THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND
2020
Segment Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended
|
|
6
Months
Ended
|
|
For
the three months ended
|
|
6
Months
Ended
|
|
|
March
31, 2021
|
|
June
30, 2021
|
|
June
30, 2021
|
|
March
31, 2020
|
|
June
30, 2020
|
|
June
30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
34,872
|
|
|
$
|
16,537
|
|
|
$
|
51,409
|
|
|
$
|
81,819
|
|
|
$
|
82,958
|
|
|
$
|
164,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Goods Sold
|
|
|
25,032
|
|
|
|
3,301
|
|
|
|
28,333
|
|
|
|
34,205
|
|
|
|
39,187
|
|
|
|
73,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
9,840
|
|
|
|
13,236
|
|
|
|
23,076
|
|
|
|
47,614
|
|
|
|
43,771
|
|
|
|
91,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Based
Compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,850
|
|
|
|
17,850
|
|
Selling and
Marketing
|
|
|
97,812
|
|
|
|
150,881
|
|
|
|
248,693
|
|
|
|
101,897
|
|
|
|
74,356
|
|
|
|
176,253
|
|
Payroll and
Related expenses
|
|
|
53,947
|
|
|
|
54,864
|
|
|
|
108,811
|
|
|
|
18,749
|
|
|
|
32,113
|
|
|
|
50,862
|
|
Depreciation
Expense
|
|
|
1,391
|
|
|
|
1,391
|
|
|
|
2,782
|
|
|
|
1,746
|
|
|
|
1,582
|
|
|
|
3,328
|
|
General
and Admin Expenses
|
|
|
55,801
|
|
|
|
95,864
|
|
|
|
151,665
|
|
|
|
67,949
|
|
|
|
53,911
|
|
|
|
121,860
|
|
Total
Expense
|
|
|
208,951
|
|
|
|
303,000
|
|
|
|
511,951
|
|
|
|
190,341
|
|
|
|
179,812
|
|
|
|
370,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss from Operations
|
|
$
|
(199,111
|
)
|
|
$
|
(289,764
|
)
|
|
$
|
(488,875
|
)
|
|
$
|
(142,727
|
)
|
|
$
|
(136,041
|
)
|
|
$
|
(278,768
|
)
|
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 condensed 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 June 30, 2021 and 2020, the Company has not recorded any unrecognized tax benefits.
Recent Accounting Pronouncements
Recently Issued Accounting
Pronouncements Not Yet Adopted
In August 2020, the FASB
issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging –
Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting
for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an
entity’s own equity. The ASU is part of the FASB’s simplification initiative which aims to reduce unnecessary complexity in
GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal
years. The Company is currently evaluating the impact ASU 2020-06 will have on its financial statements.
Recently Issued
Accounting Pronouncements Adopted
Accounting
for Income Taxes In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740).
The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC
Topic 740, Income Taxes. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC Topic 740
by clarifying and amending existing guidance. ASU 2019-12 became effective for the Company in the first quarter of fiscal year 2021.
The adoption of this standard did not have any impact on the Company’s condensed consolidated financial statements.
Equity Securities,
Equity-method Investments and Certain Derivatives In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities
(Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions
between Topic 321, Topic 323, and Topic 815. The guidance provides clarification of the interaction of rules for equity securities,
the equity method of accounting and forward contracts and purchase options on certain types of securities. ASU 2020-01 became effective
for the Company in the first quarter of 2021. The adoption of this standard did not have any impact on the Company’s condensed consolidated
financial statements.
NOTE 4 – OPERATING LEASE
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability, on a discounted
basis, and a right-of-use asset for substantially all leases, as well as additional disclosures regarding leasing arrangements. In July
2018, the FASB issued ASU 2018-11, Leases (Topic 842), which provides an optional transition method of applying the new lease standard.
ASU 2018-11, Topic 842 can be applied using either
a modified retrospective approach at the beginning of the earliest period presented, or as permitted by ASU 2018-11, at the beginning
of the period in which it is adopted.
We adopted this
standard using a modified retrospective approach on January 1, 2019. The modified retrospective approach includes a number of optional
practical expedients relating to the identification and classification of leases that commenced before the adoption date; initial direct
costs for leases that commenced before the adoption date; and the ability to use hindsight in evaluating lessee options to extend or terminate
a lease or to purchase the underlying asset.
The
Company elected the package of practical expedients permitted under ASU 2018-11, Leases, allowing it to account for its existing operating
lease that commenced before the adoption date as an operating lease under the new guidance without reassessing (i) whether the contract
contains a lease; (ii) the classification of the lease; or, (iii) the accounting for indirect costs as defined in ASC 842.
On May 31, 2021,
the Company’s operating lease for its office space located at 1340 West Valley Parkway, Suite 205, Escondido, CA 92029 expired and,
at that time, the Company fully amortized its right-of-use asset for such lease. On June 1, 2021, the Company entered into an office accommodation
agreement whereby it may access a shared office space located at 633 West Fifth Street, Suite 2826, Los Angeles, CA 90071 on a month-to-month
basis over a one-year term for a fee of $2,349 per month. In considering its qualitative disclosure obligations under ASC 842-20-50-3,
the Company examined its office accommodation agreement for office space that has a fixed monthly fee with no variable payments and no
options to extend. The office accommodation agreement creates no tenancy, leasehold, or other real property interest, other than a shared
right-of-use. The office accommodation agreement does not provide for terms and conditions granting residual value guarantees by the Company,
or any restrictions or covenants imposed for dividends or incurring additional financial obligations by the Company.
The Company determined
under ASC 2018-11, Leases (Topic 842), due to the short-term nature of the office accommodation agreement, that such agreement met the
criteria of ASC 842-20-25-2 and as such it is not necessary to capitalize the office accommodation agreement and fees will be recognized
on a monthly straight-line basis. The adoption of this guidance resulted in no significant impact to the Company’s results
of operations or cash flows.
NOTE 5 – PROPERTY, MACHINERY
AND EQUIPMENT
Property and equipment as of June 30, 2021
and December 31, 2020 is summarized as follows:
Schedule of Property and Equipment
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
Computer equipment
|
|
$
|
23,784
|
|
|
$
|
20,143
|
|
Furniture and fixtures
|
|
|
5,407
|
|
|
|
5,140
|
|
Machinery
|
|
|
104,102
|
|
|
|
—
|
|
Subtotal
|
|
|
133,293
|
|
|
|
25,283
|
|
Less accumulated depreciation
|
|
|
(21,395
|
)
|
|
|
(18,741
|
)
|
Property, machinery and equipment, net
|
|
$
|
111,898
|
|
|
$
|
6,542
|
|
Property,
machinery 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. On May 20, 2021, the Company purchased a
new cannabis extraction machine which is to be leased to a cannabis distributor and manufacturer called Lynwood-MCOA joint venture. This
joint venture is between Cannabis Global Inc. and the Company and pertains to the licensed cannabis operations of Natural Plant Extract
of California Inc. in the city of Lynwood, CA. The lease payments are scheduled to commence during the third quarter of 2021.
Depreciation expense was $2,653 and $3,328
for the six months ended June 30, 2021 and 2020, respectively.
NOTE 6 – INVESTMENTS
Bougainville
Ventures, Inc. Joint Venture
On
March 16, 2017, the Company entered into a joint venture agreement with Bougainville Ventures, Inc. (“Bougainville”), a Canadian
corporation, 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 I-502 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 BV-MCOA Management,
LLC, a limited liability company organized in the State of Washington on May 17, 2017.
Pursuant
to the joint venture agreement, 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
joint venture 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 in the Company’s Current Report on Form 8-K filed with the SEC 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 I-502 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 as a result, as further discussed below, 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 enter into
an amended 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
to the joint venture. 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 I-502 cannabis license holder to grow cannabis on the real property; and (iii) that clear title
to the real property associated with the Tier 3 I-502 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 a lawsuit against Bougainville, BV-MCOA Management,
LLC, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court, case number 18-2-0045324. The Company 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, the appointment of a receiver, the return to treasury of 15 million
shares of restricted common stock issued by the Company to Bougainville and treble damages pursuant to the Consumer Protection Act. The
Company has filed a lis pendens on the real property. The case is currently in litigation.
In
connection with the joint venture agreement, the Company recorded a cash investment of $1,188,500 to the joint venture during 2017. This
was comprised of a 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 quarters ended March 31, 2018 and June 30,
2018, 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.
Natural
Plant Extract
On
April 15, 2019, the Company entered into a joint venture agreement with Natural Plant Extract of California, Inc. and its
subsidiaries (collectively, “NPE”), to operate a licensed psychoactive cannabis
distribution service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018.
