UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MARIJUANA COMPANY OF AMERICA,
INC. |
(Exact name of Registrant as
specified in its charter) |
Utah |
|
2833 |
|
94-1246221 |
(State or other jurisdiction of
incorporation or organization) |
|
(Primary Standard Industrial
Classification Code)
|
|
(I.R.S. Employer
Identification No.)
|
1340 West Valley Parkway, Suite 205
Escondido, CA 92029
Telephone: (888) 777-4362
(Address and Telephone Number of Registrant’s Principal
Executive Offices and Principal Place of Business)
Jesus M. Quintero
Marijuana Company of America, Inc.
1340 West Valley Parkway, Suite 205
Escondido, CA 92029
Telephone: (888) 777-4362
(Name, Address, and Telephone Number for Agent of Service)
Pacific Stock Transfer, Inc.
6725 Via Austi Pkwy
Suite 300
Las Vegas, NV 89119
Telephone: (800) 785-7782
(Name, Address, and Telephone Number for Agent of Service)
Copies to:
Independent Law PLLC
2106 NW 4th PL, Gainesville, FL 32603
Attn: Alan T. Hawkins, Esq.
Telephone: (352) 353-4048
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, please check the following box:
☒
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company smaller reporting, or an emerging growth
company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated Filer |
☐ |
Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
|
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Emerging growth company |
☒ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided to Section 7(a)(2)(B) of the Securities Act.
☐
Calculation of Registration Fee
Title of Each Class of Securities to be Registered |
|
Amount to be Registered
(1) |
|
Proposed
Maximum
Aggregate
Price Per
Share
|
|
Proposed
Maximum
Aggregate
Offering
Price
|
|
Amount of
Registration
Fee
|
|
|
|
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Common Stock, par value $0.001
(2) |
|
|
646,883,314 |
|
|
$ |
0.002 |
(3) |
|
$ |
1,293,767 |
|
|
$ |
141.15 |
(4) |
|
|
|
|
|
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____________________
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(1) |
Consists of up to 646,883,314 shares of common
stock to be offered by the registrant in the
Offering. As of November 23, 2020, the Company had
2,021,510,356 shares of common stock in the public float and
2,053,481,896 shares of common stock outstanding. The
646,883,314 shares being registered represent approximately 32.0%
of the shares in the public float as of November 23,
2020. Assuming all of these shares are sold, the
registrant’s total number of issued and outstanding shares of
common stock will be 2,700,365,210, calculated on the total number
of shares issued and outstanding at November 23, 2020 of
2,053,481,896. The total number of registered shares will then
represent 24.0% of the issued and outstanding shares. |
|
(2) |
Shares of newly issued common stock to be offered
by the registrant in the Offering (as hereinafter
defined). |
|
(3) |
Estimated solely for the purpose of calculating
the amount of the registration fee in accordance with Rule 457(c)
under the Securities Act of 1933. |
|
(4) |
Based on the price per share of $0.002 for
Marijuana Company of America, Inc.’s common stock on November 16,
2020, as reported by the OTC Markets Group. |
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until the Registration Statement shall become effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this
prospectus is not complete and may be changed. The selling
stockholder may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities
and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted. |
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED November 23,
2020
Marijuana Company of America, Inc.
646,883,314 Shares of Common Stock Being Offered by the Company in
the Offering
This prospectus relates to the sale of 646,883,314 shares of common
stock, par value $0.001, of Marijuana Company of America, Inc.
(referred to herein as the “Company” or “Marijuana Company of
America, Inc.”), by the Company on a best efforts basis (the
“Offering”). The Company anticipates that public offering price
will be $0.002 per share. The Company is offering the shares on a
self-underwritten, “best efforts” basis directly through its CEO,
Jesus Quintero. The total proceeds from the Offering will not be
escrowed or segregated but will be available to the Company
immediately. There is no minimum amount of common shares required
to be purchased, and, therefore, the total proceeds received by the
Company might not be enough to sustain continued operations, or a
market may not develop. No commission or other compensation related
to the sale of the shares will be paid. For more information, see
the section titled “Plan of Distribution” and “Use of Proceeds”
herein.
As of November 23, 2020, the Company had 2,021,510,356 shares of
common stock in the public float and 2,053,481,896 shares of common
stock outstanding. The 646,883,314 shares being registered
represent approximately 32.0% of the shares in the public float as
of November 23, 2020. Assuming all of these shares are sold, the
registrant’s total number of issued and outstanding shares of
common stock will be 2,700,365,210, calculated on the total number
of shares issued and outstanding at November 23, 2020 of
2,053,481,896. The total number of registered shares will then
represent 24.0% of the issued and outstanding shares.
Our common stock is quoted on the OTC Markets Pink Open Market
alternative trading system, operated by OTC Markets Group, Inc.,
under the symbol “MCOA”. As of November 16, 2020, the last reported
sale price for our common stock was $0.002 per share.
This offering is highly speculative, and these securities
involve a high degree of risk and should be considered only by
persons who can afford the loss of their entire investment. See
“Risk Factors” beginning on page 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is November 23, 2020.
Table of Contents
|
Page |
|
|
About this
Prospectus |
3 |
Prospectus Summary |
3 |
Risk Factors |
8 |
Risks
Related to Our Business |
9 |
Risks
Related to the Company |
14 |
Risks
Related to Our Common Stock |
16 |
The Offering |
18 |
Use of Proceeds |
18 |
Determination of Offering
Price |
18 |
Dividend Policy |
19 |
Market for our Common
Stock |
19 |
Forward-Looking
Statements |
19 |
Dilution |
19 |
Financial
Statements |
F-1 |
Management’s Discussion and
Analysis of Financial Condition and Results of
Operation |
20 |
Description of
Business |
27 |
Description of
Property |
28 |
Directors, Executive Officers,
Promoters, and Control Persons |
28 |
Executive
Compensation |
33 |
Security Ownership of Certain
Beneficial Owners and Management |
33 |
Plan of
Distribution |
35 |
Certain Relationships and
Related Transactions |
36 |
Description of
Securities |
37 |
Legal Matters |
40 |
Experts |
40 |
Changes in and Disagreements
with Accountants |
40 |
Where You Can Find More
Information |
41 |
Other Expenses of Issuance and
Distribution |
II-1 |
Indemnification of Directors
and Officers |
II-1 |
Recent Sale of Unregistered
Securities |
II-3 |
Exhibits |
II-5 |
Undertakings |
II-6 |
Signatures |
II-7 |
ABOUT THIS PROSPECTUS
You should rely only on the information that we have provided in
this prospectus and any applicable prospectus supplement. We have
not authorized anyone to provide you with different information. No
dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this
prospectus and any applicable prospectus supplement. You must not
rely on any unauthorized information or representation. This
prospectus is an offer to sell only the securities offered hereby,
but only under circumstances and in jurisdictions where it is
lawful to do so. You should assume that the information in this
prospectus and any applicable prospectus supplement is accurate
only as of the date on the front of the document, regardless of the
time of delivery of this prospectus, any applicable prospectus
supplement, or any sale of a security.
As used in this prospectus, the terms “we”, “us”, “our” and the
“Company”, means Marijuana Company of America, Inc. and subsidiary
companies, H Smart, Inc, a Delaware corporation, MCOA CA, Inc., a
California corporation, Hempsmart, Ltd., a United Kingdom
corporation, H Smart Inc. (a California foreign registered
corporation) and H Smart Inc., a Washington corporation. All dollar
amounts refer to U.S. dollars unless otherwise indicated.
Hempsmart and other registered or common law trade names,
trademarks, or service marks of the Company appearing in this
prospectus are the property of H Smart, Inc. and/or Marijuana
Company of America, Inc. Solely for convenience, our trademarks and
trade names referred to in this prospectus may appear with and
without the ® and ™ symbols, but those
references are not intended to indicate, in any way, that we will
not assert, to the fullest extent under applicable law, our rights,
or the right of the applicable licensor, to these trademarks and
trade names.
PROSPECTUS SUMMARY
Except as otherwise indicated, as used in this prospectus,
references to the “Company,” “we,” “us,” or “our” refer to
Marijuana Company of America, Inc.
The following summary highlights selected information
contained in this prospectus, and it may not contain all of the
information that is important to you. Before making an investment
decision, you should read the entire prospectus carefully,
including “Risk Factors” and our financial statements and related
notes, included elsewhere in, or incorporated by reference into,
this prospectus.
Corporate Background
Marijuana Company of America, Inc. is a Utah corporation is based
in Escondido, California. The Company is a publicly listed company
quoted on OTC Markets OTCQB Tier under the symbol “MCOA”.
We were incorporated in the State of Utah on October 4, 1985, under
the name of 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. From 2009 to 2014, we operated primarily
in the mining exploration business. In 2015, we left the mining
business and began an internet-based marketing business focused on
offerings from our “Majestic Menu” food service items offered to
the hospitality and food service industry via an on-line internet
site, where individuals could purchase retail direct from food
distributors via credit cards and commercial accounts.
On September 4, 2015, Donald Steinberg and Charles Larsen purchased
400,000,000 shares of restricted common stock and 10,000,000 shares
of the Preferred Class A stock from the Company’s President,
Cornelia Volino, in exchange for $105,000.00. On September 9, 2015,
Donald Steinberg was appointed Chairman of the Board, Chief
Executive Officer and Secretary of the Company. Mr. Larsen was
appointed to the Board of Directors. The former officers and
directors of the Company resigned concurrent with the new
appointments. By virtue of Messrs. Steinberg and Larsen’s stock
purchase and appointment to the Company’s Board of Directors, a
purchase or sale of a significant amount of assets not in the
ordinary course of business and a corresponding change of control
occurred. The Company reported the change of control in its
September 30, 2015 quarterly report filed with the OTC Markets.
Thereafter, the Company’s business plans and operations changed to
focus legalized hemp more fully discussed in this filing. The
Company changed its name to Marijuana Company of America, Inc. and
trading symbol on December 1, 2015.
Our business develops, manufactures, markets and sells
non-psychoactive industrial hemp, and hemp-derived consumer
products containing cannabinoids (hereafter referred to as “CBD”),
with a THC content of less than 0.3%. Our business includes the
research and development of (1) varieties of various species of
hemp; (2) beneficial uses of hemp and hemp derivatives; (3) indoor
and outdoor cultivation methods for hemp; (4) technology used for
cultivation and harvesting of different species of hemp, including
but not limited to lighting, venting, irrigation, hydroponics,
nutrients and soil; (5) different species of industrial hemp
derived CBD, and the possible health benefits thereof; and, (6) new
and improved methods of hemp CBD extraction omitting or eliminating
the delta-9 THC molecule.
On September 21, 2015, the Company formed H Smart, Inc., a Delaware
corporation as a wholly owned subsidiary for the purpose of
operating the hempSMART™ brand.
