4,177,391 and used cash in operations of $1,263,358. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period of time.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
The Company's primary source of operating funds
in 2020 has been from funds generated from proceeds from the issuance of convertible and other debt and issuance of stock through
private placements. With the exception of the current quarter, the Company has experienced net losses from operations since inception,
but expects these conditions to improve as its business develops. The Company has stockholders' deficiencies at September 30, 2020
and requires additional financing to fund future operations.
The Company’s
existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding sources.
There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of
the Company’s liquidity problems discussed in this filing. The accompanying statements do not include any adjustments that
might result, should the Company be unable to continue as a going concern.
NOTE 3 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
For annual reporting periods after December
15, 2017, the Financial Accounting Standards Board (“FASB”) made effective ASU 2014-09 “Revenue from Contracts
with Customers,” to supersede previous revenue recognition guidance under current U.S. GAAP. Revenue is now recognized in
accordance with FASB ASC Topic 606, Revenue Recognition. The objective of the guidance is to establish the principles that an entity
shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of
revenue and cash flows arising from a contract with a customer. The core principal is to recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled
in exchange for those goods or services. Two options were made available for implementation of the standard: the full retrospective
approach or modified retrospective approach. The guidance became effective for annual reporting periods beginning after December
15, 2017, including interim periods within that reporting period, with early adoption permitted. We adopted FASB ASC Topic 606
for our reporting period as of the year ended December 31, 2017, which made our implementation of FASB ASC Topic 606 effective
in the first quarter of 2018. We decided to implement the modified retrospective transition method to implement FASB ASC Topic
606, with no restatement of the comparative periods presented. Using this transition method, we applied the new standards to all
new contracts initiated on/after the effective date. We also decided to apply this method to any incomplete contracts we determine
are subject to FASB ASC Topic 606 prospectively. For the year ended December 31, 2018, and for the quarter ended September 30,
2019, there were no incomplete contracts. As is more fully discussed below, we are of the opinion that none of our contracts for
services or products contain significant financing components that require revenue adjustment under FASB ASC Topic 606.
Identification of Our
Contracts with Our Customers.
Contracts included in
our application of FASB ASC Topic 606, consist completely of sales contracts between us and our customers that create enforceable
rights and obligations. For the year ended December 31, 2019, and for the three and nine months ended September 30, 2020, our sales
contracts included the following parties: us, our sales associates and our customers. Our sales contracts were offered by us and
our sales associates to our customers directly through our web site. Our sales contracts, and those formalized by our sales associates,
are represented by an electronic order form, which contains the contractual elements of offer for sale, acceptance and the provision
of consideration consisting of the buyer’s payment, and the concurrent delivery of our hempSMART™ product. Since our
hempSMART™ product sales contracts are consummated upon (i) receipt of the customer’s acceptance of our offer; (ii)
our concurrent receipt of our customers payment; and, (iii) our delivery of the agreed to hempSMART™ product, all parties
are equally committed to fulfilling their respective obligations under the sales contracts. Further, the sales contracts specifically
identify (i) parties; (ii) quantity and type of hempSMART™ product ordered; (iii) price; and, (iv) subject, and so each respective
party’s rights are identifiable and the payment terms are defined. Since the sales contracts are consummated concurrent with
offer, acceptance, payment and delivery of the hempSMART™ product ordered, we recognize principal revenue and cash flows
as the respective sales contract transactions are completed. Further, because our sales contracts are offered, accepted and consummated
concurrently, our ability to collect revenue is immediate. We receive no payments for agreements that do not qualify as a contract.
If customers agree to multiple sales contracts when they are entered into at or near the same time, our policy is to combine those
contracts if: (i) the sales contracts are negotiated as a single package; (ii) the payment amount of one sales contract is dependent
upon another sales contract; (iii) our performance obligations of delivering multiple hempSMART™ products can be determined
to be part of a single transaction. Since the nature of the entry into and consummation of our sales contracts occurs concurrently,
there are no changes or modifications to the terms of the sales contracts that would modify the enforceable rights and performance
obligations of the parties, and/or materially alter the timing of our receipt of revenue from our sales contracts.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Identifying the Performance
Obligations in Our Sales Contracts.
In analyzing our sales
contracts, our policy is to identify the distinct performance obligations in a sales contract arrangement. In determining our performance
obligations under our sales contracts, we consider that the terms and conditions of sales are explicitly outlined in our sales
contracts, and are so distinct and identifiable within the context of each sales contract, and so are not integrated with other
goods, or constitute a modification or customization of other goods in our contracts, or are highly dependent or highly integrated
with other goods in our sales contracts. Thus, our performance obligations are singularly related to our promise to provide the
hempSMART™ products upon receipt of payment. We offer an assurance warranty on our hempSMART™ products that allows
a customer to return any hempSMART™ products within thirty days if not satisfied for any reason. Assurance warranties are
not identifiable performance obligations, since they are electable at the whim of the customer for any reason. However, we do account
for returns of purchase prices if made.
Determination of the
Price in Our Sales Contracts.
The transaction prices
in our sales contract is the amount of consideration we expect to be entitled to for transferring promised hempSMART™ products.
The consideration amount is fixed and not variable. The transaction price is allocated to the identified performance obligations
in the contract. These allocated amounts are recognized as revenue when or as the performance obligations are fulfilled, which
is concurrently upon receipt of payment. There are no future options for a contract when considering and determining the transaction
price. We exclude amounts third parties will eventually collect, such as sales tax, when determining the transaction price. Since
the timing between receiving consideration and transferring goods or services is immediate, our sales contracts do not have significant
financing components, i.e., recognizing revenue at the amount that reflects the cash payment that the customer would have made
at the time the goods or services were transferred to them (cash selling price), rather than significantly before or after the
goods or services are provided.
Allocation of the Transaction
Price of Our Sales Contracts.
Our sales contracts are
not considered multi-element arrangements which require the fulfillment of multiple performance obligations. Rather, our sales
contracts include one performance obligation in each contract. As such, from the outset, we allocate the total consideration to
each performance obligation based on the fixed and determinable standalone selling price, which we believe is an accurate representation
of what the price is in each transaction.
Recognition of Revenue
when the Performance Obligation is Satisfied.
A performance obligation
is satisfied when or as control of the good or service is transferred to the customer. The standard defines control as “the
ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.” (ASC 606-10-20). For
performance obligations that are fulfilled at a point in time, revenue is recognized at the fulfillment of the performance obligation.
As noted above, our single performance obligation sales contracts are singularly related to our promises to provide the hempSMART™
products to the customer upon receipt of payment, which occurs concurrently and when completed, allows us under our revenue recognition
policy to realize revenue.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Product Sales
Revenue from product
sales, including delivery fees, is recognized when (i) an order is placed by the customer; (ii) the price is fixed and determinable
when the order is placed; (iii) the customer is required to and concurrently pays for the product upon order; and, (iv) the product
is shipped. The evaluation of our recognition of revenue after the adoption of FASB ASC 606 did not include any judgments or changes
to judgments that affected our reporting of revenues, since our product sales, both pre and post adoption of FASB ASC 606, were
evaluated using the same standards as noted above, reflecting revenue recognition upon order, payment and shipment, which all occurs
concurrently when the order is placed and paid for by the customer, and the product is shipped. Further, given the facts that (i)
our customers exercise discretion in determining the timing of when they place their product order; and, (ii) the price negotiated
in our product sales is fixed and determinable at the time the customer places the order, and there is no delay in shipment, we
are of the opinion that our product sales do not indicate or involve any significant customer financing that would materially change
the amount of revenue recognized under the sales transaction, or would otherwise contain a significant financing component for
us or the customer under FASB ASC Topic 606.
Consulting Services
We also offer professional
services for financial accounting, bookkeeping or real property management consulting services based on consulting agreements.
As of the date of this filing, we have not entered into any contracts for any financial accounting, bookkeeping and/or real property
management consulting services that have generated reportable revenues as of the year ended 2019 or the three and nine months ended
September 30, 2020. We intend and expect these arrangements to be entered into on an hourly fixed fee basis.
For hourly based fixed
fee service contracts, we intend to utilize and rely upon the proportional performance method, which recognizes revenue as services
are performed. Under this method, in order to determine the amount of revenue to be recognized, we will calculate the amount of
completed work in comparison to the total services to be provided under the arrangement or deliverable. We will only recognize
revenues as we incur and charge billable hours. Because our hourly fees for services are fixed and determinable and are only earned
and recognized as revenue upon actual performance, we are of the opinion that such arrangements are not an indicator of a vendor
or customer based significant financing, that would materially change the amount of revenue we recognize under the contract or
would otherwise contain a significant financing component under FASB ASC Topic 606.
The Company determined that upon adoption of
ASC 606 there were no quantitative adjustments converting from ASC 605 to ASC 606 respecting the timing of our revenue recognition
because product sales revenue is recognized upon customer order, payment and shipment, which occurs concurrently, and our consulting
services offered are fixed and determinable and are only earned and recognized as revenue upon actual performance.
Use
of Estimates
The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Significant estimates include the fair value of the
Company’s stock, stock-based compensation, fair values relating to derivative liabilities, debt discounts and the
valuation allowance related to deferred tax assets. Actual results may differ from these estimates.
Cash
The Company
considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily
convertible into cash.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Concentrations
of credit risk
The Company’s
financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Occasionally, the Company’s
cash and cash equivalents in interest-bearing accounts may exceed FDIC insurance limits. The financial stability of these institutions
is periodically reviewed by senior management.
Accounts
Receivable
Trade
receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus,
trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit
history with customers and their current financial condition.