On February 3, 2020, the parties terminated the joint venture and entered into a settlement and release agreement (the “Settlement
Agreement”). In exchange for a complete release of all claims, the Company and NPE (1) agreed that the Company would reduce its
interest in NPE from 20% to 5%; (2) the Company agreed to pay NPE a total of $85,000 as follows: $35,000 concurrent with the execution
of the Settlement Agreement, and $25,000 no later than the fifth calendar day for each of the two months following execution of Settlement
Agreement; and, (3) to retire the balance of the Company’s original valuation obligation from the material definitive agreement,
representing a shortfall of $56,085, in a convertible promissory note, with terms allowing NPE to convert the note into shares of the
Company’s common stock of at a 50% discount to the closing price of the Company’s common stock as of the maturity date. The
note was satisfied in full during the year ended December 31, 2020.
As
of the date of this filing, the Company owes $0 and is in compliance with the terms of the Settlement Agreement .
On February 3, 2020, the Company issued NPE a convertible promissory note in the principal amount of $56,085. Additionally, as a result
of the Settlement Agreement, the Company became liable to pay NPE its 5% portion equal
to $25,902 of the regulatory charges to the City of Lynwood and the State of California to transfer the cannabis licenses back to NPE.
Of the total amount due and payable by
the Company with regards to the NPE joint venture agreement as of the date of this filing, the Company owes $75,000 and is in breach
of the Settlement and Release of All Claims Agreement with NPE. On February 3, 2020, the Company issued a convertible promissory note
in the principal amount of $56,085.15 to NPE. Additionally, as a result of the Company’s settlement agreement with NPE, the Company
became liable to pay NPE its 5% portion equal to $25,902 of the regulatory charges to the City of Lynwood and the State of California
to transfer the cannabis licenses back to NPE. To date, the Company has not paid this amount and it is due and owing.
Brazilian Joint Ventures
On September 30, 2020, the Company entered into two joint venture agreements
(the “Joint Venture Agreements”) with Marco Guerrero, a director of the Company (“Guerrero”) and related party,
to form joint ventures in Brazil and in Uruguay to produce, manufacture, market and sell the Company’s hempSMART™ products
in Latin America and to develop and sell hempSMART™ products globally. The Joint Venture Agreements contain equal terms for the
formation of the joint venture entities in Uruguay and Brazil. The Brazilian joint venture, HempSmart Produtos Naturais Ltda. (“HempSmart
Brazil”), will be headquartered in São Paulo, Brazil. The Uruguayan joint venture, Hempsmart Uruguay S.A.S. (“HempSmart
Uruguay”), will be headquartered in Montevideo, Uruguay.
Pursuant to the Joint Venture
Agreements, the Company acquired a 70% equity interest in both HempSmart Brazil and HempSmart Uruguay, with a minority 30% equity
interest in both HempSmart Brazil and HempSmart Uruguay being held by newly formed entities controlled by Guerrero. Pursuant to the
Joint Venture Agreements, the Company agreed to provide capital in the amount of $50,000 to both HempSmart Brazil and HempSmart
Uruguay, 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. As of June 30, 2021, the Company has not initiated the capital contribution but is pending to be done in
the third quarter.
The boards of directors of
HempSmart Brazil and HempSmart Uruguay will consist of three directors, elected by the joint venture partners. Pursuant to the Joint Venture
Agreements, the Company agreed to license, on a royalty-free basis, certain of its intellectual property regarding its existing products
to HempSmart Brazil and HempSmart Uruguay to enable the joint ventures to manufacture and sell its products in Brazil, Uruguay, and for
export to other Latin American countries, the United States, and globally in accordance with the terms of the Joint Venture Agreements.
In
addition, as majority partner, in the event a joint venture is frustrated in its intent or purpose, the Company may trigger a compulsory
buy-sell procedure pursuant to which the Company could pursue a sale of all or substantially all of the joint venture. Subject to certain
exceptions, the joint venture partners may not transfer their interests in HempSmart Brazil and HempSmart Uruguay.
Cannabis Global,
Inc.
Joint Venture
On May 12, 2021, the Company entered into a joint
venture agreement with Cannabis Global, Inc. (“Cannabis Global”) pursuant to which the Company will invest up to $250,000
into a newly formed entity (“MCOA Lynwood”) and Cannabis Global, through Natural Plant Extracts of California, Inc. (“Natural
Plant”), an entity in which Cannabis Global owns a majority interest, will operate a regulated and licensed laboratory to manufacture
various cannabis products in the State of California. As of June 30, 2021, the Company has invested $115,000.
Share Exchange
On September 30, 2020, the Company entered into a
securities exchange agreement with Cannabis Global pursuant to which the Company issued 650,000,000 shares of its common stock to Cannabis
Global in exchange for 7,222,222 shares of Cannabis Global common stock. In addition, the Company and Cannabis Global entered into a lock-up
leak-out agreement which contains certain restrictions with respect to the sales of such securities.
Eco Innovation Group Inc. – Share Exchange
On February 26, 2021, the Company entered into a Share
Exchange Agreement with Eco Innovation Group, Inc., a Nevada corporation quoted on OTC Markets Pink (“ECOX”) dated February
26, 2021, to acquire the number of shares of ECOX’s common stock, par value $0.001, equal in value to $650,000 based on the per-share
price of $0.06, in exchange for the number of shares of Company common stock, par value $0.001, equal in value to $650,000 based on the
closing price for the trading day immediately preceding the effective date (the “Share Exchange Agreement”). For both parties,
the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional common stock in the event
that a decline in the market value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant
to the Share Exchange Agreement to fall below $650,000. As of June 30, 2021, the Company owed ECOX and additional 64,621,893 with an estimated value of $394,194 related
to the ECOX Share Exchange Agreement. The investment balance is $650,000, with a liability of $394,194 included in subscriptions payable
related to the value of the additional shares to be issued. The Company recognized a loss of $394,194 related to the shares to be issued.
Complementary to the Share Exchange Agreement, the
Company and ECOX entered into a Lock-Up Agreement dated February 26, 2021 (the “Lock-Up Agreement”), providing that the shares
of common stock acquired pursuant to the Share Exchange Agreement shall be subject to a lock-up period preventing its sale for a period
of 12 months following issuance and limiting the subsequent sale to aggregate maximum sale value of $20,000 per week, or $80,000 per month.
For a period of two years following the Effective
Date, at the closing of each fiscal quarter, should the per-share closing price of the common shares of the same class as the Shares or
the Exchange Shares, as quoted by the OTC Markets for the last day of the relevant fiscal quarter, decrease below original issuance value
with the effect that the aggregate value of the Shares or the Exchange Shares at the fiscal quarter close would be lower than $650,000,
then either MCOA, in the case of the Shares, or ECOX, in the case of the Exchange Shares, shall issue the other party the number of shares
of common stock necessary to cause the aggregate value of the Shares or the Exchange Shares, as applicable, be $650,000 as of the end
of the relevant fiscal quarter. The parties shall irrevocably instruct their respective transfer agents to reserve and maintain authorized
and unissued common stock in a reserve account designated for the purpose of issuing such shares pursuant to this share exchange adjustment
provision. Such share reserve accounts shall be maintained with a number of authorized and unissued common stock not less than three (3)
times the number of Shares or Exchange Shares, as the case may be, that are issued pursuant to the Share Exchange Closing.
On February 24, 2021, the closing price of the
Company’s common stock was $0.0155, so that the number of shares of Company common stock issuable to ECOX under the Share Exchange
Agreement is 41,935,484. As a result of the transactions pursuant to the Share Exchange Agreement, the Company will have 4,179,073,945
shares of common stock outstanding, with the shares issued to ECOX pursuant to the Share Exchange Agreement representing 1.00% of the
Company’s outstanding shares.
For the quarter ended June 30, 2021, the Company
recorded a Loss on Equity Investment and corresponding increase in Subscriptions Payable of $394,194 to address the decline in the Company's
stock price from the original issuance price of $.0155.
MARIJUANA COMPANY OF AMERICA, INC.