On February 1, 2016, the Company formed MCOA CA, Inc., a California
corporation as a wholly owned subsidiary to facilitate mergers,
acquisitions and the offering of investments or loans to the
Company.
On May 3, 2017, the Company formed Hempsmart Limited, a United
Kingdom corporation as a wholly owned subsidiary for the purpose of
future expansion into the European market.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries: H Smart, Inc., Hempsmart
Limited and MCOA CA, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
The condensed balance sheet as of December 31, 2019 has been
derived from audited financial statements.
Operating results for the three 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.
Our Business and Strategy
Our primary business strategy is to develop, manufacture, and
market non-psychoactive industrial hemp, and hemp-derived consumer
products containing cannabinoids (hereafter referred to as “CBD”),
with a THC content of less than 0.3%, while tactically investing in
related business via joint ventures and minority ownership
positions.
Our business operations include the following:

hempSMART™
Our consumer products containing hemp and CBD are sold through our
wholly owned subsidiary H Smart, Inc. under the brand name
hempSMART™. We market and sell our hempSMART™ products directly
through our web site, and through our affiliate marketing program,
where qualified sales affiliates use a secure multi-level-marketing
sales software program that facilitates order placement over the
internet via a web site, and accounts for affiliate orders and
sales; calculates referral benefits apportionable to specific sales
associates and calculates and accounts for loyalty and rewards
benefits for returning customers.
Our current hempSMART™ wellness products offerings include the
following:
|
• |
hempSMART Brain™ a proprietary
patented and formulated personal care consumer product encapsulated
with enriched non-psychoactive industrial hemp derived CBD. This
encapsulation is combined with other high quality, proprietary
natural ingredients to compliment CBD to support brain
wellness. |
|
• |
hempSMART Pain™ capsules formulated with 10mg of Full
Spectrum, non-psychoactive CBD per serving, derived from industrial
hemp, which along with a proprietary blend of other natural
ingredients, delivers an all-natural formulation for the temporary
relief of minor discomfort associated with physical activity.
|
|
• |
hempSMART Pain Cream™ each container formulated with
300 mg of full spectrum non-psychoactive CBD derived from
industrial hemp. The newly developed product contains a synergistic
combination of natural botanicals and full spectrum hemp extract
featuring CBD, CBG and a broad range of terpenes. The Company’s
proprietary blend of Ayurvedic herbs along with Menthol, Cayenne
Pepper Extract, Rosemary Oil, Aloe Gel, White Willow Bark, Arnica,
Wintergreen Extract and Tea Tree Oil, provides an immediate cooling
and soothing sensation. This topical wellness consumer product is
formulated to help reduce minor discomfort and promote muscle
relaxation on areas that it is applied.
|
|
• |
hempSMART Drops™ full Spectrum Hemp CBD Oil Tincture
Drops, available in 250mg and 500mg bottles, enriched with
non-psychoactive industrial hemp derived CBD, and available in four
different flavors: lemon, mint, orange and strawberry that is free
of the THC isolate.
|
|
• |
hempSMART Pet Drops™ for cats and dogs, formulated with
250mg of full spectrum non-psychoactive CBD derived from industrial
hemp. This new specially formulated product contains naturally
occurring CBD derived from hemp seed oil, full spectrum hemp
extract, fractionated coconut oil, and a rich bacon flavor.
|
|
• |
hempSMART Face™ a nourishing facial
moisturizer combines full spectrum CBD from hemp, with a unique
blend of Ayurvedic herbs and botanicals. Designed to refresh,
replenish and restore the skin providing long lasting hydration and
balance. |
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.
Consulting Services
We also provide financial accounting and property management
services for companies associated with the cannabis industry in all
stages of development. Our services include the following:
|
• |
Financial Accounting and Bookkeeping. Our
business accounting services provide financial accounting,
bookkeeping and reporting protocols in order to allow licensed
cannabis and/or hemp operators, in those states where cannabis has
been legalized for medicinal and/or recreational use, to report
collect, verify and state effective financial records and
disclosure. We provide a comprehensive accounting strategy based on
best accounting practices. We understand the challenges and
complexities of financial accounting in the regulated commercial
cannabis market and we have the expertise to help client businesses
report their financial operations consistent with GAAP. As of the
date of this filing, we have not offered any consulting,
bookkeeping or financial accounting consulting services that have
generated reportable revenues. As of the date of this report we
have not provided such services. |
|
• |
Property Management Consulting. Our
property management consulting services consist of providing
planning, budgeting, acquisition, accounting and management
services to licensed cannabis and/or hemp operators in those states
where cannabis and/or hemp has been legalized for medicinal and/or
recreational use, and who are searching for appropriate real
property to conduct operations. As of the date of this filing, we
have not offered any real property management consulting services
that have generated reportable revenues. As of the date of this
report, we have not provided such services. |
Recent Government Decriminalization and Legalization of
Hemp
On December 20, 2018, President Donald J. Trump signed into law the
Agriculture Improvement Act of 2018, otherwise known as the “Farm
Bill.” Prior to its passage, hemp, a member of the cannabis family,
and hemp derived CBD, were classified as Schedule 1 controlled
substances, and so illegal under the Controlled Substances Act, 21
U.S.C. § 811 (hereafter referred to as the “CSA”).
With the passage of the Farm Bill, hemp cultivation is now broadly
permitted. The Farm Bill explicitly allows the transfer of
hemp-derived products across state lines for commercial or other
purposes. It also puts no restrictions on the sale, transport, or
possession of hemp-derived products, so long as those items are
produced in a manner consistent with the law.
Under Section 10113 of the Farm Bill, hemp cannot contain more than
0.3 percent THC, the chemical compound found in cannabis that
produces the psychoactive “high” associated with cannabis. Any
cannabis plant that contains more than 0.3 percent THC would be
considered non-hemp cannabis—or marijuana—illegal under the federal
CSA.
Additionally, there will be significant, shared state-federal
regulatory power over hemp cultivation and production. Under
Section 10113 of the Farm Bill, state departments of agriculture
must consult with the state’s governor and chief law
enforcement officer to devise a plan that must be submitted to the
Secretary of the United States Department of Agriculture (hereafter
referred to as the “USDA”). A state’s plan to license and regulate
hemp can only commence once the Secretary of USDA approves that
state’s plan. In states opting not to devise a hemp regulatory
program, USDA will construct a regulatory program under which hemp
cultivators in those states must apply for licenses and comply with
a federally-run program. This system of shared regulatory
programming is similar to options states had in other policy areas
such as health insurance marketplaces under Affordable Care Act, or
workplace safety plans under Occupational Health and Safety
Act—both of which had federally-run systems for states opting not
to set up their own systems.
The Farm Bill outlines actions that are considered violations of
federal hemp law (including such activities as cultivating without
a license or producing cannabis with more than 0.3 percent THC).
The Farm Bill details possible punishments for such violations,
pathways for violators to become compliant, and even which
activities qualify as felonies under the law, such as repeated
offenses.
One of the goals of the previous 2014 Farm Bill was to generate and
protect research into hemp. The 2018 Farm Bill continues this
effort. Section 7605 re-extends the protections for hemp research
and the conditions under which such research can and should be
conducted. Further, section 7501 of the Farm Bill extends hemp
research by including hemp under the Critical Agricultural
Materials Act. This provision recognizes the importance, diversity,
and opportunity of the plant and the products that can be derived
from it, but also recognizes that there is a still a lot to learn
about hemp and its products from commercial and market
perspectives.
We currently operate two divisions within the regulated hemp
industry: (i) the development, manufacturing, marketing and sale of
our hempSMART™ consumer products that include
non-psychoactive industrial hemp-based CBD as an ingredient; and,
(ii) professional financial consulting and property management
services.
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,
who legalized THC psychoactive cannabis for medicinal and
recreational use on January 1, 2018. As disclosed in greater detail
below, on February 3, 2020, we terminated the joint venture.
As of the date of this filing, we do not conduct any business in
the psychoactive cannabis markets in those states that have
legalized cannabis for medicinal or recreational use.
Cannabis Remains an Illegal Schedule 1 Drug under Federal
Law
Psychoactive Cannabis containing greater than 0.3 percent THC
(“Psychoactive Cannabis”) and its derivatives are illegal “Schedule
1” drugs under the Controlled Substances Act (21 U.S.C. § 811). As
a Schedule 1 drug, Psychoactive Cannabis and derivatives are viewed
as being highly addictive and having no medical value. The United
States Drug Enforcement Agency enforces the CSA and persons
violating it are subject to federal criminal prosecution. The
criminal penalty structure in the CSA is determined based on the
specific predicate violations, including but not limited to: simple
possession, drug trafficking, attempt and conspiracy, distribution
to minors, trafficking in drug paraphernalia, money laundering,
racketeering, environmental damage from illegal manufacturing,
continuing criminal enterprise, and smuggling. A first conviction
under the CSA can generally result in possible fines from $250,000
to $50 million dollars, and incarceration for periods generally
from five and up to forty years. For a second conviction, fines
increase generally from $500,000 to $75 million dollars, and
incarceration for periods generally from ten years to twenty years
to life.
The United States Food & Drug Administration (“FDA”) is
generally responsible for protecting the public health by ensuring
the safety, efficacy, and security of (1) prescription and over the
counter drugs; (2) biologics including vaccines, blood & blood
products, and cellular and gene therapies; (3) foodstuffs including
dietary supplements, bottled water, and baby formula; and, (4)
medical devices including heart pacemakers, surgical implants,
prosthetics, and dental devices.
Regarding its regulation of drugs, the FDA process requires a
review that begins with the filing of an investigational new drug
(IND) application, with follow on clinical studies and clinical
trials that the FDA uses to determine whether a drug is safe and
effective, and therefore subject to approval for human use by the
FDA.
Aside from the FDA’s mandate to regulate drugs, the FDA also
regulates dietary supplement products and dietary ingredients under
the Dietary Supplement Health and Education Act of 1994. This law
prohibits manufacturers and distributors of dietary supplements and
dietary ingredients from marketing products that are adulterated or
misbranded. This means that these firms are responsible for
evaluating the safety and labeling of their products before
marketing to ensure that they meet all the requirements of the law
and FDA regulations, including, but not limited to the following
labeling requirements: (1) identifying the supplement; (2)
nutrition labeling; (3) ingredient labeling; (4) claims; and, (5)
daily use information.
The FDA has not approved Psychoactive Cannabis, hemp or derivatives
as a safe and effective drug for any indication. As of the date of
this filing, we have not, and do not intend to file an IND with the
FDA, concerning any of our products that contain CBD derived from
industrial hemp or cannabis delivered in the State of California
pursuant to our joint venture with Natural Plant Extract discussed
above. Further, our products containing CBD derived from industrial
hemp are not marketed or sold using claims that their use is safe
and effective treatment for any medical condition subject to the
FDA’s jurisdiction.