Allowance
for Doubtful Accounts
Any charges
to the allowance for doubtful accounts on accounts receivable are charged to operations in amounts sufficient to maintain
the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines
the adequacy of the allowance based on historical write-off percentages and the current status of accounts receivable. Accounts
receivable are charged off against the allowance when collectability is determined to be permanently impaired. As of September
30, 2020, and December 31, 2019, allowance for doubtful accounts was $0 and $0, respectively.
Inventories
Inventories are stated at the lower of cost
or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required. During the periods presented, there were no inventory write-downs.
Cost of sales
Cost of sales is comprised of cost of product
sold, packaging, and shipping costs.
Stock Based Compensation
The Company measures the cost of services received
in exchange for an award of equity instruments based on the fair value of the award. For employees and directors, the fair value
of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting
dates and interim financial reporting dates until the service period is complete. The fair value amount is then recognized over
the period during which services are required to be provided in exchange for the award, usually the vesting period. Stock-based
compensation expense is recorded by the Company in the same expense classifications in the statements of operations, as if such
amounts were paid in cash.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Net
Loss per Common Share, basic and diluted
The Company
computes earnings (loss) per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”).
Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per share, if presented, would include the dilution that would occur upon the
exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if
converted” methods as applicable.
The computation
of basic and diluted income (loss) per share as of September 30, 2020 and 2019 excludes potentially dilutive securities when their
inclusion would be anti-dilutive, or if their exercise prices were greater than the average market price of the common stock during
the period.
Potentially
dilutive securities excluded from the computation of basic and diluted net loss per share are as follows:
|
|
September
30,
2020
|
|
September
30,
2019
|
Convertible notes payable
|
|
|
5,281,668,086
|
|
|
|
52,346,160
|
|
Options to purchase common stock
|
|
|
—
|
|
|
|
—
|
|
Warrants to purchase common stock
|
|
|
292,054,702
|
|
|
|
3,602,160
|
|
Restricted stock units
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
5,573,722,788
|
|
|
|
55,948,320
|
|
Property and Equipment
Property
and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are
removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
For financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over
their estimated useful lives of 3 to 5 years.
Investments
The Company
follows Accounting Standards Codification subtopic 321-10, Investments-Equity Securities (“ASC 321-10”) which requires
the accounting for equity security to be measured at fair value with changes in unrealized gains and losses are included in current
period operations. Where an equity security is without a readily determinable fair value, the Company may elect to estimate its
fair value at cost minus impairment plus or minus changes resulting from observable price changes.
As a smaller reporting company, the company
is subject to provisions of Rule 8-03(b)(3) of Regulation S-X which requires the disclosure of certain financial information for
equity investees that constitute 20% of more of the Company’s consolidated net income (loss).
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Derivative
Financial Instruments
The
Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) provide the Company
with a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement) providing that
such contracts are indexed to the Company's own stock. The Company classifies as assets or liabilities any contracts that (i) require
net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the
Company’s control) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement
or net-share settlement). The Company assesses classification of its common stock purchase warrants and other free-standing derivatives
at each reporting date to determine whether a change in classification between equity and liabilities is required.
The
Company’s free-standing derivatives consisted of conversion options embedded within its issued convertible debt and warrants
with anti-dilutive (reset) provisions. The Company evaluated these derivatives to assess their proper classification in the balance
sheet using the applicable classification criteria enumerated under GAAP. The Company determined that certain conversion
and exercise options do not contain fixed settlement provisions. The convertible notes contain a conversion feature and warrants
have a reset provision such that the Company could not ensure it would have adequate authorized shares to meet all possible conversion
demands.
As
such, the Company was required to record the conversion feature and the reset provision which does not have fixed settlement provisions
as liabilities and mark to market all such derivatives to fair value at the end of each reporting period.
The Company
has adopted a sequencing policy that reclassifies contracts (from equity to assets or liabilities) with the most recent inception
date first. Thus, any available shares are allocated first to contracts with the most recent inception dates.
Fair Value of Financial
Instruments
Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to management as of September 30, 2020 and December 31, 2019.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts payables
and short-term notes, as they are short term in nature.
Advertising
The Company follows the policy of charging
the costs of advertising to expense as incurred. The Company charged to operations $59,752 and $104,411 for the three and
nine months ended September 30, 2020 and $159,428 and $550,544 for the three and nine months ended September 30, 2019,
respectively, as advertising costs.
Income Taxes
Deferred income tax assets and liabilities
are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences
between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted
tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than
not that these deferred income tax assets will be realized.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
The Company recognizes a tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities,
based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a
position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
As of September 30, 2020, and 2019, the Company has not recorded any unrecognized tax benefits.
Segment Information
Accounting Standards Codification subtopic
Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments
in annual financial statements and requires selected information for those segments to be presented in interim financial reports
issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic
areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources
and assess performance. The information disclosed herein materially represents all of the financial information related to the
Company's only material principal operating segment.
The following table represents the Company’s
hempSMART business, which is its sole operating segment as of September 30, 2020:
hempSMART
|
|
|
|
|
|
|
|
|
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2020
|
|
|
|
|
For the three
months ended September 30,
|
|
For the nine months ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenues
|
|
$
|
53,195
|
|
|
$
|
229,371
|
|
|
$
|
217,972
|
|
|
$
|
552,761
|
|
Cost of Sales
|
|
|
37,170
|
|
|
|
90,843
|
|
|
|
110,563
|
|
|
|
159,860
|
|
Gross
profit
|
|
|
16,025
|
|
|
|
138,528
|
|
|
|
107,409
|
|
|
|
392,901
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
1,374
|
|
|
|
1,696
|
|
|
|
4,702
|
|
|
|
5,087
|
|
Payroll and related
expenses
|
|
|
26,394
|
|
|
|
—
|
|
|
|
77,256
|
|
|
|
|
|
General and admin
expenses
|
|
|
55,672
|
|
|
|
137,146
|
|
|
|
169,707
|
|
|
|
1,028,401
|
|
Selling
and marketing
|
|
|
117,978
|
|
|
|
262,516
|
|
|
|
294,231
|
|
|
|
583,180
|
|
Total
Expenses
|
|
|
201,418
|
|
|
|
401,358
|
|
|
|
575,221
|
|
|
|
1,616,668
|
|
Net
Loss from Operations
|
|
$
|
(185,393
|
)
|
|
$
|
(262,830
|
)
|
|
$
|
(467,812
|
)
|
|
$
|
(1,223,767
|
)
|
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted basis, and a right-of-use asset for
substantially all leases, as well as additional disclosures regarding leasing arrangements. In July 2018, the FASB issued ASU 2018-11,
Leases (Topic 842), which provides an optional transition method of applying the new lease standard. Topic 842 can be applied using
either a modified retrospective approach at the beginning of
the earliest period presented, or as permitted by ASU 2018-11, at the beginning of the period in which it is adopted.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
We adopted this standard using a modified retrospective
approach on January 1, 2019. The modified retrospective approach includes a number of optional practical expedients relating to
the identification and classification of leases that commenced before the adoption date; initial direct costs for leases that commenced
before the adoption date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase
the underlying asset.
The Company elected the
package of practical expedients permitted under ASC 842 allowing it to account for its existing operating lease that commenced
before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract contains a lease;
(ii) the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842. The Company negotiated
a 2 year extension on its current office lease.
On July 1, 2019, the
Company entered into an amendment and extension of its one applicable lease for office space until June 30, 2021. The extension
requires the Company to pay monthly rent of $1,308.88 from July 1, 2019 to June 30, 2020; and, $1,348.14 from July 1, 2020 to June
30, 2021. In considering its qualitative disclosure obligations under ASC 842-20-50-3, the Company examined its one lease for office
space that has a fixed monthly rent with no variable lease payments. The lease is for an office space with no right of use assets.
The lease does not provide for terms and conditions granting residual value guarantees by the Company, or any restrictions or covenants
imposed by the lease for dividends or incurring additional financial obligations by the Company. The Company also elected a short-term
lease exception policy and an accounting policy to not separate non-lease components from lease components for our facility lease,
as we determined our right of use asset to be zero.
Consistent with ASC 842-20-50-4,
for the Company's September 30, 2020, quarterly financial statements, the Company calculated its total lease cost based solely
on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost,
or variable lease costs. Our office lease does not produce any sublease income, or any net gain or loss recognized from sale and
leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash
paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental
non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining
lease term; or the weighted-average discount rate.
The adoption of this guidance resulted in
no significant impact to our results of operations or cash flows.
In August 2018, the FASB issued ASU No.
2018-13, “Fair Value Measurement (Topic 820).” This standard modifies disclosure requirements related to fair value
measurement and is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019. Early adoption is permitted. Implementation on a prospective or retrospective basis varies by specific disclosure
requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption
of the additional disclosures until their effective date. The Company is currently assessing the impact of adopting this standard
on its consolidated financial statements.
In December 2019, the FASB issued ASU No.
2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. This standard simplifies the accounting for income
taxes. This standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. Early adoption is permitted for all entities. The Company is currently assessing the impact of adopting this standard on
its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06,
“Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in
Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting
for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts
on an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary
complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim
periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements.