INVESTMENT ROLL-FORWARD
AS OF JUNE 30, 2021
Schedule of Investment Roll Forward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
Cannabis
Global
|
|
|
|
|
|
Lynwood
|
|
|
|
Bougainville Ventues,
|
|
Gate C Research
|
|
Natural Plant
|
|
|
|
TOTAL
Short-Term
|
|
Global Hemp
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Inc.
|
|
ECOX
|
|
Benihemp
|
|
JV
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
Group
|
|
MoneyTrac
|
Beginning balance @12-31-16
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during 2017
|
|
|
3,049,275
|
|
|
|
10,775
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
250,000
|
|
|
|
1,188,500
|
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-17 equity method Loss
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-17 equity method Loss
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-17 equity method Loss
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(375,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-17 equity method accounting
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
313,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investment in 2017
|
|
|
(2,292,500
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(792,500
|
)
|
|
|
(1,500,000
|
)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
Balances as of 12/31/17
|
|
$
|
695,477.00
|
|
|
$
|
10,775.00
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
100,000.00
|
|
|
$
|
—
|
|
|
$
|
250,000.00
|
|
|
$
|
334,702.00
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
Cannabis
Global
|
|
|
|
|
|
Lynwood
|
|
|
|
Bougainville Ventues,
|
|
Gate C Research
|
|
Natural Plant
|
|
|
|
TOTAL
Short-Term
|
|
Global Hemp
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Inc.
|
|
ECOX
|
|
Benihemp
|
|
JV
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
Group
|
|
MoneyTrac
|
Investments made during 2018
|
|
|
986,654
|
|
|
|
986,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 03-31-18 equity method Loss
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(37,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 06-30-18 equity method Loss
|
|
|
(111,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 09-30-18 equity method Loss
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter 12-31-18 equity method Loss
|
|
|
(31,721
|
)
|
|
|
(31,721
|
)
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moneytrac investment reclassified to Short-Term investments
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(250,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - 2018
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
560,000
|
|
|
|
|
|
|
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment in 2018
|
|
|
(933,195
|
)
|
|
|
(557,631
|
)
|
|
|
|
|
|
|
|
|
|
|
(89,578
|
)
|
|
|
|
|
|
|
|
|
|
|
(285,986
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Balance @12-31-18
|
|
$
|
408,077
|
|
|
$
|
408,077
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
810,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
Cannabis
Global
|
|
|
|
|
|
Lynwood
|
|
|
|
Bougainville Ventues,
|
|
Gate C Research
|
|
Natural Plant
|
|
|
|
TOTAL
Short-Term
|
|
Global Hemp
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Inc.
|
|
ECOX
|
|
Benihemp
|
|
JV
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
Group
|
|
MoneyTrac
|
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
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
675,000
|
|
|
$
|
—
|
|
|
$
|
(135,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
|
|
|
|
|
$
|
(150,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-19
|
|
$
|
3,463,526
|
|
|
$
|
419,352
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,993,709
|
|
|
$
|
50,465
|
|
|
$
|
525,000
|
|
|
$
|
—
|
|
|
$
|
(285,000
|
)
|
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
Cannabis
Global
|
|
|
|
|
|
Lynwood
|
|
|
|
Bougainville Ventues,
|
|
Gate C Research
|
|
Natural Plant
|
|
|
|
TOTAL
Short-Term
|
|
Global Hemp
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Inc.
|
|
ECOX
|
|
Benihemp
|
|
JV
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
Group
|
|
MoneyTrac
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(362,625
|
)
|
|
|
|
|
|
$
|
(362,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-19
|
|
$
|
3,772,652
|
|
|
$
|
682,141
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,898,722
|
|
|
$
|
191,789
|
|
|
$
|
120,708
|
|
|
$
|
—
|
|
|
$
|
(689,292
|
)
|
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
Cannabis
Global
|
|
|
|
|
|
Lynwood
|
|
|
|
Bougainville Ventues,
|
|
Gate C Research
|
|
Natural Plant
|
|
|
|
TOTAL
Short-Term
|
|
Global Hemp
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Inc.
|
|
ECOX
|
|
Benihemp
|
|
JV
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
Group
|
|
MoneyTrac
|
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
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on disposition of investment
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(389,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of trading securities during quarter ended 12-31-19
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
$
|
(17,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 12-31-19
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(75,545
|
)
|
|
|
|
|
|
$
|
(75,545
|
)
|
Balance @12-31-19
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
27,403
|
|
|
$
|
—
|
|
|
$
|
(782,597
|
)
|
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
Cannabis
Global
|
|
|
|
|
|
Lynwood
|
|
|
|
Bougainville Ventues,
|
|
Gate C Research
|
|
Natural Plant
|
|
|
|
TOTAL
Short-Term
|
|
Global Hemp
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Inc.
|
|
ECOX
|
|
Benihemp
|
|
JV
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
Group
|
|
MoneyTrac
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Loss for Quarter ended 03-31-20
|
|
|
126,845
|
|
|
|
126,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognize Joint venture liabilities per JV agreement @03-31-20
|
|
|
394,848
|
|
|
|
394,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 03-31-20
|
|
|
(521,692
|
)
|
|
|
(521,692
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on trading securities - quarter ended 03-31-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,945
|
)
|
|
|
|
|
|
($
|
13,945
|
)
|
Balance @03-31-20
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
13,458
|
|
|
$
|
—
|
|
|
($
|
796,542
|
)
|
|
|
INVESTMENTS
|
|
SHORT-TERM INVESTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
Global
Hemp
|
|
Cannabis
Global
|
|
|
|
|
|
Lynwood
|
|
|
|
Bougainville Ventues,
|
|
Gate C Research
|
|
Natural Plant
|
|
|
|
TOTAL
Short-Term
|
|
Global Hemp
|
|
|
|
|
INVESTMENTS
|
|
Group
|
|
Inc.
|
|
ECOX
|
|
Benihemp
|
|
JV
|
|
MoneyTrac
|
|
Inc.
|
|
Inc.
|
|
Extract
|
|
Vivabuds
|
|
Investments
|
|
Group
|
|
MoneyTrac
|
Equity Loss for Quarter ended 06-30-20
|
|
|
(7,048
|
)
|
|
|
(7,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Equity Loss for Quarter ended 06-30-20
|
|
|
7,048
|
|
|
|
7,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of of trading securities - quarter ended 06-30-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,458
|
)
|
|
|
|
|
|
($
|
13,458
|
)
|
Balance @06-30-20
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0
|
|
|
($
|
810,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Hemp Group trading securities issued
|
|
|
650,000
|
|
|
|
|
|
|
$
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
185,000
|
|
|
$
|
185,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Cannabis Global
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @09-30-20
|
|
$
|
1,343,915
|
|
|
$
|
—
|
|
|
$
|
650,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
185,000
|
|
|
$
|
185,000
|
|
|
($
|
810,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on Global Hemp Group securities - 4th Quarter 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
54,064
|
|
|
$
|
54,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on Cannabis Global Inc securities - 4th Quarter 2020
|
|
|
208,086
|
|
|
|
|
|
|
$
|
208,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @12-31-20
|
|
$
|
1,552,001
|
|
|
$
|
—
|
|
|
$
|
858,086
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
239,064
|
|
|
$
|
239,064
|
|
|
($
|
810,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in ECOX
|
|
|
650,000
|
|
|
|
|
|
|
|
|
|
|
$
|
650,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
620,133
|
|
|
$
|
620,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @03-31-21
|
|
$
|
2,202,001
|
|
|
$
|
—
|
|
|
$
|
858,086
|
|
|
$
|
650,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693,915
|
|
|
$
|
0
|
|
|
$
|
859,197
|
|
|
$
|
859,197
|
|
|
($
|
810,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments made during quarter ended 06-30-21
|
|
|
30,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on Global Hemp Group securities - 2nd quarter 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($
|
115,997
|
)
|
|
($
|
115,997
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance @06-30-21
|
|
$
|
2,232,899
|
|
|
$
|
—
|
|
|
$
|
858,086
|
|
|
$
|
650,000
|
|
|
$
|
—
|
|
|
$
|
30,898
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
693,915
|
|
|
$
|
—
|
|
|
$
|
743,200
|
|
|
$
|
743,200
|
|
|
($
|
810,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
06-30-20
|
03-31-20
|
12-31-19
|
09-30-19
|
06-30-19
|
03-31-19
|
12-31-18
|
12-31-17
|
|
This includes balances for:
|
Note (h)
|
Note (g)
|
Note (f)
|
Note (e)
|
Note (d)
|
Note (c)
|
Note (b)
|
Note (a)
|
|
- Debt obligation of JV
|
478,494
|
394,848
|
-
|
1,633,872
|
1,778,872
|
128,522
|
289,742
|
1,500,000
|
|
- Convertible NP, net of discount
|
2,784,044
|
3,040,324
|
3,193,548
|
2,688,555
|
2,149,170
|
1,536,271
|
1,132,668
|
394,555
|
|
- Long term debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
172,856
|
|
Total Debt balance
|
3,262,538
|
3,435,172
|
3,193,548
|
4,322,427
|
3,928,042
|
1,664,793
|
1,422,410
|
2,067,411
|
|
NOTE 7 – NOTES PAYABLE, RELATED
PARTY
As of June 30, 2021 and December 31, 2020,
the Company’s officers and directors have provided advances and incurred expenses on behalf of the Company as such have been evidenced
by the issuance of notes to such officers and directors. The notes are unsecured, due on demand and accrue interest at a rate of 5% per
annum. The balance due to Notes Payable Related Party as of June 30, 2021 and December 31, 2020 was $20,000 and $40,000 respectively.
These notes are payable to the estate of Charles Larsen.
NOTE 8 – CONVERTIBLE NOTES PAYABLE
During the
six months ended June 30, 2021, the Company issued an aggregate of 810,689,880 shares of its common stock in settlement of issued
convertible notes payable and accrued interest.