The FDA has concluded that products containing Psychoactive
Cannabis or industrial hemp derived CBD are excluded from the
dietary supplement definition under sections 201(ff)(3)(B)(i) and
(ii) of the U.S. Food, Drug & Cosmetic Act, respectively. The
FDA’s position is that products containing Psychoactive Cannabis,
and derivatives are Schedule 1 drugs under the CSA, and so are
illegal. Our products containing CBD derived from industrial hemp
or cannabis delivered in the State of California are not marketed
or sold as dietary supplements. However, at some indeterminate
future time, the FDA may choose to change its position concerning
generally Psychoactive Cannabis and products containing hemp
derived CBD, and may choose to enact regulations that are
applicable to such products. In this event, our industrial hemp
based products containing CBD and Psychoactive Cannabis delivered
through our joint venture interest in Natural Plant Extract may be
subject to regulation (See Risk Factors).
Where You Can Find Us
The principal offices of our company are located at 1340 West
Valley Parkway, Suite 205, Escondido, CA 92029. Our telephone
number is (888) 777-4362.
Summary of the Offering
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Newly issued common stock being registered
pursuant to the Offering: |
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646,883,314 shares of common stock |
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Offering price: |
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$0.002 per share |
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Offering period: |
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The offering will
conclude upon such time as all of the common stock has been sold
pursuant to the registration statement, or 24 months after the
effective date. |
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Common Stock in the public float before the Offering: |
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2,021,510,356 shares
of common stock as of November 23, 2020. |
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Number of shares outstanding after the offering: |
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2,700,365,210 shares
of common stock |
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Market for the common stock: |
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Our common stock is
quoted on the OTC Link alternative trading system under the symbol
“MCOA”. As of November 16, 2020, the last reported sale price for
our common stock was $0.002 per share. |
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Use of proceeds: |
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We estimate that we
will receive approximately $1,293,767 in gross proceeds if we sell
all of the shares in the Offering and assuming a $0.002 per share
Offering Price, and we will receive estimated net proceeds (after
paying offering expenses) of approximately $1,273,767 if we sell
all of those shares. See “Use of Proceeds” for a more detailed
explanation of how the proceeds from the Offering will be
used. |
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Risk Factors: |
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See “Risk Factors‚”
and the other information in this prospectus for a discussion of
the factors you should consider before deciding to invest in shares
of our common stock. |
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OTCQB Symbol: |
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MCOA |
As of November 23, 2020, the Company had 2,021,510,356 shares of
common stock in the public float and 2,053,481,896 shares of common
stock outstanding. The 646,883,314 shares being registered
represent approximately 32.0% of the shares in the public float as
of November 23, 2020. Assuming all of these shares are sold, the
registrant’s total number of issued and outstanding shares of
common stock will be 2,700,365,210, calculated on the total number
of shares issued and outstanding at November 23, 2020 of
2,053,481,896. The total number of registered shares will then
represent 24% of the issued and outstanding shares.
RISK FACTORS
You should carefully consider the risks described below before
investing in our securities. Additional risks not presently known
to us or that our management currently deems immaterial also may
impair our business operations. If any of the risks described below
were to occur, our business, financial condition, operating
results, and cash flows could be materially adversely affected. In
such an event, the trading price of our common stock could decline,
and you could lose all or part of your investment. In assessing
these risks, you should also refer to the other information
contained in this Prospectus, including our consolidated financial
statements and related notes. The risks discussed below include
forward-looking statements, and our actual results may differ
substantially from those discussed in these forward-looking
statements.
General risk relating to COVID-19 pandemic
The novel coronavirus (COVID-19) pandemic may have an
expected effect on our business, financial condition and results of
operations.
In March 2020, the World Health Organization declared COVID-19 a
global pandemic, and governmental authorities around the world have
implemented measures to reduce the spread of COVID-19. These
measures have adversely affected workforces, customers, supply
chains, consumer sentiment, economies, and financial markets, and,
along with decreased consumer spending, have led to an economic
downturn across many global economies.
The COVID-19 pandemic has rapidly escalated in the United States,
creating significant uncertainty and economic disruption, and
leading to record levels of unemployment nationally. Numerous state
and local jurisdictions have imposed, and others in the future may
impose, shelter-in-place orders, quarantines, shut-downs of
non-essential businesses, and similar government orders and
restrictions on their residents to control the spread of COVID-19.
Such orders or restrictions have resulted in temporary facility
closures, work stoppages, slowdowns and travel restrictions, among
other effects, thereby adversely impacting our operations. In
addition, we expect to be impacted by a downturn in the United
States economy, which could have an adverse impact on discretionary
consumer spending and may have a significant impact on our business
operations and/or our ability to generate revenues and profits.
In response to the COVID-19 disruptions, we have implemented a
number of measures designed to protect the health and safety of our
staff and contractors. These measures include restrictions on
non-essential business travel, the institution of work-from-home
policies wherever feasible and the implementation of strategies for
workplace safety at our facilities that remain open. We are
following the guidance from public health officials and government
agencies, including implementation of enhanced cleaning measures,
social distancing guidelines and wearing of masks.
The extent to which COVID-19 ultimately impacts our business,
financial condition and results of operations will depend on future
developments, which are highly uncertain and unpredictable,
including new information which may emerge concerning the severity
and duration of the COVID-19 outbreak and the effectiveness of
actions taken to contain the COVID-19 outbreak or treat its impact,
among others. Additionally, while the extent to which COVID-19
ultimately impacts our operations will depend on a number of
factors, many of which will be outside of our control. The COVID-19
outbreak is evolving and new information emerges daily;
accordingly, the ultimate consequences of the COVID-19 outbreak
cannot be predicted with certainty. In addition to the COVID-19
disruptions possibility adversely impacting our business and
financial results, they may also have the effect of heightening
many of the other risks described in “Risk Factors,” including
risks relating to changes due to our limited operating history; our
ability to generate sufficient revenue, to generate positive cash
flow; our relationships with third parties, and many other factors.
We will endeavor to minimize these impacts, but there can be no
assurance relative to the potential impacts that may be
incurred.
As previously reported on Form 8-K filed on May 15, 2020, as
amended, the Company was unable to file its Quarterly Report on
Form 10-Q for the period ended March 31, 2020 by the original
deadline of May 15, 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.
Risks Related to Our Business
The Farm Bill recently passed, and undeveloped shared
state-federal regulations over hemp cultivation and production may
impact our business.
The Farm Bill was signed into law on December 20, 2018. Under
Section 10113 of the Farm Bill, state departments of agriculture
must consult with the state’s governor and chief law enforcement
officer to devise a plan that must be submitted to the Secretary of
USDA. A state’s plan to license and regulate hemp can only commence
once the Secretary of USDA approves that state’s plan. In states
opting not to devise a hemp regulatory program, USDA will need to
construct a regulatory program under which hemp cultivators in
those states must apply for licenses and comply with a
federally-run program. The details and scopes of each state’s plans
are not fully known at this time and may contain varying
regulations that may impact our business. Even if a state creates a
plan in conjunction with its governor and chief law enforcement
officer, the Secretary of the USDA must approve it. There can be no
guarantee that any state plan will be approved. Review times may be
extensive. There may be amendments and the ultimate plans, if
approved by states and the USDA, may materially limit our business
depending upon the scope of the regulations.
Laws and regulations affecting our industry to be developed
under the Farm Bill are in development.
As a result of the Farm Bill’s recent passage, laws and regulations
affecting the hemp industry will evolve which could detrimentally
affect our operations. Local, state and federal hemp laws and
regulations may be broad in scope and subject to changing
interpretations. These changes may require us to incur substantial
costs associated with legal and compliance fees and ultimately
require us to alter our business plan. Furthermore, violations of
these laws, or alleged violations, could disrupt our business and
result in a material adverse effect on our operations. In addition,
we cannot predict the nature of any future laws, regulations,
interpretations or applications, and it is possible that
regulations may be enacted in the future that will be directly
applicable to our business.
Psychoactive Cannabis and derivatives are illegal under the
CSA.
Psychoactive Cannabis and derivatives are Schedule 1 controlled
substances and are illegal under the CSA. Even in states that have
legalized the use of Psychoactive Cannabis, its sale and use remain
violations of federal law. The illegality of Psychoactive Cannabis
under the CSA preempts state laws that legalize its use. Therefore,
strict enforcement of the CSA regarding Psychoactive Cannabis and
derivatives would likely result in our inability to proceed with
our 3.5% interest in NPE, which operates a psychoactive cannabis
delivery service in California.
Risk of government action.
While we will use our best efforts to comply with all laws and
regulations, there is a possibility that governmental action to
enforce any alleged violations may result in legal fees and damage
awards that would adversely affect us.
We anticipate our operating expenses will increase, and we
may never achieve profitability.
We launched our first hempSMART™ product, hempSMART Brain™, in
November 2316. Since then, we have introduced a number of other
consumer products, including hempSMART Pain™, hempSMART™ Full
Spectrum Pet Drops™, and hempSMART™ Full Spectrum Drops™. As we
continue to produce other hempSMART™ products, we anticipate
increases in our operating expenses, without realizing
significant revenues from operations. Within the next 12 months,
these increases in expenses will be attributed to the cost of (i)
general and administrative, (ii) new research and development,
(iii) advertising and website development, (iv) legal and
accounting fees at various stages of operation, (v) joint venture
activities, (vi) creating and maintaining distribution and supply
chain channels.
As a result of some or all of these factors in combination, we will
incur significant financial losses in the foreseeable future. There
is no history upon which to base any assumption as to the
likelihood that our Company will prove successful. We cannot
provide investors with any assurance that our business will attract
customers and investors. If we are unable to address these risks,
there is a high probability that our business will fail.
Because our business is dependent upon continued market
acceptance by consumers, any negative trends will adversely affect
our business operations.
We are substantially dependent on continued market acceptance and
proliferation of consumers of hemp and hemp-derived CBD. We believe
that as hemp and hemp-derived CBD becomes more accepted as a result
of the passage of the Farm Bill, the stigma associated with hemp
and CBD will diminish and as a result consumer demand will continue
to grow. While we believe that the market and opportunity in the
hemp space continues to grow, we cannot predict the future growth
rate and size of the market. Any negative outlook on the hemp
industry will adversely affect our business operations.
The possible FDA Regulation of hemp and industrial hemp
derived CBD, and the possible registration of facilities where hemp
is grown and CBD products are produced, if implemented, could
negatively affect the hemp industry generally, which could directly
affect our financial condition.
The Farm Bill established that hemp containing less the 0.3% THC
was no longer a Schedule 1 drug under the CSA. Previously, the U.S.
Food and Drug Administration (“FDA”) did not approve hemp or CBD
derived from hemp as a safe and effective drug for any indication.