Subsequent Events
The Company
evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon
the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment
or disclosure in the financial statements, except as disclosed.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
NOTE 4 – PROPERTY
AND EQUIPMENT
Property and equipment as
of September 30, 2020 and December 31, 2019 is summarized as follows:
|
|
September 30,
2020
|
|
December 31,
2019
|
Computer equipment
|
|
$
|
15,398
|
|
|
$
|
16,358
|
|
Furniture and fixtures
|
|
|
5,140
|
|
|
|
5,140
|
|
Subtotal
|
|
|
20,538
|
|
|
|
21,498
|
|
Less accumulated depreciation
|
|
|
(17,510
|
)
|
|
|
(13,986
|
)
|
Property and equipment, net
|
|
$
|
3,028
|
|
|
$
|
7,512
|
|
Property
and equipment are stated at cost and depreciated using the straight-line method over their estimated useful lives of 3 years. When
retired or otherwise disposed, the related carrying value and accumulated depreciation are
removed
from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings.
Depreciation expense was $1,374 and $4,702 for the three and nine
months ended September 30, 2020; and $1,696 and $5,087 for the three and nine months ended September 30, 2019, respectively.
NOTE 5 – INVESTMENTS
MoneyTrac
We entered into a stock purchase agreement
on March 13, 2017 with MoneyTrac Technology, Inc., a California stock corporation (“MoneyTrac”) to purchase a 15% equity
position in MoneyTrac. On July 27, 2017, we completed tender of the purchase price of $250,000 pursuant to that stock purchase
agreement. On June 12th, 2018, Global Payout, Inc. (“Global”) entered into a reverse triangular merger business combination
(the “Merger”) with MoneyTrac and MTrac Tech Corporation, a Nevada corporation and wholly-owned subsidiary of Global
(“Merger Sub”), whereby MoneyTrac was successfully merged into Merger Sub, the surviving corporation of the Merger.
Thereafter, the separate existence of MoneyTrac ceased, and all rights, privileges, powers and property of MoneyTrac were assumed
by Merger Sub. Additionally, Merger Sub assumed all of the financial obligations and liabilities of MoneyTrac, except minute books
and stock records of MoneyTrac insofar as they relate solely to its organization and capitalization, and the rights of MoneyTrac
arising out of the executed Merger. Pursuant to the terms of the Merger, Global issued 1,100,000,000 (one billion, one hundred
million) shares of its common stock to MoneyTrac as consideration for the acquisition of MoneyTrac. Pursuant to the terms of the
Merger, a conversion of issued MoneyTrac stock was completed whereby each one (1) share of MoneyTrac stock, issued and outstanding
immediately prior to the effective date of the Merger, was canceled and extinguished and converted automatically into ten (10)
shares of Global common stock. As of the effective date of the Merger, all shares of Global Preferred Stock issued prior to the
effective date of the Merger were canceled and extinguished without any conversion thereof. We acquired 150,000,000 Global common
shares for our purchase price of $250,000, representing ownership of approximately fifteen percent (15%) of the post-Merger issued
and outstanding equity of Global. Global’s name changed in April, 2020 to Global Trac Solutions, Inc. Global’s common
stock is traded on the OTC Markets under the symbol “PYSC.” We realized $51,748.17 from the sales of all of our Global
securities, and as of September 30, 2020, have no remaining shares. We have a cash balance in the amount of $12,500 held in our
brokerage account, a receivable resulting from the proceeds of our sale of our Global shares, that we have not collected.
Benihemp
On July 19, 2017,
we agreed to lend $50,000 to Convenient Hemp Mart, LLC (“Benihemp”) based on a promissory note. The note provided
that in lieu of receiving repayment, we could elect to exercise a right to convert the loaned amount into a payment towards
the purchase of a 25% interest in Benihemp, subject to our payment of an additional $50,000, equaling a total purchase price
of $100,000. The Company exercised this option on November 23, 2017 and made payment to Benihemp on November 21, 2017. On May
1, 2019, the Company and Benihemp agreed to cancel the Company’s 25% interest in Benihemp. Benihemp issued to the
Company a credit memo equal to the Company’s $100,000 investment. The Company determined that as of December 31, 2019,
this credit was impaired and not usable.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Global Hemp Group New Brunswick Joint Venture
On September 5, 2017,
we announced our agreement to participate in a joint venture with Global Hemp Group, Inc., a Canadian corporation (“Global
Hemp Group”), in a multi-phase industrial hemp project on the Acadian peninsula New Brunswick, Canada. Our participation
included providing one-half, or $10,775, of the funding for the phase one work of the multi-phase industrial hemp project. On January
10, 2018, phase one of the project was completed by successfully cultivating industrial hemp during the 2017 growing season for
research purposes. The Company’s project-related costs incurred according to the Company’s interest in the industrial
hemp project were $0 and $10,775 for the years ended December 31, 2019 and 2018 respectively and was recorded as other income/expense
in the Company’s Statement of Operations in the appropriate periods. As of December 31, 2019, and September 30, 2020, the
balance of the New Brunswick industrial hemp joint venture investment reported on the balance sheet for the year ended December
31, 2019 was $0 as a result of the investment being deemed fully impaired and the Company withdrawing from the joint venture as
of September 30, 2019.
Global Hemp Group Oregon Joint Venture
– Scio, OR
On May 8, 2018, the Company,
Global Hemp Group, and TTO Enterprises, Ltd., an Oregon corporation (“TTO”) entered into a joint venture agreement.
The purpose of the joint venture was to develop an Oregon-licensed industrial hemp project to commercialize the cultivation of
industrial hemp biomass on a 109-acre parcel of farmland owned by the Company and Global Hemp Group in Scio, Oregon. The joint
venture operated through the Oregon corporation Covered Bridges, Ltd. On May 30, 2018, the joint venture purchased TTO’s
15% interest in the joint venture for $30,000. The Company and Global Hemp Group then had equal interests as co-owners of the joint
venture. The joint venture agreement committed the Company to a cash contribution of $600,000 payable on the following funding
schedule: $200,000 upon execution of the joint venture agreement; $238,780 by July 31, 2018; $126,445 by October 31, 2018; and
$34,775 by January 31, 2019. The Company performed these payment obligations pursuant to the joint venture agreement.
The 2018 crop of industrial
hemp grown on the joint venture’s farmland consisted of 33 acres of high-yield CBD industrial hemp biomass grown in an orchard-style
cultivation method on our farmland. The 33-acre 2018 harvest produced approximately 37,000 high CBD content industrial hemp plants,
yielding a total of 24 tons of wet harvested industrial hemp biomass that resulted in a saleable harvest of 48,000 pounds of cured
industrial hemp biomass. The joint venture partners prepared processing samples ranging in size from 100 to 2,000 lbs. for sample
offers to licensed industrial hemp handlers and CBD extraction companies. This industrial hemp biomass was processed into a CBD
crude oil concentrate with the option to refine it further into CBD isolate, or full spectrum oil, in order to increase its value
on the market.
As of December 31, 2019,
the combined balance of this joint venture investment and related farmland investment was $0, as the investment was written off
as a loss as a result of its failure to generate any cash flow for the Company for the period ended December 31, 2019. The debt
obligation of $262,414 related to this joint venture was also written off to $0 as of the year ended December 31, 2019. The debt
obligation related to the joint venture for the nine months ended September 30, 2020 was $0.
On September 28, 2020,
the Company and GHG entered into a Settlement and Mutual Release Agreement (the “Agreement”), pursuant to which the
parties agreed to resolve a dispute among them regarding the joint venture agreement. Under the Agreement, GHG agreed to make a
lump sum payment to the Company of $200,000, with $125,000 payable no later than September 30, 2020, and $75,000 payable no later
than November 15, 2020, with applicable interest, and to issue GHG common stock to the Company equal in value to $185,000 as of
the date of the Agreement, or September 28, 2020, subject to a non-dilutive protection provision, and additionally, to pay the
Company $10,000 to cover the Company’s legal fees relating to the Agreement by September 30, 2020. In exchange for the settlement
consideration, the Company has agreed to relinquish its ownership interest in the joint venture.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Bougainville Ventures, Inc. Joint Venture
On March 16, 2017, we entered into a joint
venture agreement with Bougainville Ventures, Inc., a Canadian corporation. The purpose of the joint venture was for the Company
and Bougainville to jointly engage in the development and promotion of products in the legalized cannabis industry in Washington
State; (ii) utilize Bougainville’s high quality cannabis grow operations in the State of Washington, where it claimed to
have an ownership interest in real property for use within the legalized cannabis industry; (iii) leverage Bougainville’s
agreement with a I502 Tier 3 license holder to grow cannabis on the site; provide technical and management services
and resources including, but not limited to:
sales and marketing, agricultural procedures, operations security and monitoring, processing and delivery, branding, capital resources
and financial management; and, (iv) optimize collaborative business opportunities. The Company and Bougainville agreed to operate
through a Washington State Limited Liability Company, and BV-MCOA Management, LLC was organized in the State of Washington on May
16, 2017.
As our contribution to the joint venture, the
Company committed to raise not less than $1 million dollars to fund joint venture operations based upon a funding schedule. The
Company also committed to providing branding and systems for the representation of cannabis related products and derivatives comprised
of management, marketing and various proprietary methodologies directly tailored to the cannabis industry.
Bougainville represented that it had an ownership
interest in real property located in Washington State used for growing cannabis, and possessed information primarily related to
the management and control of cannabis grow operations as conducted in Washington State that included research, development and
know how in the cannabis industry. Bougainville also represented that it had an agreement with a I502 Tier 3 license holder in
Washington
State to operate on the land. The Company and
Bougainville's agreement provided that funding provided by the Company would go, in part, towards the joint venture’s ultimate
purchase of the land consisting of a one-acre parcel located in Okanogan County, Washington, for joint venture operations.