For the six months ended June 30, 2021
and June 30, 2020, the Company recorded amortization of debt discounts of $744,783 and $1,028,931, respectively, as a charge to interest
expense.
Convertible notes payable are comprised
of the following:
Schedule of Convertible Notes Payable
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
Lender
|
|
(Unaudited)
|
|
(Audited)
|
Convertible note payable - Power Up Lending Group
|
|
$
|
—
|
|
|
$
|
35,000
|
|
Convertible note payable - Crown Bridge Partners
|
|
$
|
35,000
|
|
|
$
|
172,500
|
|
Convertible note payable – Labrys
|
|
$
|
537,500
|
|
|
$
|
—
|
|
Convertible note payable - GS Capital Partners LLC
|
|
$
|
—
|
|
|
$
|
143,500
|
|
Convertible note payable – Geneva Roth
|
|
$
|
—
|
|
|
$
|
33,500
|
|
Convertible note payable - Robert L. Hymers III
|
|
$
|
185,000
|
|
|
$
|
70,000
|
|
Convertible note payable – Dutchess Capital
|
|
$
|
135,000
|
|
|
$
|
10,000
|
|
Convertible note payable – Redstart Holdings
|
|
$
|
—
|
|
|
$
|
109,000
|
|
Convertible note payable - GW Holdings
|
|
$
|
—
|
|
|
$
|
98,175
|
|
Convertible note payable - St. George/Bucktown
|
|
$
|
727,500
|
|
|
$
|
1,160,726
|
|
Total
|
|
$
|
1,620,000
|
|
|
$
|
1,832,401
|
|
Less debt discounts
|
|
$
|
(1,122,225
|
)
|
|
$
|
(405,507
|
)
|
Net
|
|
$
|
497,775
|
|
|
$
|
1,426,894
|
|
Less current portion
|
|
$
|
(497,775
|
)
|
|
$
|
(1,426,894
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
Convertible Note Payable-Labrys
In June 2021, the Company issued a convertible
promissory note in the aggregate principal amount of $537,500 to Labrys Funds, LP (“Labrys”). The promissory note accrues
interest at 12% per annum, is due one year from the issuance date and includes an original issuance discount in the aggregate amount of
$53,750. The Company also paid $33,750 in deferred financing fees and received $450,000 of net proceeds. The note is convertible at any
time at a conversion price of $0.005 per share. The Company also issued a five-year warrants to purchase up to 76,349,431 shares of its
common stock to Labrys, at an exercise price of $0.00704 per share. In addition, the Company issued five-year warrants to purchase up
to 76,349,431 shares of its common stock to an investment banker for services, which warrants have an exercise price of $0.008448 per
share. The aggregate debt discount of $533,526 is being amortized to interest expense over the respective terms of the note.
The Company is prohibited from effecting
a conversion of the note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially
own more than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance
of shares of common stock upon conversion of the note. The Company is prohibited from effecting an exercise of the warrant to the extent
that, as a result of such exercise, the investor, together with its affiliates, would beneficially own more than 4.99% of the number of
shares of the Company’s common stock outstanding immediately after giving effect to the issuance of shares of common stock upon
exercise of the note. Accrued interest on the note was $5,375 as of June 30, 2021.
Convertible Notes Payable-Power Up Lending
From July 1 through September 12, 2019,
the Company issued four convertible promissory notes in the aggregate principal amount of $294,000 to Power Up Lending Group Ltd. (“Power
Up”). The promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date and include
an original issuance discount in the aggregate amount of $12,000. The notes are convertible at any time at a conversion price equal to
61% of the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day period prior
to the date of conversion. Upon the issuance of these convertible notes, the Company determined that the features associated with the
embedded conversion option embedded in the notes should be accounted for at fair value, as a derivative liability, as the Company cannot
determine if a sufficient number of shares of common stock would be available to settle all potential future conversion transactions.
As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility
of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face
value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $169,202
is being amortized to interest expense over the respective terms of the notes.
The Company has the right to prepay the
notes for an amount ranging from 125% to 140% multiplied by the outstanding balance (all principal and accrued interest) depending on
the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion
of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more
than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of
shares of common stock upon conversion of the note.
As of June 30, 2021 and
December 31, 2020, the Company owed an aggregate of $0
and $35,000
of principal, respectively, on the notes. As of June 30, 2021 and December 31, 2020, the Company owed $0
and $1,167,
respectively, of accrued interest on the notes.
Convertible Notes Payable-Crown Bridge
Partners
From October 1 through December 31, 2019,
the Company issued convertible promissory notes in the aggregate principal amount of $225,000
to Crown Bridge Partners LLC (“Crown Bridge”). The promissory notes accrue interest at a rate of 10%
per annum, were due one year from the respective issuance
date and include an original issuance discount in aggregate amount of $22,500. Interest accrues from the issuance date, but interest
shall not become payable until the notes becomes payable. The notes are convertible at any time at a conversion price equal to 60% of
the market price of the Company’s common stock, defined as the lowest trading price during the 15-trading-day period prior to the
conversion date. Upon the issuance of these convertible notes, the Company determined that the features associated with the embedded
conversion option embedded in the debentures should be accounted for at fair value, as a derivative liability, as the Company cannot
determine if a sufficient number of shares of common stock would be available to settle all potential future conversion transactions.
As of the funding date of each note, the Company determined the fair value of the embedded derivative associated with the convertibility
of each note. The fair value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face
value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt discount of $88,674
was being amortized to interest expense over the respective terms of the notes. The Company also issued a warrants to purchase up to
519,230 shares of the Company’s common stock with an initial exercise price of $0.26, with reset provisions based on issuances
of common stock subsequent to the issuance date. Due to the reset provision, the exercise option of these warrants is also accounted
for as a derivative liability. See Note 10.
The Company has the right to prepay the
notes for an amount ranging from 125% to 140% multiplied by the outstanding balance (all principal and accrued interest) depending on
the prepayment period (ranging from 1 to 180 days following the issuance date). The Company is prohibited from effecting a conversion
of any note to the extent that, as a result of such conversion, the investor, together with its affiliates, would beneficially own more
than 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to the issuance of
shares of common stock upon conversion of the note.
As of June 30, 2021 and December 31, 2020,
the Company owed an aggregate of $35,000 and $172,500 of principal, respectively, on the notes. As of June 30, 2021 and December 31, 2020,
the Company owed accrued interest of $0 and $6,500 on the notes, respectively.
Convertible Notes Payable-Odyssey Funding
LLC
On October 30, 2019, the Company issued
convertible promissory notes in the aggregate principal amount of $250,000 to Odyssey Funding LLC (“Odyssey”). The promissory
notes accrue interest at a rate of 12% per annum, were due one year from the respective issuance date and include an original issuance
discount in an aggregate amount of $12,500. Interest accrues from the issuance date, but interest does not become payable until the notes
becomes payable. The notes are convertible at any time at a conversion price equal to 55% the average of the two lowest trading prices
of the Company’s common stock as quoted on the OTC Markets or such other exchange where the Company's shares are then traded, for
the 20 trading days prior to the conversion date.
As of the funding date of each note, the
Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative
liability recognized as interest expense. The aggregate debt discount of $207,650 was being amortized to interest expense over the respective
terms of the notes. As of June 30, 2021 and December 31, 2020, the Company an aggregate of $0 and $0 of principal, respectively. As of
June 30, 2021 and December 31, 2020, the Company owed $0 and $0 in accrued interest on the notes, respectively .
Convertible Notes Payable - Paladin
Advisors LLC
On October 23, 2019, the Company issued
convertible promissory notes in the aggregate principal amount of $75,000 to Paladin Advisors, LLC (“Paladin”). The promissory
notes accrue interest at a rate of 8% per annum and were due six months from the respective issuance date of each note. Pursuant to the
notes, Paladin has the option to convert all or any portion of the unpaid principal amount of the notes, plus accrued interest, into shares
of the Company’s common stock at a conversion price equal to a 45% discount to the lowest closing bid of the 10 day trading period
prior to the date of conversion.
The aggregate debt discount of $46,721
was being amortized to interest expense over the respective terms of the notes. As of June 30, 2021 and December 31, 2020, the Company
owed an aggregate of $0 and $0 of principal, respectively, on the notes. As of June 30, 2021 and December 31, 2020, the Company owed $0
and $0 in accrued interest on the notes , respectively.
Convertible Notes Payable-GS Capital
Partners LLC
On December 19, 2019, the Company issued
convertible promissory notes in the aggregate principal amount of $173,000 to GS Capital Partners LLC (“GS Capital”). The
promissory notes accrue interest at a rate of 10% per annum, were due one year from the respective issuance date, and include an original
issuance discount in an aggregate amount of $15,000. Pursuant to the notes, GS Capital is entitled, at its option, at any time after cash
payment, to convert all or any amount of the principal face amount of the notes into shares of the Company's common stock at a conversion
price equal to 62% of the lowest trading price of the Company's common stock as reported on the OTC Markets or such other exchange on
which the Company’s shares are then traded, for the 20 trading days prior to the date of conversion.