The FDA considered hemp and hemp-derived CBD as illegal Schedule 1
drugs. Further, the FDA has concluded that products containing hemp
or CBD derived from hemp are excluded from the dietary supplement
definition under sections 201(ff)(3)(B)(i) and (ii) of the U.S.
Food, Drug & Cosmetic Act, respectively. However, as a result
of the passage of the Farm Bill, at some indeterminate future time,
the FDA may choose to change its position concerning products
containing hemp, or CBD derived from hemp, and may choose to enact
regulations that are applicable to such products, including, but
not limited to: the growth, cultivation, harvesting and processing
of hemp; regulations covering the physical facilities where hemp is
grown and processed; and possible testing to determine efficacy and
safety of hemp derived CBD. In this hypothetical event, our
hemp-based hempSMART™ products containing CBD may be subject to
regulation. In the hypothetical event that some or all of these
regulations are imposed, we do not know what the impact would be on
the hemp industry in general, and what costs, requirements and
possible prohibitions may be enforced. If we are unable to comply
with the conditions and possible costs of possible regulations
and/or registration as may be prescribed by the FDA, we may be
unable to continue to operate our business.
Laws governing our access to banking services remain
uncertain and are in a state of flux.
On February 14, 2014, the U.S. government issued rules allowing
banks to legally provide financial services to state-licensed
cannabis businesses. A memorandum issued by the Justice Department
to federal prosecutors re-iterated guidance previously given, this
time to the financial industry, that banks can do business with
legal cannabis businesses and “may not” be prosecuted.
We believe this applies to hemp and to Psychoactive Cannabis. The
Treasury Department’s Financial Crimes Enforcement Network (FinCEN)
issued guidelines to banks that “it is possible to provide
financial services” to state-licensed cannabis (and hemp)
businesses and still be in compliance with federal anti-money
laundering laws. These provisions created barriers to our banking
operations. With the passage of the Farm Bill, we expect that the
banking industry will be more open to doing business with compliant
hemp businesses. Currently, the U.S. Congress is considering the
Secure and Fair Enforcement Banking Act sponsored by Reps. Ed
Perlmutter (D-CO) Denny Heck (D-WA), Steve Stivers (R-OH) and
Warren Davidson (R-OH) filed in March, 2019 designed to protect
banks that service the marijuana industry from being penalized by
federal regulators. The act currently has 138 cosponsors—more than
a quarter of the House. However, this may take time and may not
result in a more open banking climate. We expect that banks will be
more open to serving cannabis and hemp businesses, but there is no
guarantee – even with the passage of the Farm Bill.
Banking regulations in our business are costly and time
consuming.
In assessing the prospective risk of providing services to a
hemp-related business, a financial institutions may conduct
customer due diligence that includes: (i) verifying with the
appropriate state authorities whether the business is duly licensed
and registered; (ii) reviewing the license application (and related
documentation) submitted by the business for obtaining a state
license to operate its cannabis-related business; (iii) requesting
from state licensing and enforcement authorities available
information about the business and related parties; (iv) developing
an understanding of the normal and expected activity for the
business, including the types of products to be sold; (v) ongoing
monitoring of publicly available sources for adverse information
about the business and related parties; (vi) ongoing monitoring for
suspicious activity, including for any of the red flags described
in this guidance; and (vii) refreshing information obtained as part
of customer due diligence on a periodic basis and commensurate with
the risk. With respect to information regarding state licensure
obtained in connection with such customer due diligence, a
financial institution may reasonably rely on the accuracy of
information provided by state licensing authorities, where states
make such information available. These regulatory reviews may be
time consuming and costly.
Due to our involvement in the hemp industry and the
Psychoactive Cannabis delivery business, we may have a difficult
time obtaining the various insurances that are desired to operate
our business, which may expose us to additional risk and financial
liability.
Insurance that is otherwise readily available, such as general
liability, and directors and officer’s insurance, is more difficult
for us to find, and more expensive, because we are service
providers to companies in the cannabis industry. There are no
guarantees that we will be able to find such insurances in the
future, or that the cost will be affordable to us. If we are forced
to go without such insurances, it may prevent us from entering into
certain business sectors, may inhibit our growth, and may expose us
to additional risk and financial liabilities.
The Company’s industry is highly competitive, and we have
less capital and resources than many of our competitors which may
give them and advantage in developing and marketing products
similar to ours or make our products obsolete.
We are involved in a highly competitive industry where we may
compete with numerous other companies who offer alternative hemp
products and derivatives, who may have far greater resources, more
experience, and personnel perhaps more qualified than we do. Such
resources may give our competitors an advantage in developing and
marketing products similar to ours or products that make our
products less desirable to consumers or obsolete. There can be no
assurance that we will be able to successfully compete against
these other entities.
We may be unable to respond to the rapid technological change
in the industry and such change may increase costs and competition
that may adversely affect our business.
Rapidly changing technologies, frequent new product and service
introductions and evolving industry standards characterize our
market. The continued growth of the Internet and intense
competition in our industry exacerbates these market
characteristics. Our future success will depend on our ability to
adapt to rapidly changing technologies by continually improving the
performance features and reliability of our hempSMART™ products. We
may experience difficulties that could delay or prevent the
successful development, introduction or marketing of our hempSMART™
products. In addition, any new enhancements must meet the
requirements of our current and prospective customers and must
achieve significant market acceptance. We could also incur
substantial costs if we need to modify our hempSMART™ products and
services or infrastructures to adapt to these changes.
We also expect that new competitors may introduce products or
services that are directly or indirectly competitive with us. These
competitors may succeed in developing, products and services that
have greater functionality or are less costly than our products and
services and may be more successful in marketing such products and
services. Technological changes have lowered the cost of operating
communications and computer systems and purchasing software. These
changes reduce our cost of selling products and providing services,
but also facilitate increased competition by reducing competitors’
costs in providing similar services. This competition could
increase price competition and reduce anticipated profit
margins.
Our hempSMART™ products are relatively new and our industry
is rapidly evolving.
Due consideration must be given to our prospects in light of the
risks, uncertainties and difficulties frequently encountered by
companies in their early stage of development, particularly
companies in the rapidly evolving legal cannabis and hemp
industries. To be successful we must, among other things:
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Develop, manufacture and introduce new attractive
and successful consumer products in our hempSMART™
brand. |
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Attract and maintain a large customer base and
develop and grow that customer base. |
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Increase awareness of our hempSMART™ brand and
develop effective marketing strategies to insure consumer
loyalty. |
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Establish and maintain strategic relationships
with key sales, marketing, manufacturing and distribution
providers. |
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Respond to competitive and technological
developments. |
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Attract, retain and motivate qualified
personnel. |
We may be unable to fully capture the expected value from our
new joint venture operations in Brazil and Uruguay..
In connection with our entry into new joint ventures in Brazil and
Uruguay, we face numerous risks and uncertainties, including
effectively integrating our respective personnel, management
controls and business relationships into an effective and cohesive
operation. Further, we are subject to additional risks and
uncertainties because we may be dependent upon, and subject to,
liability losses or damages relating to system controls and
personnel that are not under our control. The joint venture
business may be subject to unforeseeable negative market
conditions, economic downturns, and legal and political
considerations in Brazil and Uruguay.
Our joint ventures in Brazil and Uruguay will rely significantly
upon the activities of our joint venture partners. We will rely
upon our joint venture partner’s Brazilian and Uruguayan personnel,
business acumen, experience and involvement to seek economic
success and the joint ventures’ compliance with applicable
Brazilian and Uruguayan laws.
If we are unable to integrate and monitor our Brazilian and
Uruguayan joint ventures successfully and efficiently, there is a
risk that our results of operations, financial condition and cash
flows may be materially and adversely affected. In addition,
conflicts or disagreements between us and our joint venture
partners in Brazil and Uruguay may negatively impact the benefits
to be achieved by the relevant joint venture. There is no assurance
that our joint ventures will be successfully integrated or yield
all of the positive benefits anticipated.
Our joint venture investments in Latin America, and other
joint venture investments that we make in the future, could be
adversely affected by our lack of sole decision-making authority,
our reliance on co-venturers’ financial condition and liquidity and
disputes between us and our co-venturers.
In addition to our new joint venture projects in Brazil and
Uruguay, which are in development stage, will require financial
investment on our part, and have not yet generated revenue for the
Company, we may co-invest in other joint ventures in the future
with third parties through partnerships or other joint ventures,
acquiring non-controlling interests in or sharing responsibility
for any such ventures. In this event, we would not be in a position
to exercise sole decision-making authority regarding the joint
venture and, in certain cases, may have little or no
decision-making authority. Investments through partnerships or
other joint ventures may, under certain circumstances, involve
risks not present were a third party not involved, including the
possibility that partners or co-venturers might become bankrupt,
fail to fund their share of required capital contributions, make
dubious business decisions or block or delay necessary decisions.
Partners or co-venturers may have economic or other business
interests or goals which are inconsistent with our business
interests or goals, and may be in a position to take actions
contrary to our policies or objectives. Such investments may also
have the potential risk of impasses on decisions, such as a sale,
because neither we nor the partner or co-venturer would have full
control over the partnership or joint venture. Disputes between us
and partners or co-venturers may result in litigation or
arbitration that would increase our expenses and prevent our
executive officers, senior management and/or directors
from focusing their time and effort on our business. Consequently,
action by, or disputes with, partners or co-venturers might result
in subjecting properties owned by the partnership or joint venture
to additional risk. In addition, we may in certain circumstances be
liable for the actions of our third-party partners or
co-venturers.
We cannot guarantee that we will succeed in achieving our
goals, and our failure to do so would have a material adverse
effect on our business, prospects, financial condition and
operating results.
Some of our hempSMART™ products are new and are only in the
developmental stages of commercialization. We are not certain that
these products will function as anticipated or be desirable to
their intended markets. Also, some of our products may have limited
functionalities, which may limit their appeal to consumers and put
us at a competitive disadvantage. If our current or future
hempSMART™ products fail to function properly or if we do not
achieve or sustain market acceptance, we could lose customers or
could be subject to claims which could have a material adverse
effect on our business, financial condition and operating
results.
As is typical in a new and rapidly evolving industry, demand and
market acceptance for recently introduced products and services are
subject to a high level of uncertainty and risk. Because the market
for our Company is evolving, it is difficult to predict with any
certainty the ultimate size of this market and its growth rate, if
any. We cannot guarantee that a market for our products will
develop or that demand for our products will emerge or be
sustainable. If the market fails to develop, develops more slowly
than expected or becomes saturated with competitors, our business,
financial condition and operating results would be materially
adversely affected.
The Company’s failure to continue to attract, train, or
retain highly qualified personnel could harm the Company’s
business.
The Company’s success also depends on the Company’s ability to
attract, train, and retain qualified personnel, specifically those
with management and product development skills. In particular, the
Company must hire additional skilled personnel to further the
Company’s research and development efforts. Competition for such
personnel is intense. If the Company does not succeed in attracting
new personnel or retaining and motivating the Company’s current
personnel, the Company’s business could be harmed.