As disclosed on Form 8-K on December 11, 2017,
the Company did not comply with the funding schedule for the joint venture. On November 6, 2017, the Company and Bougainville amended
the joint venture agreement to reduce the amount of the Company's commitment to $800,000 and also required the Company to issue
Bougainville 250,000 shares of the Company's restricted common stock. The Company completed its payments pursuant to the amended
agreement on November 7, 2017, and on November 9, 2017, issued to Bougainville 15 million shares of restricted common stock. The
amended agreement provided that Bougainville would deed the real property to the joint venture within thirty days of its receipt
of payment.
Thereafter, the Company determined that Bougainville
had no ownership interest in the property in Washington State, but rather was a party to a purchase agreement for real property
that was in breach for non-payment. Bougainville also did not possess an agreement with a Tier 3 I502 license holder to grow Marijuana
on the property. Nonetheless, as a result of funding arranged for by the Company, Bougainville and an unrelated third party, Green
Ventures Capital Corp., purchased the land. The land is currently pending the payment of delinquent property taxes that would
allow for the Okanogan County Assessor conditions to complete the subdivision of the land by the Okanogan County Assessor. However,
Bougainville failed to cooperate or communicate with the Company in good faith, and failed to pay the delinquent taxes on the
real property that would allow for sub-division and the deeding of the real property to the joint venture.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
On August 10, 2018, the Company advised its
independent auditor that Bougainville did not cooperate or communicate with the Company regarding its requests for information
concerning the audit of Bougainville’s receipt and expenditures of funds contributed by the Company in the joint venture
agreement. Bougainville had a material obligation to do so under the joint venture agreement. The Company believes that some of
the funds it paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds. Additionally,
the Company believes that Bougainville misrepresented material facts in the joint venture agreement, as amended, including, but
not limited to, Bougainville’s representations that: (i) it had an ownership interest in real property that
was to be deeded to the joint venture; (ii)
it had an agreement with a Tier 3 # I502 cannabis license holder to grow cannabis on the real property; and, (iii) that clear title
to the real property associated with the Tier 3 # I502 license would be deeded to the joint venture thirty days after the Company
made its final funding contribution. As a result, on September 20, 2018, the Company filed suit against Bougainville Ventures,
Inc., BV-MCOA Management, LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2-
0045324. The Company’s complaint seeks legal and equitable relief for breach of contract, fraud, breach of fiduciary duty,
conversion, recession of the joint venture agreement, an accounting, quiet title to real property in the name of the Company, for
the appointment of a receiver, the return to treasury of 15 million shares issued to Bougainville, and, for treble damages pursuant
to the Consumer Protection Act in Washington State. The registrant has filed a lis pendens on the real property. The case is currently
in litigation. The trial is set for January 26-28, 2021.
In connection with the agreement, the Company
recorded a cash investment of $1,188,500 to the Joint Venture during 2017. This was comprised of 49.5% ownership of BV-MCOA Management
LLC, and was accounted for using the equity method of accounting. The Company recorded an annual impairment in 2017 of $792,500,
reflecting the Company’s percentage of ownership of the net book value of the investment. During 2018, the Company recorded
equity losses of $37,673 and $11,043 for the first and second quarters respectively, and recorded an annual impairment of $285,986
for the year ended December 31, 2018, at which time the Company determined the investment to be fully impaired due to Bougainville’s
breach of contract, including: (i) its failure to communicate and cooperate regarding the Company’s audit; (ii) its misrepresentations
concerning its ownership interest in the real property in Okanogan County Washington; (iii) its failure to deed the property to
the joint venture within thirty days of payment pursuant to the amended joint venture agreement; and, (iv) its misrepresentation
that it possessed an agreement with a Tier 3 license holder to operate on the property.
The Company was able to obtain general loans
from St. George Investments LLC, not specific to any of the company’s joint ventures. Therefore, accordingly, the impairment
of this investment did not create any defaults to the loan agreements and covenants. The loan agreement established the lender’s
option to convert the loans to common shares of the Company.
GateC Joint Venture
On March 17, 2017, the
Company and GateC Research, Inc. (“GateC”) entered into a Joint Venture Agreement (“Agreement”) whereby
the Company committed to raise up to one and one-half million dollars ($1,500,000) over a six-month period, with a minimum commitment
of five hundred thousand dollars ($500,000) within a three (3) month period; and, information establishing brands and systems for
the representation of cannabis related products and derivatives comprised of management, marketing and various proprietary methodologies,
including but not limited to its affiliate marketing program, directly tailored to the cannabis industry.
GateC agreed to contribute
its management and control services and systems related to cannabis grow operations in Adelanto County, California, and its permit
to grow marijuana in an approved zone in Adelanto, California. GateC did not own a physical site for its operation in Adelanto
County, California, and GateC’s permit to grow cannabis did not contain a conditional use permit.
On or about November
28, 2017, GateC and the Registrant orally agreed to suspend the Company’s funding commitment, pending the finalization of
California State regulations governing the growth, cultivation and distribution of cannabis, which were expected to be completed
in 2018.
On March 19, 2018,
the Company and GateC rescinded the Agreement and concurrently released each other from any all any and all losses, claims,
debts, liabilities, demands, obligations, promises, acts, omissions, agreements, costs and expenses, damages, injuries,
suits, actions and causes of action, of whatever kind or nature, whether known or unknown, suspected or unsuspected,
contingent or fixed, that they may have against each other and their Affiliates, arising out of the Agreement.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
The Registrant incurred
no termination penalties as the result of its entry into the Recession and Mutual Release Agreement.
In 2017, the Company
recorded a debt obligation of $1,500,000 to the Joint Venture and a corresponding impairment charge of $1,500,000 during for year
ended December 31, 2017. Upon termination of the material definitive agreement on March 19, 2018, the Company realized a gain on
settlement of debt obligation of $1,500,000 during the six months ended June 30, 2018.
Natural Plant Extract (“NPE”)
On April
15, 2019, we entered into a joint venture with Natural Plant Extract of California, Inc. (“NPE”) to operate a licensed
psychoactive cannabis distribution service in California to be named Viva Buds. California legalized psychoactive cannabis for
medicinal and recreational use on January 1, 2018. On February 3, 2020, we terminated the NPE joint venture and entered into a
Settlement and Release of All Claims Agreement with NPE. In exchange for that universal release, the Company and NPE (i) agreed
to reduce the Company’s interest in NPE from 20% to 5%; (ii) agreed the Company would pay NPE a total of $85,000 as follows:
$35,000 concurrent with the execution of the universal release, and $25,000 no later than the 5th calendar day for each of the
two months following execution of Settlement and Release of All Claims Agreement; and, (iii) agreed to retire the balance of our
original valuation obligation from the material definitive agreement, representing a shortfall of $56,085.15, in a convertible
promissory note, with terms allowing NPE to convert the note into common stock of MCOA at a 50% discount to the closing price of
MCOA’s common stock as of the maturity date.
Cannabis
Global (“CBGL”)
On September 30, 2020,
the Company entered into a Share Exchange Agreement with Cannabis Global, Inc., a Nevada corporation quoted on OTC Markets Pink
(“CBGL”) dated September 30, 2020, to acquire the number of shares of CBGL’s common stock, par value $0.001,
equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date, in exchange
for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the closing price for the
trading day immediately preceding the effective date (the “Share Exchange Agreement”). For both parties, the Share
Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that
a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant
to the Share Exchange Agreement to fall below $650,000.
Complementary to the
Share Exchange Agreement, the Company and CBGL entered into a Lock-Up Agreement dated September 30, 2020, providing that the shares
of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for
a period of 12 months following issuance, and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week,
or $80,000 per month.
Brazil
and Uruguay Joint Ventures
On October
1, 2020, the Company entered into two Joint Venture Agreements with Marco Guerrero, a director of the Company (“Guerrero”)
dated September 30, 2020, to form joint venture operations in Brazil and in Uruguay (the “Joint Venture Agreements”)
to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America, and will also work to
develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the formation of joint
venture entities in Uruguay and Brazil. The Brazilian joint venture will be headquartered in São Paulo, Brazil, and will
be named HempSmart Produtos Naturais Ltda. (“HempSmart Brazil”). The Uruguayan joint venture will be headquartered
in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S. (“HempSmart Uruguay”).