As of the funding date of each note, the
Company determined the fair value of the embedded derivative associated with the convertibility of each note. The fair value of the embedded
derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess of the derivative
liability recognized as interest expense. The aggregate debt discount of $166,193 was being amortized to interest expense over the respective
terms of the notes. As of June 30, 2021 and December 31, 2020, the Company owed $0 and $143,500 of principal, respectively, on the notes.
As of June 30, 2021 and December 31, 2020, the Company owed $0 and $$2,789 in accrued interest on the notes , respectively.
Convertible Notes Payable-St. George
Investments
On November 1, 2017, the Company issued
a secured convertible promissory note in the principal amount of $601,420 to St. George Investments LLC (“St. George”). The
promissory note accrues interest at a rate of 10% per annum compounded daily, was due upon maturity on September 10, 2018 and includes
an original issue discount of $59,220. The promissory note was funded on November 11, 2017 for $542,200, net of the original issue discount
and transaction costs. As of September 30, 2019, the Company owed $417,890 of principal and $38,378 of accrued interest on this convertible
promissory note. As of September 30, 2019, this note was in default, but the lender has not enforced the default interest rate. On December
20, 2017, the Company issued a secured convertible promissory note in the principal amount of up to $1,655,000 to St. George. The promissory
note accrues interest at a rate of 10% per annum compounded daily, was due upon maturity on October 27, 2018 and includes an original
issue discount of $155,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender.
The promissory note was funded in nine tranches of $300,000; $200,000; $200,000; $400,000; $75,000; $150,000; $85,000; $120,000
and $70,000, resulting in aggregate net proceeds of $1,500,000. The Company received aggregate net proceeds of $1,200,000 and $300,000
during the years ended December 31, 2018 and 2017, respectively. As an investment incentive, the Company issued five-year warrants to
purchase up to 1,100,000 shares of the Company’s common stock at an exercise price of $2.40 per share, with certain reset provisions.
As of June 30, 2020, the warrants had an exercise price of $0.0085 for 5,274,146 total warrants.
The promissory note is convertible, at
any time at the lender’s option, at $2.40 per share. However, in the event the Company’s Market Capitalization falls below
$30,000,000, the conversion price will be 60% of the three lowest closing trade prices from the 20 trading days immediately prior to the
date of conversion. In addition, the promissory note includes certain anti-dilution provisions should the Company subsequently issue any
common stock or common stock equivalents at an effective price less than the conversion price then in effect. The Company has a right
to prepayment of the note, subject to a 20% prepayment premium. The note is secured by a trust deed of certain assets of the Company.
“Market Capitalization” means the total outstanding shares of common stock multiplied by the stock price published on OTC
Markets.
On November 5, 2018, $250,000 of principal
and accrued interest was assigned to John Fife as an individual with all the terms and conditions of the original note issued to St. George.
On March 21, 2019, $150,959 of principal and $4,963 of accrued interest along with $160,454 of derivative liabilities valued as of the
respective conversion date were converted into an aggregate of 394,460 shares of the Company’s common stock.
During the nine months ended September
30, 2019, $550,000 of principal, $122,694 of accrued interest and $441,394 of derivative liabilities valued as of the respective conversion
dates were converted into an aggregate of 1,710,897 shares of the Company’s common stock, resulting in a gain on debt settlement
of $21,586. As of September 30, 2019, the Company owed $0 of principal and $0 of accrued interest on these convertible promissory notes.
Although these notes were in default until they were repaid, the lender did not enforce the default interest rate.
On August 28, 2018, the Company issued
a secured convertible promissory note in the amount of $1,128,518 (including overfunding of $23,518) to St. George. The promissory note
accrues interest at a rate of 10% per annum compounded daily, was due upon maturity on June 30, 2019, and includes an original issue discount
of $100,000. In addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During the
year ended December 31, 2018, the Company received aggregate net proceeds of $825,000. During the nine months ended September 30, 2019,
an additional $218,518 was funded under this note resulting in net proceeds of $198,518.
As an investment incentive to St. George,
the Company issued St. George five-year warrants to purchase up to 750,000 shares of the Company’s common stock at an exercise price
of $2.40 per share, with certain reset provisions. The aggregate fair value of the issued warrants was $1,588,493. The face value of the
debt was then allocated, on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants has been
added to the debt discount with a resulting increase in additional paid-in capital. As of the funding date of each tranche of this note,
the Company determined the fair value of the embedded derivative associated with the convertibility of this note. The fair value of the
embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with any excess
of the derivative liability recognized as interest expense. The aggregate debt discount of $1,114,698 is being amortized to interest expense
over the respective term of each tranche. As of June 30, 2020, the warrants had an exercise price of $0.0085 for 3,750,000
total warrants.
The promissory notes are convertible, at
any time at St. George’s option, at $2.40 per share. However, in the event the Company’s Market Capitalization falls below $30,000,000, the conversion rate
will be 60% of the three lowest closing trade prices during the 20 trading days immediately prior to the date of conversion, subject to
additional adjustments. In addition, the promissory notes include certain anti-dilution provisions should the Company subsequently issue
any common stock or common stock equivalents at an effective price per share that is less than the conversion price then in effect. The
Company has a right to prepayment of the note, subject to a 15% prepayment premium. The note is secured by a trust deed of certain assets
of the Company.
During the nine months ended September
30, 2019, $1,000,859 of principal and $840,299 of derivative liabilities valued as of the respective conversion dates were converted into
an aggregate of 4,475,543 shares of the Company’s common stock, resulting in a loss on debt settlement of $612,034. As of September
30, 2019, the Company owed $828,518 of principal and $28,138 of accrued interest on this convertible promissory note. As of September
30, 2019, this note was in default, but the lender has not enforced the default interest rate.
On January 29, 2019, the Company issued
a secured convertible promissory note in the principal amount of $2,205,000 to St. George. The promissory note accrues interest at a rate
of 10% per annum compounded daily, was due upon maturity on December 5, 2019, and includes an original issue discount of $200,000. In
addition, the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During the nine months ended
September 30, 2019, the promissory note was funded in eight tranches totaling $1,406,482, resulting in aggregate net proceeds of $1,276,482.
As an investment incentive to St. George, the Company issued to St. George five-year warrants to purchase up to 1,500,000 shares of the
Company’s common stock at an exercise price of $2.40 per share, with certain reset provisions. As of June 30, 2020, the warrants
had an exercise price of $0.0085 for 7,500,000 total warrants. The aggregate fair value of the issued warrants was $999,838. The face
value of the debt was then allocated, on a relative fair value basis, between the debt and the warrants. The portion allocated to warrants
has been added to the debt discount with a resulting increase in additional paid-in capital. As of the funding date of each tranche of
this note, the Company determined the fair value of the embedded derivative associated with the convertibility of this note. The fair
value of the embedded derivative has been added to the debt discount (total debt discount is limited to the face value of the debt) with
any excess of the derivative liability recognized as interest expense.
The promissory notes are convertible,
at any time at the lender’s option, at $2.40 per share. However, in the event the Company’s Market Capitalization falls below $30,000,000, the conversion price will be 60% of the three lowest closing trade prices the 20 trading days immediately prior
to the date of conversion, subject to additional adjustments. In addition, the promissory note includes certain anti-dilution provisions
should the Company subsequently issue any common stock or common stock equivalents at an effective price per share that is less than the
conversion price then in effect. The Company has a right to prepayment of the note, subject to a 15% prepayment premium. The note is secured
by a trust deed of certain assets of the Company.
On March 25, 2019, the Company issued a
secured convertible promissory note in the principal amount of $580,000 to St. George. The promissory note accrues interest at a rate
of 10% per annum compounded daily, was due upon maturity on January 24, 2020 and includes an original issue discount of $75,000. In addition,
the Company agreed to pay $5,000 for legal, accounting and other transaction costs of the lender. During the nine months ended September
30, 2019, the promissory note was funded in the amount of $580,000 resulting in net proceeds of $500,000. As an investment incentive,
the Company issued five-year warrants to purchase up to 375,000 shares of the Company’s common stock at an exercise price of $2.40
per share, with certain reset provisions. As of June 30, 2020, the warrants had an exercise price of $0.0085 for 1,875,000 total warrants.
The aggregate fair value of the issued warrants was $258,701. The face value of the debt was then allocated, on a relative fair value
basis, between the debt and the warrants. The portion allocated to warrants has been added to the debt discount with a resulting increase
in additional paid-in capital. As of the funding date of this note, the Company determined the fair value of the embedded derivative associated
with the convertibility of this note. The fair value of the embedded derivative has been added to the debt discount (total debt discount
is limited to the face value of the debt) with any excess of the derivative liability recognized as interest expense. The aggregate debt
discount of $483,966 is being amortized to interest expense over the term of the note.