If we are unable to attract and retain independent
associates, our business may suffer.
Our future success depends largely upon our ability to attract and
retain a large active base of independent direct sales associates
and members who purchase our hempSMART™ products. We cannot give
any assurances that the number of our independent associates will
be established or increase in the future. Several factors affect
our ability to attract and retain independent associates and
members, including: on-going motivation of our independent
associates; general economic conditions; significant changes in the
amount of commissions paid; public perception and acceptance of our
industry; public perception and acceptance of multi-level
marketing; public perception and acceptance of our business and our
products, including any negative publicity; the limited number of
people interested in pursuing multi-level marketing as a business;
our ability to provide proprietary quality-driven products that the
market demands; and, competition in recruiting and retaining
independent associates.
The loss of key management personnel could adversely affect
our business.
We depend on the continued services of our executive officers and
senior management team as they work closely with independent
associate leaders and are responsible for our day-to-day
operations. Our success depends in part on our ability to retain
our executive officers, to compensate our executive officers at
attractive levels, and to continue to attract additional qualified
individuals to our management team. Although we have entered into
employment agreements with our senior management team, and do not
believe that any of them are planning to leave or retire in the
near term, we cannot assure that our senior managers will remain
with us. The loss or limitation of the services of any of our
executive officers or members of our senior management team, or the
inability to attract additional qualified management personnel,
could have a material adverse effect on our business, financial
condition, results of operations, or independent associate
relations.
If government regulations regarding multi-level marketing
change or are interpreted or enforced in a manner adverse to our
business, we may be subject to new enforcement actions and material
limitations regarding our overall business model.
Multi-level marketing is subject to foreign, federal, and state
regulations. Any change in legislation and regulations could affect
our business. Furthermore, significant penalties could be imposed
on us for failure to comply with various statutes or regulations
resulting from: ambiguity in statutes; regulations and related
court decisions; the discretion afforded to regulatory authorities
and courts interpreting and enforcing laws; and new regulations or
interpretations of regulations affecting our business.
If our network marketing activities do not comply with
government regulations, our business could suffer.
Many governmental agencies regulate our multi-level marketing
activities. A government agency’s determination that our business
or our independent associates have significantly violated a law or
regulation could adversely affect our business. The laws and
regulations for multi-level marketing intend to prevent fraudulent
or deceptive schemes. Our business faces constant regulatory
scrutiny due to the interpretive and enforcement discretion given
to regulators, periodic misconduct by our independent associates,
adoption of new laws or regulations, and changes in the
interpretation of new or existing laws or regulations.
Independent associates could fail to comply with our policies
and procedures or make improper product, compensation, marketing or
advertising claims that violate laws or regulations, which could
result in claims against us that could harm our financial condition
and operating results.
In part, we sell our products through a sales force of independent
associates. The independent associates are independent contractors
and, accordingly, we are not in a position to provide the same
direction, motivation, and oversight as we would if associates were
our own employees. As a result, there can be no assurance that our
associates will participate in our marketing strategies or plans,
accept our introduction of new products, or comply with our
associate policies and procedures. All independent associates will
be required to sign a written contract and agree to adhere to our
policies and procedures, which prohibit associates from making
false, misleading or other improper claims regarding our hempSMART™
products or income potential from the distribution of the products.
However, independent associates may from time to time, without our
knowledge and in violation of our policies, create promotional
materials or otherwise provide information that does not accurately
describe our marketing program. There is a possibility that some
jurisdictions could seek to hold us responsible for independent
associate activities that violate applicable laws or regulations,
which could result in government or third-party actions or fines
against us, which could harm our financial condition and operating
results.
We may be held responsible for certain taxes or assessments
relating to the activities of our independent associates, which
could harm our financial condition and operating
results.
Our independent associates are subject to taxation and, in some
instances, legislation or governmental agencies impose an
obligation on us to collect taxes, such as value added taxes, and
to maintain appropriate tax records. In addition, we are subject to
the risk in some jurisdictions of being responsible for social
security and similar taxes with respect to our distributors. In the
event that local laws and regulations require us to treat our
independent distributors as employees, or if our distributors are
deemed by local regulatory authorities to be our employees, rather
than independent contractors, we may be held responsible for social
security and related taxes in those jurisdictions, plus any related
assessments and penalties, which could harm our financial condition
and operating results.
There could be unidentified risks involved with an investment
in our securities.
The foregoing risk factors are not a complete list or explanation
of the risks involved with an investment in the securities.
Additional risks will likely be experienced that are not presently
foreseen by the Company. Prospective investors must not construe
this the information provided herein as constituting investment,
legal, tax or other professional advice. Before making any decision
to invest in our securities, you should read this entire prospectus
and consult with your own investment, legal, tax and other
professional advisors. An investment in our securities is suitable
only for investors who can assume the financial risks of an
investment in the Company for an indefinite period of time and who
can afford to lose their entire investment. The Company makes no
representations or warranties of any kind with respect to the
likelihood of the success or the business of the Company, the value
of our securities, any financial returns that may be generated or
any tax benefits or consequences that may result from an investment
in the Company.
Risks Related to the Company
Uncertainty of profitability
Our business strategy may result in increased volatility of
revenues and earnings. As we will only develop a limited number of
products at a time, our overall success will depend on a limited
number of products, which may cause variability and unsteady
profits and losses depending on the products and/or services
offered and their market acceptance.
Our revenues and our profitability may be adversely affected by
economic conditions and changes in the market for our products. Our
business is also subject to general economic risks that could
adversely impact the results of operations and financial
condition.
Because of the anticipated nature of the products that we offer and
attempt to develop, it is difficult to accurately forecast revenues
and operating results and these items could fluctuate in the future
due to a number of factors. These factors may include, among other
things, the following:
|
• |
Our
ability to raise sufficient capital to take advantage of
opportunities and generate sufficient revenues to cover
expenses. |
|
• |
Our
ability to source strong opportunities with sufficient risk
adjusted returns. |
|
• |
Our
ability to manage our capital and liquidity requirements based on
changing market conditions generally and changes in the developing
legal medical marijuana and recreational marijuana
industries. |
|
• |
The
acceptance of the terms and conditions of our multi-level sales
agreements. |
|
• |
The
amount and timing of operating and other costs and
expenses. |
|
• |
The
nature and extent of competition from other companies that may
reduce market share and create pressure on pricing and investment
return expectations. |
|
• |
Adverse changes in the national and regional
economies in which we will participate, including, but not limited
to, changes in our performance, capital availability, and market
demand. |
|
• |
Adverse changes in the projects in which we plan
to invest which result from factors beyond our control, including,
but not limited to, a change in circumstances, capacity and
economic impacts. |
|
• |
Adverse developments in the efforts to legalize
cannabis or increased federal enforcement. |
|
• |
Changes in laws, regulations, accounting,
taxation, and other requirements affecting our operations and
business. |
|
• |
Our
operating results may fluctuate from year to year due to the
factors listed above and others not listed. At times, these
fluctuations may be significant. |
Management of growth will be necessary for us to be
competitive.
Successful expansion of our business will depend on our ability to
effectively attract and manage staff, strategic business
relationships, and shareholders. Specifically, we will need to hire
skilled management and technical personnel as well as manage
partnerships to navigate shifts in the general economic
environment. Expansion has the potential to place significant
strains on financial, management, and operational resources, yet
failure to expand will inhibit our profitability goals.
We are operating in a highly competitive market.
The markets for businesses in the hemp industry is competitive and
evolving. In particular, we face strong competition from larger
companies that may be in the process of offering similar products
and services to ours. Many of our current and potential competitors
have longer operating histories, significantly greater financial,
marketing and other resources and larger client bases than we have
(or may be expected to have).
Given the rapid changes affecting the global, national, and
regional economies generally and the cannabis and hemp industries,
in particular, we may not be able to create and maintain a
competitive advantage in the marketplace. Our success will depend
on our ability to keep pace with any changes in its markets,
especially with legal and regulatory changes. Our success will
depend on our ability to respond to, among other things, changes in
the economy, market conditions, and competitive pressures. Any
failure by us to anticipate or respond adequately to such changes
could have a material adverse effect on our financial condition,
operating results, liquidity, cash flow and our operational
performance.
It is unknown whether the passage of the Farm Bill will
provide us trademark protection for our hempSMART™ brand and
products.
We have applied for a trademark for our hempSMART™ brand name.
Before passage of the Farm Bill, we were uncertain that we could
obtain patent or trademark protection for our products Because hemp
derived CBD was considered an illegal Schedule 1 drug under the CSA
at the time. With the passage of the Farm Bill, we may be able to
overcome these uncertainties, since hemp containing less than 0.3%
THC is no longer a Schedule 1 drug under the CSA. However, we
cannot guarantee more favorable treatment and the failure to obtain
trademark protection may materially impact our brand establishment,
sales and good will.
If we fail to protect our intellectual property, our business
could be adversely affected.
Our viability will depend, in part, on our ability to develop and
maintain the proprietary aspects of our hempSMART™ products and
brand to distinguish our hempSMART™ products and services from our
competitors’ products and services. We rely on patents, copyrights,
trademarks, trade secrets, and confidentiality provisions to
establish and protect our intellectual property.
Any infringement or misappropriation of our intellectual property
could damage its value and limit our ability to compete. We may
have to engage in litigation to protect the rights to our
intellectual property, which could result in significant litigation
costs and require a significant amount of our time.
Competitors may also harm our sales by designing products that
mirror the capabilities of our products or technology without
infringing on our intellectual property rights. If we do not obtain
sufficient protection for our intellectual property, or if we are
unable to effectively enforce our intellectual property rights, our
competitiveness could be impaired, which would limit our growth and
future revenue.
We may also find it necessary to bring infringement or other
actions against third parties to seek to protect our intellectual
property rights. Litigation of this nature, even if successful, is
often expensive and time-consuming to prosecute, and there can be
no assurance that we will have the financial or other resources to
enforce our rights or be able to enforce our rights or prevent
other parties from developing similar technology or designing
around our intellectual property.
Our trade secrets may be difficult to protect.
Our success depends upon the skills, knowledge and experience of
our scientific and technical personnel, our consultants and
advisors, as well as our contractors. Because we operate in a
highly competitive industry, we rely in part on trade secrets to
protect our proprietary hempSMART™ products and processes. However,
trade secrets are difficult to protect. We enter into
confidentiality or non-disclosure agreements with our corporate
partners, employees, consultants, outside scientific collaborators,
developers and other advisors. These agreements generally require
that the receiving party keep confidential and not disclose to
third party’s confidential information developed by the receiving
party or made known to the receiving party by us during the course
of the receiving party’s relationship with us. These agreements
also generally provide that inventions conceived by the receiving
party in the course of rendering services to us will be our
exclusive property, and we enter into assignment agreements to
perfect our rights.