Under
the Joint Venture Agreements, the Company will acquire a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay. A
minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay will be held by newly formed entities controlled by
Guerrero, a director of the Company, who is a successful Brazilian entrepreneur. The Company will provide capital in the amount
of $50,000 to both HempSmart Brazil and HempSmart Uruguay under the Joint Venture Agreements, for a total capital outlay obligation
of $100,000. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party
manufacturing facilities in Brazil and Uruguay, and related infrastructure and employment of key personnel.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
MARIJUANA COMPANY OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF SEPTEMBER 30, 2020
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
Global Hemp
|
|
|
|
Cannabis Global
|
|
|
|
|
|
|
|
|
|
|
|
Bougainville Ventures,
|
|
|
|
Gate C Research
|
|
|
|
Natural Plant
|
|
|
|
|
|
|
|
TOTAL Short-Term
|
|
|
|
Global Hemp
|
|
|
|
|
|
|
|
|
INVESTMENTS
|
|
|
|
Group
|
|
|
|
Inc.
|
|
|
|
Benihemp
|
|
|
|
MoneyTrac
|
|
|
|
Inc.
|
|
|
|
Inc.
|
|
|
|
Extract
|
|
|
|
Vivabuds
|
|
|
|
Investments
|
|
|
|
Group
|
|
|
|
MoneyTrac
|
|
Beginning balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during 2017
|
|
|
3,049,275
|
|
|
|
10,775
|
|
|
|
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
1,188,500
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 equity method Loss
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 equity method Loss
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 equity method accounting
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investment in 2017
|
|
|
(2,292,500
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(792,500
|
)
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
0
|
|
Balances as of 12/31/17
|
|
|
695,477
|
|
|
|
10,775
|
|
|
|
0
|
|
|
|
100,000
|
|
|
|
250,000
|
|
|
|
334,702
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during 2018
|
|
|
986,654
|
|
|
|
986,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 equity method Loss
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 equity method Loss
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 equity method Loss
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 equity method Loss
|
|
|
(31,721
|
)
|
|
|
(31,721
|
)
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moneytrac investment reclassified to Short-Term investments
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - 2018
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560,000
|
|
|
|
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2018
|
|
|
(933,195
|
)
|
|
|
(557,631
|
)
|
|
|
|
|
|
|
(89,578
|
)
|
|
|
|
|
|
|
(285,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Balance @12-31-18
|
|
$
|
408,077
|
|
|
$
|
408,077
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
$
|
0
|
|
|
$
|
810,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 03-31-19
|
|
|
129,040
|
|
|
|
129,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 equity method Loss
|
|
|
(59,541
|
)
|
|
|
(59,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,000
|
)
|
|
|
|
|
|
$
|
(135,000
|
)
|
Balance @03-31-19
|
|
$
|
477,576
|
|
|
$
|
477,576
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
$
|
0
|
|
|
$
|
675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 06-30-19
|
|
$
|
3,157,234
|
|
|
$
|
83,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,000,000
|
|
|
$
|
73,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-19 equity method Income (Loss)
|
|
$
|
(171,284
|
)
|
|
$
|
(141,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(6,291
|
)
|
|
$
|
(23,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 06-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
|
|
|
|
$
|
(150,000
|
)
|
Balance @06-30-19
|
|
$
|
3,463,526
|
|
|
$
|
419,352
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
0
|
|
|
$
|
525,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 09-30-19
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
186,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 equity method Income (Loss)
|
|
$
|
122,863
|
|
|
$
|
262,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(94,987
|
)
|
|
$
|
(44,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 09-30-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(41,667
|
)
|
|
|
|
|
|
$
|
(41,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 09-30-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,625
|
)
|
|
|
|
|
|
$
|
(362,625
|
)
|
Balance @09-30-19
|
|
$
|
3,772,652
|
|
|
$
|
682,141
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
0
|
|
|
$
|
120,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 12-31-19
|
|
$
|
392,226
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
129,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 equity method Income (Loss)
|
|
$
|
(178,164
|
)
|
|
$
|
(75,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(23,865
|
)
|
|
$
|
(79,079
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of Equity method Loss for 2019
|
|
$
|
272,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,143
|
|
|
$
|
147,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2019
|
|
$
|
(3,175,420
|
)
|
|
$
|
(869,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,306,085
|
)
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposition of investment
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 12-31-19
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,545
|
)
|
|
|
|
|
|
$
|
(75,545
|
)
|
Balance @12-31-19
|
|
$
|
693,915
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
$
|
0
|
|
|
$
|
27,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 03-31-20
|
|
|
126,845
|
|
|
|
126,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
|
394,848
|
|
|
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 03-31-20
|
|
|
(521,692
|
)
|
|
|
(521,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,945
|
)
|
|
|
|
|
|
$
|
(13,945
|
)
|
Balance @03-31-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
13,458
|
|
|
$
|
0
|
|
|
$
|
13,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 06-30-20
|
|
|
(7,048
|
)
|
|
|
(7,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 06-30-20
|
|
|
7,048
|
|
|
|
7,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of trading securities - quarter ended 06-30-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,458
|
)
|
|
|
|
|
|
$
|
(13,458
|
)
|
Balance @06-30-20
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Hemp Group trading securities issued
|
|
|
650,000
|
|
|
|
|
|
|
$
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
185,000
|
|
|
$
|
185,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Cannabis Global
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-20
|
|
$
|
1,343,915
|
|
|
$
|
0
|
|
|
$
|
650,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
185,000
|
|
|
$
|
185,000
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Loan
Payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
|
|
|
|
Bougainville
Ventures,
|
|
Gate
C
Research
|
|
Natural
Plant
|
|
Robert
L. Hymers
|
|
|
|
General
Operating
|
|
|
JV
Debt
|
|
Group
|
|
Benihemp
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
III
|
|
Vivabuds
|
|
Expense
|
Beginning
balance @12-31-16
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 loan
borrowings
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 loan
activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 loan
borrowings
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 loan
repayments
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
operational expense
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances as of
12/31/17 (a)
|
|
|
2,067,411
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
1,500,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 loan
borrowings (payments)
|
|
|
376,472
|
|
|
|
447,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(70,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 cancellation
of JV debt obligation
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 loan
repayments
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(101,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 loan
activity
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
12-31-18 loan borrowings
|
|
|
580,425
|
|
|
|
580,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@12-31-18 (b)
|
|
|
1,422,410
|
|
|
|
1,027,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan
borrowings
|
|
|
649,575
|
|
|
|
649,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
03-31-19 debt conversion to equity
|
|
|
(407,192
|
)
|
|
|
(407,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-19
(c)
|
|
|
1,664,793
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-19 loan
borrowings
|
|
|
3,836,220
|
|
|
$
|
161,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,000,000
|
|
|
|
|
|
|
$
|
0
|
|
|
$
|
1,675,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
03-31-19 debt conversion to equity
|
|
|
(1,572,971
|
)
|
|
($
|
161,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($
|
349,650
|
)
|
|
|
|
|
|
|
|
|
|
($
|
1,062,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@06-30-19 (d)
|
|
|
3,928,042
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
612,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-19 loan
borrowings
|
|
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
582,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
09-30-19 debt conversion to equity
|
|
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(187,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@09-30-19 (e)
|
|
|
4,322,427
|
|
|
|
1,270,238
|
|
|
|
0
|
|
|
|
0
|
|
|
|
394,555
|
|
|
|
0
|
|
|
|
1,650,350
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,007,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-19 loan
borrowings
|
|
|
2,989,378
|
|
|
$
|
262,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
596,784
|
|
|
$
|
4,221
|
|
|
|
|
|
|
$
|
2,125,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment
in 2019
|
|
|
(4,083,349
|
)
|
|
$
|
(1,532,652
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(394,555
|
)
|
|
|
|
|
|
$
|
(2,156,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of
debt in 2019
|
|
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
50,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
to reclassify amount to accrued liabilities
|
|
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(85,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@12-31-19 (f)
|
|
$
|
3,193,548
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
4,221
|
|
|
$
|
0
|
|
|
$
|
3,133,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 loan
borrowings
|
|
$
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
441,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-20 debt
conversion to equity
|
|
$
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(619,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture
liabilities per JV agreement @03-31-20
|
|
$
|
394,848
|
|
|
$
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
03-31-20 Debt Discount adjustments
|
|
$
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@03-31-20 (g)
|
|
$
|
3,435,172
|
|
|
$
|
394,848
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
28,359
|
|
|
$
|
0
|
|
|
$
|
2,955,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 loan
borrowings, net
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 debt
conversion to equity
|
|
$
|
(727,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(727,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-20 reclass
of liability
|
|
$
|
83,647
|
|
|
$
|
83,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
06-30-20 Debt Discount adjustments
|
|
$
|
405,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(27,715
|
)
|
|
|
|
|
|
$
|
433,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@06-30-20 (h)
|
|
$
|
3,262,538
|
|
|
$
|
478,495
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
56,085
|
|
|
$
|
65,735
|
|
|
$
|
0
|
|
|
$
|
2,662,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-20 debt
conversion to equity
|
|
$
|
(606,472
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(56,085
|
)
|
|
$
|
(65,735
|
)
|
|
|
|
|
|
$
|
(484,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
Settlement during Q3 2020
|
|
$
|
(474,495
|
)
|
|
$
|
(474,495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
@09-30-20 (i)
|
|
$
|
2,181,571
|
|
|
$
|
4,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
(0
|
)
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,177,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
09-30-20
|
|
06-30-20
|
|
03-31-20
|
|
12-31-19
|
|
09-30-19
|
|
06-30-19
|
|
03-31-19
|
|
12-31-18
|
|
12-31-17
|
This includes balances for:
|
|
|
Note (i)
|
|
|
|
Note (h)
|
|
|
|
Note (g)
|
|
|
|
Note (f)
|
|
|
|
Note (e)
|
|
|
|
Note (d)
|
|
|
|
Note (c)
|
|
|
|
Note (b)
|
|
|
|
Note (a)
|
|
- Debt obligation of JV
|
|
|
0
|
|
|
|
478,494
|
|
|
|
394,848
|
|
|
|
0
|
|
|
|
1,633,872
|
|
|
|
1,778,872
|
|
|
|
128,522
|
|
|
|
289,742
|
|
|
|
1,500,000
|
|
- Convertible NP, net of discount
|
|
|
2,181,571
|
|
|
|
2,784,044
|
|
|
|
3,040,324
|
|
|
|
3,193,548
|
|
|
|
2,688,555
|
|
|
|
2,149,170
|
|
|
|
1,536,271
|
|
|
|
1,132,668
|
|
|
|
394,555
|
|
- Long term debt
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
172,856
|
|
Total Debt balance
|
|
|
2,181,571
|
|
|
|
3,262,538
|
|
|
|
3,435,172
|
|
|
|
3,193,548
|
|
|
|
4,322,427
|
|
|
|
3,928,042
|
|
|
|
1,664,793
|
|
|
|
1,422,410
|
|
|
|
2,067,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Concerning our investment loans for general
operation for the quarter ended September 30, 2020, the Company accounted these transactions as an investment and a liability -
“debt obligation of Joint Venture”. The Company follows Accounting Standards Codification subtopic 321-10, Investments-Equity
Securities (“ASC 321-10”) which requires the accounting for equity security to be measured at fair value with changes
in unrealized gains and losses are included in current period operations. Where an equity security is without a readily determinable
fair value, the Company may elect to estimate its fair value at cost minus impairment plus or minus changes resulting from observable
price changes.