The promissory notes are convertible, at
any time at St. George’s option, at $2.40 per share. However, in the event the Company’s Market Capitalization falls below $30,000,000, the conversion price will be 60% of the three lowest closing trade prices from the 20 trading days immediately
prior to the date of conversion, subject to additional adjustments. In addition, the promissory note includes certain anti-dilution provisions
should the Company subsequently issue any common stock or common stock equivalents at an effective price per share less than the conversion
price then in effect. The Company has a right to prepayment of the note, subject to a 15% prepayment premium. The note is secured by a
trust deed of certain assets of the Company.
The Company entered into five convertible
note agreements with Bucktown Capital, LLC, an affiliated entity of St. George in fiscal year 2020 and during the six months ended June
30, 2021. The notes have total principal due of $727,500, bear interest at 8% per annum. The notes mature between December 2021 and March
2022. The notes are convertible at fixed prices, with $225,000 of principal convertible at $0.002 per share, $80,000 convertible at $0.003
per share, and $422,500 convertible at $0.005 per share.
As of June 30, 2021 and December 31, 2020,
the Company owed $727,500 and $1,160,726 of principal, respectively, on these notes. As of June 30, 2021 and December 31, 2020, the Company
owed $24,042 and $350,525 of accrued interest on the above notes, respectively.
Convertible Notes Payable - Robert L.
Hymers III
On December 23, 2019, the Company issued
convertible promissory notes in the aggregate principal amount of $96,552.70 to Robert L. Hymers III (“Hymers”) in satisfaction
of funds owed to Mr. Hymers from his consulting contract with the Company for past services rendered and completed. The promissory notes
accrue interest at a rate of 10% per annum, and are were six months from the respective issuance date of the note along with accrued and
unpaid interest. Hymers has the option to convert all or any portion of the unpaid principal amount of the notes, plus accrued interest,
into shares of the Company’s common stock at a conversion price equal to a 50% discount to the lowest closing bid price of the Company’s
common stock during the 15 day trading period prior to the date of conversion. The aggregate debt discount of $92,332 is being amortized
to interest expense over the respective terms of the notes. As of June 30, 2021 and December 31, 2020, the Company owed an aggregate of
$185,000 and $70,000 of principal, respectively, to Hymers. As of June 30, 2021 and December 31, 2020, the Company owed $3,125
and $1,005 in accrued interest on the notes , respectively.
Convertible Notes Payable – Natural
Plant Extract
On April 15, 2019, the Company entered
into a joint venture agreement with Natural Plant Extract of California, Inc. (“NPE”) to operate a licensed psychoactive cannabis
distribution service in California. California legalized THC psychoactive cannabis for medicinal and recreational use on January 1, 2018.
On February 3, 2020, the Company terminated the joint venture.
Definitive Agreement
Pursuant to the agreement with NPE, the
Company agreed to acquire 20% (equal to 200,000 shares of NPE) of NPE’s authorized shares in exchange for the payment of $2,000,000
and $1,000,000 worth of the Company’s restricted common stock. The Company agreed to form a joint venture with NPE incorporated
in California under the name “Viva Buds, Inc.” for the purpose of operating a California licensed
cannabis distribution business pursuant to California law legalizing THC psychoactive cannabis for recreational and medicinal use.
The Company’s payment obligations
were governed by a stock purchase agreement which required the Company to make the following payments:
a. Deposit of $350,000 within 5 days
of the execution of the agreement;
b. Deposit of $250,000 payable within
30 days of the execution of the agreement;
c. Deposit of $400,000 within 60
days of the execution of the agreement;
d. Deposit of $500,000 within 75
days of the execution of the agreement; and
e. Deposit of $500,000 within 90
days of the execution of the agreement.
The Company made its initial payment pursuant
to this schedule, but otherwise failed to comply with the payment schedule and was in breach of contract.
Settlement and Release of All Claims
Agreement
On February 3, 2020, the Company and NPE
entered into a Settlement and Release of All Claims Agreement. In exchange for a universal release of all claims, the Company and NPE
(i) agreed to reduce the Company’s interest in NPE from 20% to 5%; (ii) agreed that the Company would to pay NPE a total of $85,000
as follows: $35,000 concurrent with the execution of the Settlement and Release of All Claims Agreement, and $25,000 no later than the
5th calendar day for each of the two months following execution of Settlement and Release of All Claims Agreement; and, (iii) agreed to
retire the balance of the Company’s original valuation obligation from the agreement, representing a shortfall of $56,085.15, in
a convertible promissory note, with terms allowing NPE to convert the note into the Company’s common stock at a 50% discount to
the closing price of the Company’s common stock as of the maturity date.
Of the total amount due and payable by
the Company as of the date of this filing, the Company owes $50,000, and is in breach of the Settlement and Release of All Claims Agreement.
On February 3, 2020, the Company issued a convertible promissory note in the principal amount of $56,085.15 to NPE. Additionally, as a
result of the Company’s settlement agreement with NPE, the Company became liable to pay NPE its 5% portion equal to $25,902 of the
regulatory charges to the City of Lynwood and the State of California to transfer the cannabis licenses back to NPE. To date, the Company
has not paid this amount and it is due and owing.
Convertible Note Payable – GW
Holdings Group
On January 6, 2020, the Company entered
into a convertible promissory note in the amount of $57,750 with GW Holdings Group, LLC (“GW”). GW has the option, beginning
on the six month anniversary of the date of issuance, to convert all or any amount of the principal face amount of the note then outstanding
into shares of the Company's common stock at a conversion price equal to 40% discount of the lowest trading price for the 15 trading days
prior to the date of the conversion. The note accrues interest at a rate of 10% per annum and include a $5,250 original issue discount
such that the price of the note was $57,750. As of June 30, 2021 and December 31, 2020, the Company owed $0 and $98,175 of principal,
respectively, on the note. As of June 30, 2021 and December 31, 2020, the Company owed $0 and $818 in accrued interest on the note ,
respectively.
Convertible Note Payable – Jefferson
Capital
On January 20, 2020, the Company issued
a convertible promissory note to Jefferson Capital, LLC (“Jefferson”) with note matured on January 20, 2021. Jefferson has
the right to convert any or all of the note into common stock of the Company at a conversion price equal to (i) 60% of the lowest trading
price of the Company’s common stock during the 20 trading day period prior to the issue date of the note or (ii) 60% multiplied
by the market price, meaning the lowest trade price for the Company’s common stock during the 20 trading day period ending on the
latest complete trading day prior to the conversion. As of June 30, 2021 and December 31, 2020, the Company owed $0 and $0 of principal,
respectively, on the note. As of June 30, 2021 and December 31, 2020, the Company owed $0 and $0 in accrued interest on the note.
Convertible Note Payable – BHP
Capital
On January 21, 2021, the Company issued
a convertible promissory note in the principal amount of $37,625to BHP Capital NY, Inc. (“BHP”). The Company agreed to pay
simple interest on the outstanding principal amount of the note at a rate of 10% per annum. All amounts owed pursuant to the note are
convertible, in whole or in part, into shares of the Company’s common stock at BHP’s option at the lower of (i) the lowest
price at which the Company has issued stock; or (ii) the market price, defined as 60% of the lowest trading price for the Company’s
common stock during the 20 trading day period ending on the last trading day prior to the conversion date. As of June 30, 2021 and December
31, 2020, the Company owed $0 and $0 of principal, respectively, on the notes. As of June 30, 2021 and December 31, 2020, the Company
owed $0 and $0 in accrued interest on the note.
Convertible Notes Payable – LG
Capital
On March 2, 2020, the Company entered issued
a convertible promissory note in the principal amount of $50,000 to LG Capital Funding, LLC (“LG Capital”) which note matured
on March 2, 2021. The note accrues interest at a rate of 8% per annum. LG Capital is entitled, at its option, at any time after cash payment,
to convert all or any amount of the principal face amount of the note then outstanding into shares of the Company's common stock at a
price per share of equal to 55% of the lowest trading price of the Company’s common stock as quoted on the OTC Markets for the 20
trading days prior to the date of conversion. As of June 30, 2021 and December 31, 2020, the Company owed $0 and $0 of principal, respectively,
on the note. As of June 30, 2021 and December 31, 2020, the Company owed $0 and $0 in accrued interest on the note .
Convertible Debt Summary:
The Company has identified the embedded
derivatives related to the above described notes and warrants. These embedded derivatives included certain conversion and reset features.
The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the
inception date of the note and to fair value as of each subsequent reporting date.
At June 30, 2021, the Company determined
the aggregate fair value of embedded derivatives to be $1,904,016. The fair values were determined using the Binomial Option Pricing Model
based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 128.2% to 169.0%, (3) weighted average risk-free
interest rate of 0.16% to 0.18%, (4) expected life of 0.05 to 2.7 years, (5) conversion prices of $0.00185 to $0.00333 and (6) the Company's
common stock price of $0.0044 per share as of June 30, 2020.