These confidentiality, inventions and assignment agreements may be
breached and may not effectively assign intellectual property
rights to us. Our trade secrets also could be independently
discovered by competitors, in which case we would not be able to
prevent the use of such trade secrets by our competitors. The
enforcement of a claim alleging that a party illegally obtained and
was using our trade secrets could be difficult, expensive and
time consuming and the outcome would be unpredictable. The failure
to obtain or maintain meaningful trade secret protection could
adversely affect our competitive position.
Our Business Can be Affected by Unusual Weather
Patterns.
The production of some of our hempSMART™ products relies on the
availability and use of live hemp plant material. Growing periods
can be impacted by weather patterns and these unpredictable weather
patterns may impact our ability to harvest hemp. In addition,
severe weather, including drought and hail, can destroy a hemp
crop, which could result in our having no hemp to harvest, process
and sell. If our suppliers are unable to obtain sufficient hemp
from which to process CBD, our ability to meet customer demand,
generate sales, and maintain operations will be impacted.
Our hempSMART™ sales in the UK may be subject to
unforeseeable events and regulation that may have a material impact
on our efforts to sell our hempSMART™ products in the
UK.
Currently, the UK regulates wellness products containing CBD
through its Medicines and Healthcare products Regulatory Agency
(“MHRA”). Pursuant to the MHRA, only wellness products containing
less than 0.2% THC may be sold in the UK. Our latest laboratory
results from testing the THC content of our hempSMART™ products
containing CBD derived from industrial hemp show that our products
approach 0% THC. While we are confident that our hempSMART™
products are compliant with regulations in both the UK, these
regulations may change unforeseeably, and any such changes may have
a material effect on our ability to market and sell our hempSMART™
products in the UK. Additionally, we rely on affiliates in the UK
for the administration of our business there. We have not to date
established an effective warehousing protocol to efficiently store
and deliver products there. The failure of our UK affiliates to
efficiently handle the storage and distribution of our products
could create a material deficiency in conducting our business
there.
Risks Related to Our Common Stock
Because we may issue additional shares of our common stock,
investment in our company could be subject to substantial
dilution.
Investors’ interests in our Company will be diluted and investors
may suffer dilution in their net book value per share when we issue
additional shares. Dilution is the difference between what
investors pay for their stock and the net tangible book value per
share immediately after the additional shares are sold by us. We
are authorized to issue 15,000,000,000 shares of common stock,
$0.001 par value per share. As of November 23, 2020, there
were 2,021,510,356 shares of our common stock in the public
float. Our financing activities in the past focused on convertible
note financing that requires us to issue shares of common stock to
satisfy principal, interest and any applicable penalties related to
these convertible notes. When required under the terms and
conditions of the convertible notes, we issue additional shares of
common stock that have a dilutive effect on our stockholders. We
anticipate that all or at least some of our future funding, if any,
will be in the form of equity financing from the sale of our common
stock and so any investment in our company will be diluted, with a
resulting decline in the value of our common stock.
Our variably priced convertible notes will result in
dilution.
We have entered into various financing instruments containing terms
making interest and principal convertible into our common stock at
variable prices. As is referenced elsewhere in this filing, some of
those financiers are St. George Investments, LLC, John Fife, GS
Capital, Paladin Advisors, LLC, Power Up Lending, Crown Bridge, LG
Capital, Jefferson Street Capital and White Lion Partners. As a
result, we may be required to issue additional shares of our common
stock which will cause material dilution. As a result, such
issuances will materially reduce the value of existing investors’
shares and their proportional ownership of our company.
Our financing instrument with Power Up Lending may impede a
successful corporate action.
FINRA may or may not allow us to complete a corporate action
including, but not limited to, a change of our name and/or trading
symbol, due to our financing arrangements with Power Up Lending and
St. George Investments, LLC. One of Power Up Lending’s principals
was involved with a former SEC enforcement action. The principal of
St. George Investments, LLC, John Fife, is currently involved, as a
defendant, in an SEC enforcement litigation. The action with Power
Up and its affiliate completed without liability to Power Up or the
Power Up affiliate, and the action with John Fife and St. George
Investments LLC is ongoing. FINRA has, from time to time when
considering whether or not to grant a corporate action, determined
that association with Power Up is a deficiency causing rejection of
corporate actions, and FINRA may take a similar stance with St.
George Investments LLC.
Trading in our common stock on the OTCQB Exchange has been
subject to wide fluctuations.
Our common stock is currently quoted for public trading on the OTC
Pink Market Tier. The trading price of our common stock has been
subject to wide fluctuations. Trading prices of our common stock
may fluctuate in response to a number of factors, many of which
will be beyond our control, including our issuance of additional
common shares at variable prices to our convertible note holders.
The stock market has generally experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to
the operating performance of companies with limited business
operation. There can be no assurance that trading prices and price
earnings ratios previously experienced by our common stock will be
matched or maintained. These broad market and industry factors may
adversely affect the market price of our common stock, regardless
of our operating performance. In the past, following periods of
volatility in the market price of a company’s securities,
securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for us
and a diversion of management’s attention and resources.
Our common stock has been delisted from OTC Markets OTCQB
listing tier to OTC Markets Pink listing tier.
Our common stock traded below $0.01 per share on the OTC Markets’
QB trading tier for more than 30 consecutive calendar days, and as
a result we no longer met the Standards for Continued Eligibility
for OTCQB as per the OTCQB Standards, Section 2.3(2), which state
that the company must “maintain proprietary priced quotations
published by a Market Maker in OTC Link with a minimum closing bid
price of $.01 per share on at least one of the prior thirty
consecutive calendar days.”
As per Section 4.1 of the OTCQB Standards, the Company was granted
a cure period of 90 calendar days, and at the Company’s petition,
the OTCQB granted the Company an extension from this requirement,
until October 2020. However, the Company did not meet the
requirement and was down-listed from the OTCQB marketplace to the
OTC Markets Pink listing tier.
Utah law, our Certificate of Incorporation and our by-laws
provides for the indemnification of our officers and directors at
our expense, and correspondingly limits their liability, which may
result in a major cost to us and hurt the interests of our
shareholders because corporate resources may be expended for the
benefit of officers and/or directors.
Our Certificate of Incorporation and By-Laws include provisions
that eliminate the personal liability of our directors for monetary
damages to the fullest extent possible under the laws of the State
of Utah or other applicable law. These provisions eliminate the
liability of our directors and our shareholders for monetary
damages arising out of any violation of a director of his fiduciary
duty of due care. Under Utah law, however, such provisions do not
eliminate the personal liability of a director for (i) breach of
the director’s duty of loyalty, (ii) acts or omissions not in good
faith or involving intentional misconduct or knowing violation of
law, (iii) payment of dividends or repurchases of stock other than
from lawfully available funds, or (iv) any transaction from which
the director derived an improper benefit. These provisions do not
affect a director’s liabilities under the federal securities laws
or the recovery of damages by third parties.
We do not intend to pay cash dividends on any investment in
the shares of stock of our Company and any gain on an investment in
our Company will need to come through an increase in our stock’s
price, which may never happen.
We have never paid any cash dividends and currently do not intend
to pay any cash dividends for the foreseeable future. To the extent
that we require additional funding currently not provided for, our
funding sources may prohibit the payment of a dividend. Because we
do not currently intend to declare dividends, any gain on an
investment in our company will need to come through an increase in
the stock’s price. This may never happen, and investors may lose
all of their investment in our company.
FINRA sales practice requirements may also limit a
stockholder’s ability to buy and sell our stock.
The Financial Industry Regulatory Authority (known as “FINRA”) has
adopted rules that require that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior
to recommending speculative low-priced securities to their
non-institutional customers, broker-dealers must make reasonable
efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information.
Under interpretations of these rules, FINRA believes that there is
a high probability that speculative low-priced securities will not
be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers
buy our common shares, which may limit your ability to buy and sell
our stock and have an adverse effect on the market for our
shares.
Costs and expenses of being a reporting company under the
1934 Securities and Exchange Act may be burdensome and prevent us
from achieving profitability.
As a public company, we are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended, and parts of
the Sarbanes-Oxley Act. We expect that the requirements of these
rules and regulations will continue to increase our legal,
accounting and financial compliance costs, make some activities
more difficult, time-consuming and costly, and place significant
strain on our personnel, systems and resources.
There could be unidentified risks involved with an investment
in our securities.
The foregoing risk factors are not a complete list or explanation
of the risks involved with an investment in the securities.
Additional risks will likely be experienced that are not presently
foreseen by the Company. Prospective investors must not construe
this the information provided herein as constituting investment,
legal, tax or other professional advice. Before making any decision
to invest in our securities, you should read this entire prospectus
and consult with your own investment, legal, tax and other
professional advisors. An investment in our securities is suitable
only for investors who can assume the financial risks of an
investment in the Company for an indefinite period of time and who
can afford to lose their entire investment. The Company makes no
representations or warranties of any kind with respect to the
likelihood of the success or the business of the Company, the value
of our securities, any financial returns that may be generated or
any tax benefits or consequences that may result from an investment
in the Company.
THE OFFERING
This prospectus relates to the sale of 646,883,314 shares of common
stock, par value $0.001, of the Company at a price of $0.002 per
share on a best efforts basis. This offering (the “Offering”)
terminates 24 months after commencement of this offering. The
Company is offering the shares on a self-underwritten “best
efforts” basis directly through its CEO and director, Jesus
Quintero. There is no minimum amount of common shares required to
be purchased, and the total proceeds received by the Company might
not be enough to continue operations or a market may not develop.
No commission or other compensation related to the sale of the
shares will be paid. For more information, see the section titled
“Plan of Distribution” and “Use of Proceeds” herein.
USE OF PROCEEDS
We estimate the net proceeds to us from this offering will be
approximately $1,273,767, based on an assumed initial offering
price of $0.002 per share, after deducting estimated offering
expenses payable by us.