NOTE 6 – NOTES
PAYABLE, RELATED PARTY
As of September 30, 2020,
and December 31, 2019, the Company’s officers and directors have provided advances and incurred expenses on behalf of the
Company. The issued notes are unsecured, due on demand and bear 5% interest. The balance due to Notes Payable Related Party as
of September 30, 2020 and December 31, 2019 was $40,000 and $40,000 respectively. These notes are payable to the estate of Charles
Larsen, who passed away on May 15, 2020.
NOTE
7 – CONVERTIBLE NOTES PAYABLE
During
the nine months ended September 30, 2020, the Company issued an aggregate of 1,491,109,401 shares of its common stock in settlement
of the issued convertible notes payable and accrued interest.
For
the nine months ended September 30, 2020 and September 30, 2019, the Company recorded amortization of debt discounts of $1,373,575
and $2,172,936, respectively, as a charge to interest expense.
Convertible
notes payable as of September 30, 2020 and December 31, 2019 was comprised of the following:
|
|
2020
|
|
2019
|
Lender
|
|
(Unaudited)
|
|
(Audited)
|
Convertible note payable - Power Up Lending Group
|
|
$
|
73,000
|
|
|
$
|
294,000
|
|
Convertible note payable - Crown Bridge Partners
|
|
$
|
117,040
|
|
|
$
|
110,000
|
|
Convertible note payable - Odyssey Funding LLC
|
|
$
|
—
|
|
|
$
|
250,000
|
|
Convertible note payable - Paladin Advisors LLC
|
|
$
|
—
|
|
|
$
|
75,000
|
|
Convertible note payable - GS Capital Partners LLC
|
|
$
|
143,500
|
|
|
$
|
173,000
|
|
Convertible note payable - Natural Plant Extract
|
|
$
|
—
|
|
|
$
|
56,085
|
|
Convertible note payable - Robert L. Hymers III
|
|
$
|
205,803
|
|
|
$
|
96,553
|
|
Convertible note payable - St. George
|
|
$
|
1,977,208
|
|
|
$
|
2,947,890
|
|
Total
|
|
$
|
2,516,551
|
|
|
$
|
4,002,528
|
|
Less debt discounts
|
|
$
|
(334,980
|
)
|
|
$
|
(808,980
|
)
|
Net
|
|
$
|
2,181,571
|
|
|
$
|
3,193,548
|
|
Less current portion
|
|
$
|
(2,181,571
|
)
|
|
$
|
(3,193,548
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Convertible
notes payable-Power Up Lending
From
July 1 through September 12, 2019, the Company issued four convertible promissory notes in the aggregate principal amount of $294,000
to Power Up Lending Group Ltd. (“Power Up”). The promissory notes bear interest at 10% per annum, are due one year
from the respective issuance date and include an original issuance discount in the aggregate of $12,000. Interest on the notes
accrues from the issuance date, but interest will not become payable until the notes become payable. The notes are convertible
at any time at a conversion rate equal to 61% of the market price of the Company’s common stock, defined as the lowest trading
price during the 15-trading-day period prior to the conversion date. Upon the issuance of these convertible notes, the Company
determined that the features associated with the embedded conversion option embedded in the debentures should be accounted for
at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to
settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value
of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been
added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability
recognized as interest expense. The aggregate debt discount of $169,202 is being amortized to interest expense over the respective
terms of the notes.
The
Company has the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal
and accrued interest) depending on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company
is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together
with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding
immediately after giving effect to the issuance of shares of common stock upon conversion of the note.
As
of September 30, 2020, and December 31, 2019, the Company owed an aggregate of $73,000 and, $294,000 of principal, respectively
on these convertible promissory notes. As of September 30, 2020, the Company owed $1,825 of accrued interest.
Convertible
notes payable-Crown Bridge Partners
From
October 1 through December 31, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $225,000
to Crown Bridge Partners LLC (“Crown Bridge”). The promissory notes bear interest at 10% per annum, are due one year
from the respective issuance date and include an original issuance discount (“OID”) in aggregate of $22,500. Interest
accrues from the issuance date, but interest shall not become payable until the notes becomes payable. The notes are convertible
at any time at a conversion rate equal to 60% of the market price of the Company’s common stock, defined as the lowest trading
price during the 15-trading-day period prior to the conversion date. Upon the issuance of these convertible notes, the Company
determined that the features associated with the embedded conversion option embedded in the debentures should be accounted for
at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to
settle all potential future conversion transactions. As of the funding date of each note, the Company determined the fair value
of the embedded derivative associated with the convertibility of each note. The fair value of the embedded derivative has been
added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative liability
recognized as interest expense. The aggregate debt discount of $88,674 is being amortized to interest expense over the respective
terms of the notes. The Company also issued a total of 519,230 warrants with an initial exercise price of $0.26, with reset provisions
based on issuances of common stock subsequent to the issuance date. Due to the reset provision, the conversion option of these
warrants is also accounted for as a derivative liability. See Note 10.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
The
Company has the right to prepay the notes for an amount ranging from 125% - 140% multiplied by the outstanding balance (all principal
and accrued interest) depending on the prepayment period (ranging from 1 to 180 days following the issuance date). The Company
is prohibited from effecting a conversion of any note to the extent that, as a result of such conversion, the investor, together
with its affiliates, would beneficially own more than 4.99% of the number of shares of the Company’s common stock outstanding
immediately after giving effect to the issuance of shares of common stock upon conversion of the note.
As
of September 30, 2020, and December 31, 2019, the Company owed an aggregate of $117,040 and, $110,000 of principal, respectively
on these convertible promissory notes. As of September 30, 2020, the Company owed $1,607 of accrued interest.
Convertible
notes payable-Odyssey Funding LLC
On
October 30, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $250,000 to Odyssey Funding
LLC (“Odyssey”). The promissory notes bear interest at 12% per annum, are due one year from the respective issuance
date and include an original issuance discount in an aggregate of $12,500. Interest accrues from the issuance date, but interest
does not become payable until the notes becomes payable. The notes are convertible at any time at a conversion rate equal to 55%
the average of the two lowest trading prices of the Company’s common stock as quoted on the National Quotations Bureau OTC
market or exchange where the Company's shares are traded or any exchange upon which the Common Stock may be traded in the future,
for the twenty prior trading days to the conversion date.
As
of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility
of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to
the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount
of $207,650 is being amortized to interest expense over the respective terms of the notes. As of September 30, 2020, and December
31, 2019, the Company owed principal of $0 and $250,000. As of September 30, 2020, the Company owed $0 in accrued interest.
Convertible
notes payable - Paladin Advisors LLC
On
October 23, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $75,000 to Paladin Advisors,
LLC (“Paladin”). The promissory notes bear interest at 8% per annum and are due six months from the respective issuance
date of each note along with accrued and unpaid interest. Principal and interest is payable on the date six months from the date
of issuance of the note. Pursuant to the notes, Paladin has the option to convert all or any portion of the unpaid principal amount
of the notes, plus accrued interest, into shares of the Company’s common stock at a conversion price equal to a 45% discount
to the lowest closing bid of the previous 10 day trading period prior to the conversion.
The
aggregate debt discount of $46,721 is being amortized to interest expense over the respective terms of the notes. As of September
30, 2020, and December 31, 2019, the Company owed an aggregate of $0 and $75,000 of principal. As of September 30, 2020, the Company
owed $0 in accrued interest.
Convertible
notes payable-GS Capital Partners LLC
On
December 19, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $173,000 to GS Capital
Partners LLC (“GS Capital”). The promissory notes bear interest at 10% per annum, are due one year from the respective
issuance date, and include an original issuance discount in an aggregate of $15,000.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Pursuant
to the notes, GS Capital is entitled, at its option, at any time after cash payment, to convert all or any amount of the principal
face amount of the notes into shares of the Company's common stock at a per-share conversion price equal to 62% of the lowest trading
price of the Company's common stock as reported on the National Quotations Bureau OTC Marketplace exchange on which the Company’s
shares are quoted, or any exchange upon which the Company's common stock may be traded in the future, for the twenty trading days
prior to the conversion.
As
of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility
of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to
the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount
of $166,193 is being amortized to interest expense over the respective terms of the notes. As of September 30, 2020, and December
31, 2019, the Company owed principal of $143,500 and $173,000 respectively. As of September 30, 2020, the Company owed $1,593 in
accrued interest.