For the six months ended June 30, 2021,
the Company recorded a gain on the change in fair value of derivative liabilities of $1,347,646 and a loss of $1,035,115 related to the
excess of the fair value of derivatives at issuance above convertible note principle as a charge to interest expense. For the six months
ended June 30, 2020, the Company recorded a gain on change in fair value of derivative liabilities of $1,142,272, a loss of $395,607 related
to the excess of the fair value of derivatives at issuance above convertible note principle as a charge to interest expense, and amortization
of debt discounts of $1,028,931 as a charge to interest expense.
Paycheck Protection Program Loan
During the quarter ended June 30, 2020, the Company's wholly owned subsidiary,
H Smart Inc., received a $35,500 loan as part of the Paycheck Protection Program (“PPP”) offered by the Small Business
Administration.
The Company has elected to account for the PPP loan
pursuant to FASB ASC 470, Debt, or as a government grant by analogy to International Accounting Standard 20, Accounting
for Government Grants and Disclosure of Government Assistance.
Following the guidance in ASC 470, the Company
has recognized the entire loan amount as a liability on the balance sheet, with interest accrued and expensed over the term of the loan.
The Company will not impute additional interest at a market rate because transactions where interest rates are prescribed by governmental
agencies are excluded from the scope of ASC 835-30.
For purposes of derecognizing the liability,
ASC 470 refers to the extinguishment guidance in ASC 405, Liabilities.
Based on that guidance, the loan would remain recorded as a liability
until either of the following criteria are met:
|
·
|
The Company has been legally released from being the primary obligor under the liability.
|
|
·
|
The Company pays the lender and is relieved of its obligation for the liability.
|
Because the Company will not be legally released
from being the primary obligor of the PPP loan until forgiveness is actually granted, income from the extinguishment of the loan would
only be recognized once the Company's application for forgiveness is approved. If the forgiveness application is approved, any resulting amount
forgiven would be recognized and separately disclosed in the income statement as a gain on extinguishment.
Subscriptions Payable
On September 30, 2020, the Company entered
into a share exchange agreement (“Share Exchange Agreement”) with Cannabis Global, Inc. (“CBGL”) dated September
30, 2020, to acquire the number of shares of CBGL’s common stock equal in value to $650,000 based on the closing price for the trading
day immediately preceding the effective date of the Share Exchange Agreement, in exchange for the number of shares of Company common stock
equal in value to $650,000 based on the closing price for the trading day immediately preceding the effective date of the Share Exchange
Agreement. For both parties, the Share Exchange Agreement contains a “true-up” provision requiring the issuance of additional
common stock in the event that a decline in the market value of either parties’ common stock should cause the aggregate value of
the stock acquired pursuant to the Share Exchange Agreement to fall below $650,000.
On February 26, 2021, the Company entered
into a share exchange agreement (“ECOX Share Exchange Agreement”) with Eco Innovation Group, Inc. (“ECOX”) dated
February 26, 2021, to acquire the number of shares of ECOX’s common stock, equal in value to $650,000 based on the per-share price
of $0.06, in exchange for the number of shares of Company common stock equal in value to $650,000 based on the closing price for the trading
day immediately preceding the effective date of the ECOX Share Exchange Agreement. For both parties, the ECOX Share Exchange Agreement
contains a “true-up” provision requiring the issuance of additional common stock in the event that a decline in the market
value of either parties’ common stock should cause the aggregate value of the stock acquired pursuant to the ECOX Share Exchange
Agreement to fall below $650,000. Based on the value of ECOX shares in the market as of June 30, 2021, the Company recorded a value for
additional shares owed to ECOX pursuant to the ECOX Share Exchange Agreement of $329,572 as a subscription agreement along with a loss
from equity investment of $391,194. As of June 30, 2021 41,935,484 shares of the Company’s common stock have been issued. As a result,
the balance of subscriptions payable as of June 30, 2021 and December 31, 2020 was $999,355 and $670,000, respectively.
NOTE
9 – STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company is authorized to issue 50,000,000 shares of $0.001 par value
preferred stock (“Series A Preferred Stock”) as of June 30, 2021 and December 31, 2020 of which 10,000,000 shares are outstanding
as of June 30, 2021. As of June 30, 2021 and December 31, 2020, the Company is authorized to issue 5,000,000 shares of Class B Preferred
Stock of which 2,000,000 shares are issued and outstanding as of June 30, 2021.
Each share of Class A Preferred Stock is entitled
to 100 votes on all matters submitted to a vote to the stockholders of the Company and does not have conversion, dividend or distribution
upon liquidation rights.
Each
share of Class B Preferred Stock is entitled to 1,000 votes on all matters submitted to a vote to the stockholders of the
Company and does not have conversion, dividend or distribution upon liquidation rights.
Common stock
The Company is authorized to issue
15,000,000,000 shares of $0.001 par value common stock as of June 30, 2021. As of December 31, 2020, the Company was authorized to
issue 5,000,000,000 shares of $0.001 par
value common stock. As of June 30, 2021, and December 31, 2020, the Company had 5,068,524,855 and 3,136,774,861
shares of common stock issued and outstanding, respectively. As of August 19, 2021, there were 5,405,130,704 shares of the
Company’s common stock issued and outstanding.
During the six months ended June 30, 2021,
the Company issued an aggregate of 21,000,020 shares of its common stock for services with an estimated fair value of $140,900.
During the six months ended June 30, 2021,
the Company issued an aggregate of 810,689,880 shares of its common stock, including 153,227,150 related to warrants accounted for as liabilities, in settlement of convertible notes payable, accrued interest
of $1,677,373, and reclassified derivative liabilities of $5,975,670 to additional paid in capital in connection with the conversions.
During the six months ended June 30, 2021,
the Company issued a net amount of 3,027,031
shares of its common stock in settlement of liabilities with an estimated fair value of $8,623,
which included 10,892,411 related to shares to be issued as of December 31, 2020, and the cancellation of 8,755,714 shares for previous
settlements, and 890,334 new shares issued for settlement of accounts payable.
During the six months ended June 30, 2021,
the Company issued 22,500,000 of its common stock upon the settlement of related party notes payable and accounts payable with an estimated
fair value of $141,750.
During the six months ended June 30,
2021, the Company issued 400,000,000
of its common stock upon the exercise of warrants on a cash basis, including warrant liabilities with an estimated value of
$63,500.
During the six months ended June 30, 2021,
the Company sold 632,597,599 of its common stock for an aggregate value of $1,358,767.
During the six months ended June 30,
2021, the
Company issued 41,935,484 of its common stock with a value of $650,000 and will issue an additional 64,621,893 shares for investments
with an estimated value of $394,194 related to the ECOX Share Exchange Agreement. The investment balance is $650,000, with a
liability of $394,194 included in subscriptions payable related to the value of the additional shares to be issued. The Company
recognized a loss of $394,194 related to these additional shares during the three months ended June 30, 2021.
The Company is authorized to issue 15,000,000,000
shares of $0.001 par value common stock as of June 30, 2021. As of December 31, 2020, the Company was authorized to issue 5,000,000,000
shares of $0.001 par value common stock. As of June 30, 2020 and December 31, 2019, the Company had 469,288,934 and 77,958,081 shares
of common stock issued and outstanding, respectively.
During the six months ended June 30, 2020,
the Company issued an aggregate of 8,333 shares of its common stock to settle amounts previously accrued with an estimated fair value
of $6,700.
During the six months ended June 30, 2020,
the Company issued an aggregate of 44,658,333 shares of its common stock for services with an estimated fair value of $542,766.
During the six months ended June 30, 2020,
the Company issued an aggregate of 270,547,861 shares of its common stock in settlement of convertible notes payable, accrued interest
and embedded derivative liabilities of an aggregate of $1,531,471.
During the six months ended June 30, 2020,
the Company issued 21,384,103 of its common stock upon the conversion of related party notes payable with an estimated fair value of $50,613.
During the six months ended June 30, 2020,
the Company issued 51,054,214 shares of its common stock upon the exercise of warrants on a cashless basis.
During the six months ended June 30, 2020,
the Company issued 3,677,889 shares of its common stock in settlement of a legal case with an estimated fair value of $956,251.
On January 17, 2020, the Company entered
into an amendment of an existing convertible promissory note issued to Paladin. The Company authorized the issuance of a warrant to purchase
up to 5,750,000 shares of the Company’s common stock, which warrant could be exercised on a cashless basis. This warrant was exercised
during the three months ended June 30, 2020.
Options
As of June 30, 2021, the Company has no
outstanding stock options.