We anticipate that the net proceeds of the Offering will be used
primarily to execute our business plan as follows: $150,000 for
inventory and product development, $350,000 for extinguishing debt
and debt service, $350,000 for potential acquisition(s) in the hemp
sector (we have located potential acquisition candidates), $100,000
for advertising and marketing costs, $120,000 for staffing and
personnel costs, $173,767 for general working capital, and $30,000
remaining in cash reserves. Additionally, proceeds will be used for
website development, paying other general and administrative
expenses associated with this offering, and paying general and
administrative expenses associated with being a public company,
such as accounting, auditing, transfer agent, EDGAR filing, and
legal expenses. The precise amounts that the Company will devote to
its programs will vary depending on numerous factors, including but
not limited to, the progress and results of its research and
assessments as to the market reception of the Company’s beverage
products. In the event that we sell less than the maximum shares
offered in the Offering, our first priority is to pay fees
associated with registration of our stock and developing our
website (and expanding our internet sales platforms), and then
increasing our inventory and marketing efforts. The following table
summarizes how we anticipate using the gross proceeds of the
Offering, depending upon whether we sell 100%, 75%, 50%, or 25% of
the shares being offered in the Offering:
|
|
If 25% of |
|
If 50% of |
|
If 75% of |
|
If 100% |
Shares Sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Proceeds |
|
$ |
323,442 |
|
|
$ |
646,883 |
|
|
$ |
970,325 |
|
|
$ |
1,293,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected offering expenses |
|
|
20,000 |
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Proceeds |
|
|
303,442 |
|
|
|
626,883 |
|
|
|
950,325 |
|
|
|
1,273,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory & Product Development |
|
|
37,500 |
|
|
|
75,000 |
|
|
|
112,500 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguish Debt & Debt Services |
|
|
87,500 |
|
|
|
175,000 |
|
|
|
262,500 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Acquisition(s) |
|
|
87,500 |
|
|
|
175,000 |
|
|
|
262,500 |
|
|
|
350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising and marketing |
|
|
25,000 |
|
|
|
50,000 |
|
|
|
75,000 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Staffing |
|
|
30,000 |
|
|
|
60,000 |
|
|
|
90,000 |
|
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Working Capital |
|
|
35,942 |
|
|
|
86,884 |
|
|
|
130,325 |
|
|
|
173,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Reserves |
|
|
0 |
|
|
|
5,000 |
|
|
|
17,500 |
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
303,442 |
|
|
$ |
626,883 |
|
|
$ |
950,325 |
|
|
$ |
1,273,767 |
|
The Company anticipates that the estimated $1,293,767 gross
proceeds from the offering would enable it to purchase new
inventory, improve product development, expand operations, and fund
its other capital needs for the next fiscal year. In the event that
the offering is not completed, the Company will likely be required
to seek additional financing as the Company needs a minimum of
approximately $1,000,000 in gross proceeds to implement its
business plan and support its operations over the next twelve
months. There can be no assurance that additional financing will be
available when needed, and, if available, that it will be on terms
acceptable to the Company.
DETERMINATION OF OFFERING PRICE
The shares for sale by the Company in the Offering of 646,883,314
shares will be sold at estimated price of $0.002 per share.
DIVIDEND POLICY
We have not declared or paid dividends on our common stock since
our formation, and we do not anticipate paying dividends in the
foreseeable future. Declaration or payment of dividends, if any, in
the future, will be at the discretion of our Board of Directors and
will depend on our then current financial condition, results of
operations, capital requirements and other factors deemed relevant
by the Board of Directors. There are no contractual restrictions on
our ability to declare or pay dividends. Consequently, you will
only realize an economic gain on your investment in our common
stock if the price appreciates. You should not purchase our common
stock expecting to receive cash dividends. Since we do not
anticipate paying dividends, and if we are not successful in
establishing an orderly public trading market for our shares, then
you may not have any manner to liquidate or receive any payment on
your investment. Therefore, our failure to pay dividends may cause
you to not see any return on your investment even if we are
successful in our business operations. In addition, because we may
not pay dividends in the foreseeable future, we may have trouble
raising additional funds which could affect our ability to expand
our business operations.
MARKET FOR OUR COMMON STOCK
Market Information
Our common stock is quoted on the OTC Link alternative trading
system operated by OTC Markets Group, Inc., at the “Pink” level
under the symbol “MCOA”.
The market price of our common stock is subject to significant
fluctuations in response to variations in our quarterly operating
results, general trends in the market and other factors, over many
of which we have little or no control. In addition, broad market
fluctuations, as well as general economic, business and political
conditions, may adversely affect the market for our common stock,
regardless of our actual or projected performance.
Holders
We had 387 shareholders of record of our common stock as of
November 18, 2020.
Dividends
Please see “Dividend Policy” above.
FORWARD-LOOKING STATEMENTS
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.
DILUTION TO STOCKHOLDERS
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:
Percentage of Offering Shares
Sold |
|
|
100 |
% |
|
|
75 |
% |
|
|
50 |
% |
|
|
25 |
% |
Offering price per
share |
|
$ |
0.002 |
|
|
$ |
0.002 |
|
|
$ |
0.002 |
|
|
$ |
0.002 |
|
Net tangible book value per share
before offering |
|
|
0.0010 |
|
|
|
0.0735 |
|
|
|
0.0490 |
|
|
|
0.0245 |
|
Increase per share attributable
to investors |
|
|
(0.00023) |
|
|
|
(0.0176) |
|
|
|
(0.0117) |
|
|
|
(0.0059) |
|
Pro forma net tangible book value
per share after offering |
|
|
0.00075 |
|
|
|
0.0559 |
|
|
|
0.0373 |
|
|
|
0.0186 |
|
Dilution per share attributable
to investors in this offering |
|
|
(0.00023) |
|
|
|
(0.0176) |
|
|
|
(0.0117) |
|
|
|
(0.0059) |
|
FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of
Directors and Stockholders of
Marijuana Company of
America, Inc. (Converge Global, Inc.)
Opinion on the Financial
Statements
We have audited the
accompanying balance sheets of Marijuana Company of
America, Inc.
and its subsidiaries (“the Company”) as of December 31, 2019 and
December 31, 2018 and the related statements of operations,
stockholders’ deficit, cash flow and the related notes to
consolidated financial statements (collectively referred to as the
consolidated financial statements) for the year ended December 31,
2019 and December 31, 2018. In our opinion, the consolidated
financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2019 and December
31, 2018, and the results of its operations and its cash flows for
the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements
are the responsibility of the Company’s management. Our
responsibility is to express an opinion on the Company’s
consolidated financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control
over financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial
reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.
Our audit included performing procedures
to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
The Company’s Ability to Continue as
a Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has an accumulated
deficit, recurring losses, and expects continuing future losses,
and has stated that substantial doubt exists about the Company’s
ability to continue as a going concern. Management’s evaluation of
the events and conditions and management’s plans regarding these
matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
The firm has served
this client since December 2016.
/s/ L&L CPAS, PA
L&L CPAS, PA
Certified Public Accountants
Plantation, FL
The United States of America
May 14, 2020
MARIJUANA COMPANY OF AMERICA, INC. AND
SUBSIDIARIES |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS (Audited) |
|
|
|
|
|
December 31, |
|
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
211,765 |
|
|
$ |
359,577 |
|
Short-term
Investments |
|
|
27,403 |
|
|
|
810,000 |
|
Accounts receivable,
net |
|
|
18,317 |
|
|
|
46,376 |
|
Inventory |
|
|
149,175 |
|
|
|
186,989 |
|
Other
current assets |
|
|
11,034 |
|
|
|
93,833 |
|
Total current
assets |
|
|
417,694 |
|
|
|
1,496,775 |
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net |
|
|
7,512 |
|
|
|
12,430 |
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
Long-term Investments |
|
|
693,915 |
|
|
|
408,077 |
|
Right-of-use assets |
|
|
22,101 |
|
|
|
- |
|
Security deposit |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,143,722 |
|
|
$ |
1,919,782 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
797,790 |
|
|
$ |
416,444 |
|
Accrued compensation |
|
|
4,875 |
|
|
|
454,316 |
|
Accrued liabilities |
|
|
522,258 |
|
|
|
216,946 |
|
Debt obligations of Joint
venture |
|
|
- |
|
|
|
289,742 |
|
Notes payable, related
parties |
|
|
40,000 |
|
|
|
287,140 |
|
Convertible notes payable, net of
debt discount of $808,890 and $896,180, respectively |
|
|
3,193,548 |
|
|
|
1,132,668 |
|
Right-of-use liabilities –
current portion |
|
|
14,361 |
|
|
|
— |
|
Warrant liability to be
settled |
|
|
192,115 |
|
|
|
— |
|
Contingency Liability |
|
|
956,251 |
|
|
|
— |
|
Subscriptions payable |
|
|
330,797 |
|
|
|
— |
|
Derivative liability |
|
|
5,693,071 |
|
|
|
2,256,631 |
|
Total current liabilities |
|
|
11,745,066 |
|
|
|
5,053,887 |
|
|
|
|
|
|
|
|
|
|
Noncurrent
liabilities |
|
|
|
|
|
|
|
|
Right-of-use
liabilities |
|
|
7,858 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
11,752,924 |
|
|
|
5,053,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, 2019 and December 31,
2018 |
|
|
10,000 |
|
|
|
10,000 |
|
Class B preferred stock, $0.001
par value, 5,000,000 shares designated, 0 shares issued and
outstanding as of December 31, 2019 and December 31,
2018 |
|
|
— |
|
|
|
— |
|
Common stock, $0.001 par value;
5,000,000,000 shares authorized; 77,958,081 and 42,687,301 shares
issued and outstanding as of December 31, 2019 and December 31,
2018, respectively |
|
|
77,958 |
|
|
|
42,687 |
|
Common Stock to be
issued |
|
|
- |
|
|
|
90,000 |
|
Additional paid in
capital |
|
|
63,467,0564 |
|
|
|
50,707,103 |
|
Accumulated deficit |
|
|
(74,164,213 |
) |
|
|
(53,983,895 |
) |
Total stockholders'
deficit |
|
|
(10,609,201 |
) |
|
|
(3,134,105 |
) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders'
deficit |
|
$ |
1,143,722 |
|
|
$ |
1,919,782 |
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to these audited
condensed consolidated financial statements |
|
MARIJUANA COMPANY OF AMERICA, INC.