Convertible
notes payable-St George Investments
On
November 1, 2017, the Company issued a secured convertible promissory note in the amount of $601,420 to St. George Investments
LLC (“St George”). The promissory note bears interest at 10% compounded daily, was due upon maturity on September 10,
2018 and includes an original issue discount of $59,220. The promissory note was funded on November 11, 2017 for $542,200, net
of the original issue discount and transaction costs. As of September 30, 2019, the Company owed $417,890 of principal and $38,378
of accrued interest on this convertible promissory note. As of September 30, 2019, this note was in default, but the lender has
not enforced the default interest rate. On December 20, 2017, the Company issued a secured convertible promissory note in aggregate
of $1,655,000 to St George Investments LLC (“St George”). The promissory note bears interest at 10% compounded daily,
was due upon maturity on October 27, 2018 and includes an original issue discount of $155,000. In addition, the Company agreed
to pay $5,000 for legal, accounting and other transaction costs of the lender. The promissory note was funded in nine tranches
of $300,000; $200,000; $200,000; $400,000; $75,000; $150,000; $85,000; $120,000 and $70,000, resulting in aggregate net proceeds
of $1,500,000. The Company received aggregate net proceeds of $1,200,000 and $300,000 during the years ended December 31, 2018
and 2017, respectively. As an investment incentive, the Company issued 1,100,000 five-year warrants, exercisable at $2.40 per share,
with certain reset provisions. As of June 30, 2020, the warrants had an exercise price of $0.0085 for 5,274,146 total warrants.
The
promissory notes are convertible, at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s
market capitalization (as defined) falls below $30,000,000, the conversion rate pursuant to the promissory notes will be 60% of
the 3 lowest closing trade prices from the 20 trading days immediately preceding the date of conversion. In addition, the promissory
notes include certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents at an effective
price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 20% prepayment premium
and is secured by a trust deed of certain assets of the Company.
On
November 5, 2018, $250,000 of principal and accrued interest was assigned to John Fife as an individual with all the terms and
conditions of the original note issued to St George. On March 21, 2019, $150,959 of principal and $4,963 of accrued interest along
with $160,454 of derivative liabilities valued as of the respective conversion date were converted into 394,460 shares of common
stock.
During
the nine months ended September 30, 2020, $550,000 of principal, $122,694 of accrued interest and $441,394 of derivative liabilities
valued as of the respective conversion dates were converted into 1,710,897 shares of common stock, resulting in a gain on debt
settlement of $21,586. As of September 30, 2020, the Company owed $0 of principal and
$0 of accrued interest on this convertible promissory note. Although this note was in default until it was repaid, the lender did
not enforce the default interest rate.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
On
August 28, 2018, the Company issued a secured convertible promissory note in the amount of $1,128,518 (including overfunding of
$23,518) to St. George Investments LLC (“St. George”). The promissory note bears interest at 10% compounded daily,
was due upon maturity on June 30, 2019, and includes an original issue discount of $100,000. In addition, the Company agreed to
pay $5,000 for legal, accounting and other transaction costs of the lender. During the year ended December 31, 2018, the Company
received aggregate net proceeds of $825,000. During the nine months ended September 30, 2020, an additional $218,518 was funded
under this note resulting in net proceeds of $198,518.
As
an investment incentive to St. George, the Company issued to St. George 750,000 five-year warrants, exercisable at $2.40 per share,
with certain reset provisions. The aggregate fair value of the issued warrants was $1,588,493. The face value of the debt was then
allocated, on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants has been added
to the debt discount with a resulting increase in additional paid-in capital. As of the funding date of each tranche of this note,
the Company determined the fair value of the embedded derivative associated with the convertibility of this note. The fair value
of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with
any excess of the derivative liability recognized as interest expense. As of the aggregate debt discount of $1,114,698 is being
amortized to interest expense over the respective term of each tranche. As of June 30, 2020, the warrants had an exercise price
of $0.0085 for 3,750,000 total warrants.
The
promissory notes are convertible, at any time at St. George’s option, at $2.40 per share. However, in the event the Company’s
market capitalization falls below $30,000,000, the conversion rate will be 60% of the 3 lowest closing trade prices due the 20
trading days immediately preceding date of conversion, subject to additional adjustments, as defined. In addition, the promissory
notes include certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents at an effective
price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium
and is secured by a trust deed of certain assets of the Company.
During
the nine months ended September 30, 2020, $1,000,859 of principal and $840,299 of derivative liabilities valued as of the respective
conversion dates were converted into 4,475,543 shares of common stock, resulting in a loss on debt settlement of $612,034. As of
September 30, 2019, the Company owed $828,518 of principal and $28,138 of accrued interest on this convertible promissory note.
As of September 30, 2019, this note was in default, but the lender has not enforced the default interest rate.
On
January 29, 2019, the Company issued a secured convertible promissory note in the amount of $2,205,000 to St. George Investments
LLC (“St. George”). The promissory note bears interest at 10% compounded daily, is due upon maturity on December 5,
2019, and includes an original issue discount of $200,000. In addition, the Company agreed to pay $5,000 for legal, accounting
and other transaction costs of the lender. During the nine months ended September 30, 2020, the promissory note was funded in eight
tranches totaling $1,406,482, resulting in aggregate net proceeds of $1,276,482. As an investment incentive to St. George, the
Company issued to St. George 1,500,000 5-year warrants, exercisable at $2.40 per share, with certain reset provisions. As of September
30, 2020, the warrants had an exercise price of $0.0085 for 7,500,000 total warrants. The aggregate fair value of the issued warrants
was $999,838. The face value of the debt was then allocated, on a relative fair value basis, between the debt and the warrants.
The portion allocated to warrants has been added to the debt discount with a resulting increase in additional paid-in capital.
As of the funding date of each tranche of this note, the Company determined the fair value of the embedded derivative associated
with the convertibility of this note. The fair value of the embedded derivative has been added to the debt discount
(total debt discount is limited to the face value of the debt) with any excess of the derivative liability recognized as interest
expense.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
The
promissory notes are convertible, at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s
market capitalization (as defined) falls below $30,000,000, the conversion rate will be 60% of the 3 lowest closing trade prices
due the 20 trading days immediately preceding date of conversion, subject to additional adjustments, as defined. In addition, the
promissory note includes certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents
at an effective price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 15%
prepayment premium and is secured by a trust deed of certain assets of the Company.
On
March 25, 2019, the Company issued a secured convertible promissory note in the amount of $580,000 to St. George Investments LLC
(“St. George”). The promissory note bears interest at 10% compounded daily, is due upon maturity on January 24, 2020
and includes an original issue discount of $75,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other
transaction costs of the lender. During the nine months ended September 30, 2019, the promissory note was funded in the amount
of $580,000 resulting in net proceeds of $500,000. As an investment incentive, the Company issued 375,000 five-year warrants, exercisable
at $2.40 per share, with certain reset provisions. As of September 30, 2020, the warrants had an exercise price of $0.0085 for
1,875,000 total warrants. The aggregate fair value of the issued warrants was $258,701. The face value of the debt was then allocated,
on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants has been added to the debt
discount with a resulting increase in additional paid-in capital. As of the funding date of this note, the Company determined the
fair value of the embedded derivative associated with the convertibility of this note. The fair value of the embedded derivative
has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative
liability recognized as interest expense. The aggregate debt discount of $483,966 is being amortized to interest expense over the
term of the note.
The
promissory notes are convertible, at any time at St. George’s option, at $2.40 per share. However, in the event the Company’s
market capitalization (as defined) falls below $30,000,000, the conversion rate will be 60% of the 3 lowest closing trade prices
from the 20 trading days immediately preceding the date of conversion, subject to additional adjustments. In addition, the promissory
note includes certain anti-dilution provisions should the Company subsequently issue any common stock or equivalents at an effective
price less than the lender conversion price. The Company has a right to prepayment of the note, subject to a 15% prepayment premium
and is secured by a trust deed of certain assets of the Company. As of September 30, 2020, and December 31, 2019, the Company owed
principal of $1,977,208 and $ 2,947,890 respectively. As of September 30, 2020, the Company owed $391,986 of accrued interest.
Convertible
notes payable - Robert L. Hymers III
On
December 23, 2019, the Company issued convertible promissory notes in the aggregate principal amount of $96,552.70 to Robert L.
Hymers III (“Hymers”) in satisfaction of funds owed to Mr. Hymers from his consulting contract with the Company for
past services rendered and completed. The promissory notes bear interest at 10% per annum, and are due six months from the respective
issuance date of the note along with accrued and unpaid interest. Principal and interest are payable to Hymers six months after
the date of issuance. Hymers has the option to convert all or any portion of the unpaid principal amount of the note, plus accrued
interest, into shares of the Company’s common stock. The conversion price will be equal to a 50% discount to the lowest closing
bid of the previous 15 day trading period. The aggregate debt discount of $92,332 is being amortized to interest expense over the
respective terms of the notes. As of September 30, 2020, and December 31, 2019, the Company owed an aggregate of $ 205,803 and
$96,553 of principal respectively. As of September 30, 2020, the Company owed $422 in accrued interest.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
NOTE
8 – DERIVATIVE LIABILITIES
As described
in Note 7, the Company issued convertible notes and warrants that contained conversion features and a reset provisions. The accounting
treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception
date and to fair value as of each subsequent reporting date. See Note 10 for further details.
NOTE
9 – STOCKHOLDERS’ DEFICIT
Preferred
stock
The Company
is authorized to issue 50,000,000 shares of $0.001 par value preferred stock as of September 30, 2020 and December 31, 2019. As
of September 30, 2020, and December 31, 2019, the Company designated and issued 10,000,000 shares of Class A Preferred Stock.
Each
share of Class A Preferred Stock is entitled to 100 votes on all matters submitted to a vote to the stockholders of the Company,
does not have conversion, dividend or distribution upon liquidation rights.