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
FOR THE 12 MONTHS ENDED DECEMBER 31, 2019 and
2018 |
(AUDITED) |
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
REVENUES: |
|
|
|
|
|
|
|
|
Sales |
|
$ |
673,919 |
|
|
$ |
240,452 |
|
Related party Sales |
|
|
21,157 |
|
|
|
11,683 |
|
Total Revenues |
|
|
695,076 |
|
|
|
252,135 |
|
|
|
|
|
|
|
|
|
|
Cost
of sales |
|
|
248,556 |
|
|
|
81,250 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
446,520 |
|
|
|
170,885 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
|
6,910,039 |
|
|
|
3,980,493 |
|
Depreciation |
|
|
7,299 |
|
|
|
5,341 |
|
Total operating
expenses |
|
|
6,917,338 |
|
|
|
3,985,834 |
|
|
|
|
|
|
|
|
|
|
Net loss from
operations |
|
|
(6,470,818 |
) |
|
|
(3,814,949 |
) |
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSES): |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(4,682,247 |
) |
|
|
(6,828,939 |
) |
Legal contingency
expense |
|
|
(1,497,674 |
) |
|
|
(1,682,870 |
) |
Impairment of Joint
Ventures |
|
|
(478,400 |
) |
|
|
(933,195 |
) |
Loss on equity
investment |
|
|
(13,842 |
) |
|
|
(90,859 |
) |
Loss on debt
modification |
|
|
— |
|
|
|
(1,343,161 |
) |
loss on disposition of
investment |
|
|
(389,664 |
) |
|
|
— |
|
(Loss) Gain on change in fair
value of derivative liabilities |
|
|
(2,123,570 |
) |
|
|
1,443,249 |
|
Gain on cancellation of
debt |
|
|
— |
|
|
|
1,500,000 |
|
Unrealized (Loss) Gain on trading
securities |
|
|
(677,584 |
) |
|
|
560,000 |
|
Loss on sales of trading
securities |
|
|
(75,545 |
) |
|
|
— |
|
(Loss) Gain on settlement of debt |
|
|
(3,770,974 |
) |
|
|
94,933 |
|
Total other income
(expense) |
|
|
(13,709,500 |
) |
|
|
(7,280,842 |
) |
|
|
|
|
|
|
|
|
|
Net loss before income
taxes |
|
|
(20,180,318 |
) |
|
|
(11,095,791 |
) |
|
|
|
|
|
|
|
|
|
Income taxes (benefit) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) |
|
$ |
(20,180,318 |
) |
|
$ |
(11,095,791 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share, basic and
diluted |
|
$ |
(0.41 |
) |
|
$ |
(0.29 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding, basic and diluted (after stock-split) |
|
|
48,669,683 |
|
|
|
37,924,703 |
|
|
|
|
|
|
|
|
|
|
See the accompanying
notes to these audited condensed consolidated financial
statements |
|
|
MARIJUANA COMPANY OF AMERICA, INC.
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS' DEFICIT |
FOR THE YEAR ENDED DECEMBER 31, 2019 AND
2018 (AUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2017 |
|
|
10,000,000 |
|
|
$ |
10,000 |
|
|
|
— |
|
|
$ |
— |
|
|
|
35,057,733 |
|
|
$ |
35,058 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
32,525,294 |
|
|
$ |
(42,888,104 |
) |
|
$ |
(10,317,752 |
) |
Common stock issued for services
rendered |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
516,680 |
|
|
|
517 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
717,583 |
|
|
|
|
|
|
|
718,100 |
|
Common stock issued in settlement
of convertible notes payable and accrued interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,465,463 |
|
|
|
2,465 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,350,703 |
|
|
|
— |
|
|
|
12,353,168 |
|
Additional paid-in capital due to
issuance of convertible debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,010,426 |
|
|
|
|
|
|
|
2,010,426 |
|
Common stock issued in settlement
of related party and accrued compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,340,471 |
|
|
|
1,340 |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
802,939 |
|
|
|
|
|
|
|
804,279 |
|
Common stock issued in exchange
for exercise of warrants on a cashless basis |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
2,034,112 |
|
|
|
2,034 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(2,034 |
) |
|
|
— |
|
|
|
— |
|
Common stock issued in settlement
of legal case |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
961,280 |
|
|
|
961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,700,505 |
|
|
|
|
|
|
|
1,701,466 |
|
Sale of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
311,561 |
|
|
|
312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151,688 |
|
|
|
|
|
|
|
152,000 |
|
Proceeds from common stock
subscriptions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
316,693 |
|
|
|
90,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000 |
|
Stock based
compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
450,000 |
|
|
|
— |
|
|
|
450,000 |
|
Net
Loss |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,095,791 |
) |
|
|
(11,095,791 |
) |
Balance, December 31, 2018 |
|
|
10,000,000 |
|
|
$ |
10,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
42,687,301 |
|
|
$ |
42,687 |
|
|
|
316,693 |
|
|
$ |
90,000 |
|
|
$ |
— |
|
|
$ |
50,707,104 |
|
|
$ |
(53,983,895 |
) |
|
$ |
(3,134,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to settle
amounts previously accrued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,669 |
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
26,975 |
|
|
|
|
|
|
|
193,800 |
|
Common stock issued for services
rendered |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
18,510,381 |
|
|
|
18,510 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,370,264 |
|
|
|
|
|
|
|
3,293,688 |
|
Common stock issued in settlement
of convertible notes payable and accrued interest |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
9,251,217 |
|
|
|
9,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,832,638 |
|
|
|
— |
|
|
|
5,424,736 |
|
Issuance of warrants and BCF with
convertible debt |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
855,717 |
|
|
|
|
|
|
|
856,717 |
|
Conversion of related party notes
payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,220,856 |
|
|
|
1,221 |
|
|
|
954 |
|
|
|
|
|
|
|
|
|
|
|
1,181,194 |
|
|
|
|
|
|
|
1,182,415 |
|
Common stock issued in exchange
for exercise of warrants on a cashless basis |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
1,653,175 |
|
|
|
1,653 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
(1,653 |
) |
|
|
— |
|
|
|
— |
|
Issuance of common
shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
316,693 |
|
|
|
317 |
|
|
|
(316,693 |
) |
|
|
(90,000 |
) |
|
|
|
|
|
|
89,683 |
|
|
|
|
|
|
|
— |
|
Sale of common stock |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
222,221 |
|
|
|
222 |
|
|
|
27,778 |
|
|
|
28 |
|
|
|
|
|
|
|
64,778 |
|
|
|
— |
|
|
|
90,000 |
|
Common shares issued in settlement
of legal case |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,082,398 |
|
|
|
2,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
539,341 |
|
|
|
|
|
|
|
541,424 |
|
Common shares cancelled by
officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,349,877 |
) |
|
|
(1,350 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,350 |
|
|
|
|
|
|
|
— |
|
Issuance of common stock for
investments in joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,222,047 |
|
|
|
2,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,216,818 |
|
|
|
|
|
|
|
1,219,040 |
|
Reclassification of derivative
liabilities to additional paid-in capital |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,582,845 |
|
|
|
— |
|
|
|
1,582,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(20,180,318 |
) |
|
|
(20,180,318 |
) |
Balance, December 31, 2019 |
|
|
10,000,000 |
|
|
$ |
10,000 |
|
|
|
10,000,000 |
|
|
$ |
— |
|
|
|
77,958,081 |
|
|
$ |
77,958 |
|
|
|
0 |
|
|
$ |
0 |
|
|
$ |
— |
|
|
$ |
63,467,054 |
|
|
$ |
(74,164,213 |
) |
|
$ |
(10,609,201 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying
notes to these audited condensed consolidated financial
statements |
|
MARIJUANA COMPANY OF AMERICA, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS |
|
FOR THE YEARS ENDED DECEMBER 31,
2019 AND 2018 |
|
(AUDITED) |
|
|
|
2019 |
|
|
|
2018 |
|
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(20,180,318 |
) |
|
$ |
(11,095,791 |
) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
|
|
|
|
|
|
Loss(gain) in fair value of trading
securities |
|
|
677,584 |
|
|
|
(560,000 |
) |
Loss
on sale of trading securities |
|
|
105,013 |
|
|
|
— |
|
Bad
debt expense |
|
|
15,000 |
|
|
|
1,559 |
|
Depreciation and amortization |
|
|
7,299 |
|
|
|
1,151,890 |
|
Loss
on equity investment |
|
|
— |
|
|
|
90,859 |
|
Share-based compensation |
|
|
3,222,092 |
|
|
|
— |
|
Amortization of debt discount |
|
|
2,906,843 |
|
|
|
— |
|
Impairment loss on equity method
investee |
|
|
286,127 |
|
|
|
— |
|
Impairment loss on joint ventures |
|
|
720,921 |
|
|
|
933,195 |
|
Value
of common stock issued for services |
|
|
— |
|
|
|
737,305 |
|
Value
of vested options issued for services |
|
|
— |
|
|
|
(245,001 |
) |
Loss(gain) on settlement of debt |
|
|
3,770,974 |
|
|
|
(1,594,933 |
) |
Loss(gain) on change in fair value of derivative
liability |
|
|
2,123,570 |
|
|
|
(1,443,249 |
) |
Interest expense recognized for the excess of
fair value of derivative liability over net book value of notes
payable at issuance |
|
|
1,374,078 |
|
|
|
6,885,654 |
|
Imputed interest on stock-settled
debt |
|
|
147,115 |
|
|
|
— |
|
Changes in operating assets and
liabilities: |
|
|
— |
|
|
|
|
|
Accounts receivable |
|
|
13,059 |
|
|
|
(43,073 |
) |
Inventories |
|
|
37,814 |
|
|
|
(23,269 |
) |
Prepaid expenses and other current
assets |
|
|
57,799 |
|
|
|
|
|
Accounts payable |
|
|
171,629 |
|
|
|
394,003 |
|
Accrued expenses and other current
liabilities |
|
|
(92,741 |
) |
|
|
649,316 |
|
Right-of-use assets |
|
|
(22,101 |
) |
|
|
- |
|
Right-of-use liabilities |
|
|
22,219 |
|
|
|
- |
|
Accrued liabilities |
|
|
322,068 |
|
|
|
99,316 |
|
Contingency liability |
|
|
1,497,674 |
|
|
|
1,676,870 |
|
Net cash provided by (used in) operating
activities |
|
|
(2,816,282 |
) |
|
|
(2,385,349 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(2,381 |
) |
|
|
(682,255 |
) |
Investment in joint ventures |
|
|
(223,788 |
) |
|
|
(4,203 |
) |
Net cash provided by (used in) investing
activities |
|
|
(226,169 |
) |
|
|
(686,458 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from stock sold for cash |
|
|
90,000 |
|
|
|
421,237 |
|
Proceeds from issuance of notes
payable |
|
|
2,802,500 |
|
|
|
2,541,470 |
|
Proceeds from sale of cashless
warrant |
|
|
45,000 |
|
|
|
— |
|
Repayments to related parties |
|
|
(42,861 |
) |
|
|
218,846 |
|
Net cash provided by (used in) financing
activities |
|
|
2,894,639 |
|
|
|
3,181,553 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in
cash |
|
|
(147,812 |
) |
|
|
109,746 |
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period |
|
|
359,577 |
|
|
|
249,831 |
|
|
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
211,765 |
|
|
$ |
359,577 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
|
— |
|
|
|
— |
|
Cash paid for taxes |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Non cash financing
activities: |
|
|
|
|
|
|
|
|
Common stock issued in settlement of related
party notes payable |
|
$ |
462,714 |
|
|
$ |
804,279 |
|
Common stock issued in settlement of convertible
notes payable |
|
$ |
3,016,750 |
|
|
$ |
12,166,976 |
|
Investment in joint venture |
|
$ |
2,650,000 |
|
|
$ |
— |
|
Reclassification of derivative liabilities to
additional paid-in capital |
|
$ |
1,582,845 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to these audited
condensed consolidated financial statements |
MARIJUANA COMPANY OF AMERICA, INC.
AND SUBSIDIARIES
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|