On October 28, 2019, Donald Steinberg, Charles
Larsen and the Company agreed, in exchange for a mutual release of all claims, to cancel and return to treasury Messrs. Steinberg
and Larsen’s respective 5,000,000 shares of Preferred Class A common stock. The Board of Directors subsequently issued pro
rata, 10 million Class A Preferred shares of common stock to directors Robert Coale, Edward Manolos and Jesus Quintero. On May
20, 2020, Robert Coale resigned his position as a director. As part of a severance agreement, Mr. Coale returned to treasury 3,333,333
shares of Class A Preferred Shares. On July 10, 2020, the Company issued 3,333,333 Class A Preferred Shares to Jesus M. Quintero.
On November 9, 2020, the Company issued 2,000,000 shares of its
Class B Preferred Common Stock to Jesus Quintero. The Class B Preferred Stock carries a voting preference of One Thousand (1,000)
times that number of votes on all matters submitted to the shareholders that is equal to the number of shares of Common Stock (rounded
to the nearest whole number), at the record date for the determination of the shareholders entitled to vote on such matters or,
if no such record date is established, at the date such vote is taken or any written consent of such shareholders is affected.
The issuance constitutes a change of control of the Company, as the voting preference of the issued Class B Preferred Stock provides
Mr. Quintero with the right to control a majority of the votes of shareholders eligible to cast votes on any matter brought before
the stockholders.
Common
stock
The Company is authorized to issue 5,000,000,000
shares of $0.001 par value common stock. As of September 30, 2020, and December 31, 2019, the Company had 1,913,880,887 and 77,958,081
shares issued and outstanding, respectively. All references to our common stock in this filing reflect a 1:60 reverse stock split
effective September 3, 2019.
During the nine months
ended September 30, 2020, the Company issued an aggregate of 156,444,047 shares of its common stock for services rendered with
an estimated fair value of $665,767.
During the nine months
ended September 30, 2020, the Company issued an aggregate of 21,384,103 shares of its common stock, in settlement of outstanding
related party notes payable, for a total aggregate value of $50,613.
During the nine months
ended September 30, 2020, the Company issued 1,469,725,298 shares of its common stock in settlement of convertible notes payable,
accrued interest of $2,635,647.
During the nine months
ended September 30, 2020, the Company issued 51,054,214 shares of its common stock in exchange for exercise of warrants on a cashless
basis with an aggregate value of $427,500.
During the nine
months ended September 30, 2020, the Company sold an aggregate of 127,012,847 shares of its common stock for net proceeds of
$153,686. On November 9, 2020, the Company issued 2,000,000 shares of its
Class B Preferred Common Stock to Jesus Quintero. The Class B Preferred Stock carries a voting preference of One Thousand (1,000)
times that number of votes on all matters submitted to the shareholders that is equal to the number of shares of Common Stock (rounded
to the nearest whole number), at the record date for the determination of the shareholders entitled to vote on such matters or,
if no such record date is established, at the date such vote is taken or any written consent of such shareholders is affected.
The issuance constitutes a change of control of the Company, as the voting preference of the issued Class B Preferred Stock provides
Mr. Quintero with the right to control a majority of the votes of shareholders eligible to cast votes on any matter brought before
the stockholders.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Warrants
The following table presents
information related to warrants at September 30, 2020:
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Exercise
Price
|
|
|
Number of
Options
|
|
|
|
Weighted Average
Remaining Life
In Years
|
|
|
|
Exercisable
Number of
Options
|
|
$.01-1.00
|
|
|
61,111
|
|
|
|
2.18
|
|
|
|
61,111
|
|
$1.01-2.00
|
|
|
41,891
|
|
|
|
1.86
|
|
|
|
41,891
|
|
$2.01-3.00
|
|
|
3,499,146
|
|
|
|
3.99
|
|
|
|
3,499,146
|
|
|
|
|
3,602,148
|
|
|
|
|
|
|
|
3,602,148
|
|
NOTE 10 — FAIR VALUE MEASUREMENT
The
Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”)
on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements
for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous
market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability,
such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10
establishes three levels of inputs that may be used to measure fair value:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant
inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term
of the assets or liabilities.
Level
3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All
items required to be recorded or measured on a recurring basis are based upon level 3 inputs.
To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the
fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
Upon
adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial
statements.
The
carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including
convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.
As
of September 30, 2020, and December 31, 2019, the Company did not have any items that would be classified as level 1 or 2 disclosures.
The
Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed in note 7. While
the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that
the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in
a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values
using the methods discussed in Note 6 are that of volatility and market price of the underlying common stock of the Company.
As
of September 30, 2020, and December 31, 2019, the Company did not have any derivative instruments that were designated as hedges.
The derivative liability as
of September 30, 2020 in the amount of $3,426,888, has a level 3 classification.
The following
table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities for the two years ended
September 30, 2020:
|
|
|
Debt Derivative
|
|
|
Balance, December 31, 2019
|
|
$
|
5,693,071
|
|
Initial fair value of debt derivative at note issuance
|
|
|
1,308,157
|
|
Mark-to-market at September 30, 2020
|
|
|
7,001,228
|
|
Transfers out of Level 3 upon conversion or payoff of notes payable
|
|
|
(3,886,971
|
)
|
Net loss in fair value included in earnings related to derivative liabilities during the nine months ended September 30, 2020
|
|
$
|
312,631
|
|
Balance, September 30, 2020
|
|
$
|
3,426,888
|
|
Fluctuations
in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period.
During the period ended September 30, 2020, the Company’s stock price decreased significantly from initial valuations.
As the stock price decreases for each of the related derivative instruments, the value to the holder of the instrument generally
decreases. Stock price is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s
derivative instruments.
MARIJUANA COMPANY OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2020
(unaudited)
NOTE
11 — RELATED PARTY TRANSACTIONS
The
Company’s current officers and stockholders advanced funds to the Company for travel related and working capital purposes.
As of September 30, 2020, and December 31, 2019, there were no related party advances outstanding.
As
of September 30, 2020, and December 31, 2019, accrued compensation due officers and executives was accrued compensation was $125,738
and $4,875, respectively.
During
the nine months ended September 30, 2020, the Company issued an aggregate of 21,384,103 shares of its common stock in settlement
of outstanding related party notes payable of $50,613.
On November
9, 2020, the Company issued 2,000,000 shares of its Class B Preferred Common Stock to Jesus Quintero, our CEO and CFO. The Class
B Preferred Stock carries a voting preference of One Thousand (1,000) times that number of votes on all matters submitted to the
shareholders that is equal to the number of shares of Common Stock (rounded to the nearest whole number), at the record date for
the determination of the shareholders entitled to vote on such matters or, if no such record date is established, at the date
such vote is taken or any written consent of such shareholders is affected. The issuance constitutes a change of control of the
Company, as the voting preference of the issued Class B Preferred Stock provides Mr. Quintero with the right to control a majority
of the votes of shareholders eligible to cast votes on any matter brought before the stockholders.
NOTE
12 – SUBSEQUENT EVENTS
Share Exchange Agreement
with Cannabis Global
On September 30, 2020,
the Company entered into a Share Exchange Agreement with Cannabis Global, Inc., a Nevada corporation quoted on OTC Markets Pink
(“CBGL”) dated September 30, 2020, to acquire the number of shares of CBGL’s common stock, par value $0.001,
equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date, in exchange
for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the closing price for the
trading day immediately preceding the effective date (the “Share Exchange Agreement”). For both parties, the Share
Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event that
a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant
to the Share Exchange Agreement to fall below $650,000.
Complementary to the
Share Exchange Agreement, the Company and CBGL entered into a Lock-Up Agreement dated September 30, 2020, providing that the shares
of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for
a period of 12 months following issuance, and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week,
or $80,000 per month.
Brazil
and Uruguay Joint Ventures
On October
1, 2020, the Company entered into two Joint Venture Agreements with Marco Guerrero, a director of the Company (“Guerrero”)
dated September 30, 2020, to form joint venture operations in Brazil and in Uruguay (the “Joint Venture Agreements”)
to produce, manufacture, market and sell the Company’s hempSMART™ products in Latin America, and will also work to
develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the formation of joint
venture entities in Uruguay and Brazil. The Brazilian joint venture will be headquartered in São Paulo, Brazil, and will
be named HempSmart Produtos Naturais Ltda. (“HempSmart Brazil”). The Uruguayan joint venture will be headquartered
in Montevideo, Uruguay and will be named Hempsmart Uruguay S.A.S. (“HempSmart Uruguay”).
Under
the Joint Venture Agreements, the Company will acquire a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay. A
minority 30% equity interest in both HempSmart Brazil and HempSmart Uruguay will be held by newly formed entities controlled by
Guerrero, a director of the Company, who is a successful Brazilian entrepreneur. The Company will provide capital in the amount
of $50,000 to both HempSmart Brazil and HempSmart Uruguay under the Joint Venture Agreements, for a total capital outlay obligation
of $100,000. It is expected that the proceeds of the initial capital contribution will be used for contracting with third-party
manufacturing facilities in Brazil and Uruguay, and related infrastructure and employment of key personnel.
On November
9, 2020, the Company issued 2,000,000 shares of its Class B Preferred Common Stock to Jesus Quintero. The Class B Preferred Stock
carries a voting preference of One Thousand (1,000) times that number of votes on all matters submitted to the shareholders that
is equal to the number of shares of Common Stock (rounded to the nearest whole number), at the record date for the determination
of the shareholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken
or any written consent of such shareholders is affected. The issuance constitutes a change of control of the Company, as the voting
preference of the issued Class B Preferred Stock provides Mr. Quintero with the right to control a majority of the votes of shareholders
eligible to cast votes on any matter brought before the stockholders.