Warrants
The following table summarizes the stock
warrant activity for the three months ended June 30, 2021:
Summarizes the Stock Warrant Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Term
|
|
Aggregate
Intrinsic Value
|
Outstanding at December 31, 2020
|
|
|
293,054,702
|
|
|
$
|
0.0011
|
|
|
|
2.22
|
|
|
$
|
1,023,306
|
|
Granted
|
|
|
79,785,156
|
|
|
|
0.0071
|
|
|
|
5.00
|
|
|
|
—
|
|
Increase due to reset provision
|
|
|
(9,722,222
|
)
|
|
|
0.004
|
|
|
|
2.41
|
|
|
|
—
|
|
Exercised
|
|
|
(194,788,035
|
)
|
|
|
0.004
|
|
|
|
1.66
|
|
|
|
1,427,826
|
|
Outstanding at June 30, 2021
|
|
|
168,329,601
|
|
|
$
|
0.0039
|
|
|
|
3.49
|
|
|
$
|
503,850
|
|
Exercisable at June 30, 2021
|
|
|
168,329,601
|
|
|
$
|
0.0039
|
|
|
|
3.49
|
|
|
$
|
503,850
|
|
Certain warrants issued to debt holders
have reset provisions whereby upon subsequent issuances of common stock at a price below the current exercise price, the number of warrants
increase and the exercise price is reduced to the new price. The aggregate intrinsic value in the preceding tables represents the total
pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $0.0061 as of June 30, 2021,
which would have been received by the option holders had those option holders exercised their options as of that date.
NOTE 10 — FAIR VALUE MEASUREMENT
ASC 825-10 defines fair value as the price
that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at
the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at
fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that
market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active
markets for identical assets or liabilities.
Level 2 – Observable inputs other
than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally
from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs to
the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
All items required to be recorded or measured
on a recurring basis are based upon level 3 inputs.
To the extent that valuation is based on
models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest
level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was
no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.
The carrying value of the Company’s
cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other
current assets and liabilities approximate fair value because of their short-term maturity.
As of June 30, 2021 and December 31, 2020,
the Company did not have any items that would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative liabilities
as level 3 and values its derivatives using the methods discussed in Note 3. While the Company believes that its valuation methods are
appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine
the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary
assumptions that would significantly affect the fair values using the methods discussed in Note 3 are that of volatility and market price
of the underlying common stock of the Company.
As of June 30, 2021 and December 31, 2020,
the Company did not have any derivative instruments that were designated as hedges.
The derivative liability as of June 30,
2021 and December 31, 2020, in the amount of $1,904,016 and $4,426,057, respectively, have a level 3 classification.
The following table provides a summary
of changes in fair value of the Company’s Level 3 financial liabilities for the three months ended June 30, 2021:
Summary of Changes in Fair Value of Derivative Liabilities
|
|
|
|
|
|
|
Debt
Derivative
|
Balance, January 1, 2021
|
|
$
|
4,426,057
|
|
Increase resulting from initial issuance of additional convertible notes payable
|
|
|
1,824,340
|
|
Decreases resulting from conversion of convertible notes payable
|
|
|
(5,975,670
|
)
|
Decreases resulting from payoff of convertible notes payable
|
|
|
(649,961
|
)
|
Loss from change in fair value included in earnings
|
|
|
2,279,250
|
|
Balance, June 30, 2021
|
|
$
|
1,904,016
|
|
Fluctuations in the Company’s stock
price are a primary driver for the changes in the derivative valuations during each reporting period. During the period ended June 30,
2021, the Company’s stock price decreased significantly from initial valuations. As the stock price decreases for each of the related
derivative instruments, the value to the holder of the instrument generally decreases. Stock price is one of the significant unobservable
inputs used in the fair value measurement of each of the Company’s derivative instruments.
NOTE 11 — RELATED PARTY TRANSACTIONS
The Company’s current officers
and stockholders advanced funds to the Company for travel related to business meetings and due diligence with respect to
acquisition targets and working capital purposes. As of June 30, 2021 and December 31, 2020, the balance due to officers for travel
and working capital purposes was $0 and $0,
respectively.
As of June 30, 2021 and December 31, 2020,
accrued compensation due to officers and executives included as accrued compensation was $9,000 and $79,214, respectively.
Related party
sales contributed $0 and $5,131 to revenues for the three months ended June 30, 2021 and 2020, respectively, while related party sales
contributed $0 and $8,303 to revenues for the six months ended June 30, 2021 and 2020, respectively. Related party sales are comprised
of sales of the Company’s hempSMART products to the Company’s directors, officers, employees, and sales team members. No related
party sales were for services. All sales were made at listed retail prices and were for cash consideration.
NOTE 12 – ACQUISITION
On June 29, 2021, the Company, cDistro Merger Sub,
Inc., a Nevada corporation and a wholly-owned subsidiary of the Company (“Merger Sub”), and cDistro, Inc., a privately-held
Nevada corporation engaged in the hemp and CBD product distribution business (“cDistro”) entered into an Agreement and Plan
of Merger (the “Merger Agreement”) pursuant to which, among other things, Merger Sub merged with and into cDistro on June
30, 2021, with cDistro becoming a wholly-owned subsidiary of the Company and the surviving corporation in the merger (the “Merger”).
The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended.
Contingent Consideration - Earnout Agreement
In connection to the Merger, the Company and the securityholder
of cDistro (the “cDistro Stockholder”) entered into an earnout agreement dated June 29, 2021 (the “Earnout Agreement”),
whereby the Company agreed to issue additional shares of its common stock to the cDistro Stockholder as compensation for the Merger conditioned
upon the achievement of certain gross revenue milestones. If cDistro meets revenue targets of $600,000 per quarter, up to a total of $2,400,000
of revenue, the Company will issue shares worth $250,000 upon the achievement each quarterly revenue target, with the number of shares
to be issued at each payout date calculated based on the lessor of 220,970,059 shares of common stock or a 30% discount to the average
close price of the Company’s common stock for the 20-day period immediately preceding the payout date of the earnout. In accordance
with ASC 805, the Company accounts for this earnout agreement as contingent consideration based on the number of shares calculated as
owed as of each quarter end, with changes in value to be recorded in earnings each reporting period.
Leak-Out Agreement
On June 29, 2021, in connection with the Merger and
the Earnout Agreement, the cDistro Stockholder entered into a Lock-Up and Leak-Out Agreement with the Company pursuant to which, among
other thing, such stockholder agreed to certain restrictions regarding the resale of the common stock issued pursuant to the Merger for
a period of six months from the date of the Merger.
Employment Agreement
On June 29, 2021, in connection with the Merger, the
Company and the Chief Executive Officer of cDistro entered into an employment agreement, pursuant to which that employee will serve as
cDistro’s Chief Executive Officer for a three-year term.
The acquisition
of cDistro is being accounted for as a business combination under ASC 805. The Company is continuing to gather evidence to evaluate what
identifiable intangible assets were acquired, such as a customer list, and the fair value of each, and expects to finalize the fair value
of the acquired assets within one year of the acquisition date.
The aggregate preliminary fair value of consideration for the cDistro acquisition
was as follows
Schedule of aggregate preliminary fair value
|
|
|
|
|
|
|
Amount
|
Cash, net of cash acquired of $99,393
|
|
$
|
250,607
|
|
Contingent Consideration - Earnout Agreement
|
|
|
1,000,000
|
|
265,164,070 shares of common stock (not issued as of June 30, 2021)
|
|
|
1,617,501
|
|
Total preliminary consideration transferred
|
|
$
|
2,868,108
|
|
During the three months ended June 30, 2021, the Company
has paid $250,000 of the cash consideration.
The following information summarizes the preliminary
allocation of the fair values assigned to the assets acquired and liabilities assumed at the acquisition date:
Schedule summarizes the preliminary
allocation of the fair values
|
|
|
|
|
Accounts Receivable
|
|
$
|
40,291
|
|
Inventory
|
|
|
6,746
|
|
Other Assets
|
|
|
19,310
|
|
Goodwill
|
|
|
2,989,803
|
|
Accounts payable
|
|
|
(181,042
|
)
|
other accrued liabilities
|
|
|
(7,000
|
)
|
Net assets acquired
|
|
$
|
2,868,108
|
|
Unaudited Pro Forma Financial Information
The following table sets forth the pro-forma consolidated results of operations
for the three and six months ended June 30, 2021 and 2020 as if the cDistro acquisition occurred on January 1, 2020. The pro forma results
of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved
if the acquisitions had taken place on the dates noted above, or of results that may occur in the future.
Schedule of pro-forma consolidated results of operations
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue
|
|
$
|
290,196
|
|
|
$
|
152,402
|
|
|
$
|
444,239
|
|
|
$
|
234,221
|
|
Operating loss
|
|
|
(1,067,780
|
)
|
|
|
(965,158
|
)
|
|
|
(1,855,860
|
)
|
|
|
(1,357,315
|
)
|
Net loss
|
|
|
(1,869,775
|
)
|
|
|
(276,742
|
)
|
|
|
(5,532,928
|
)
|
|
|
(2,395,044
|
)
|
Net loss per common share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
Weighted Average common shares outstanding
|
|
|
5,102,510,297
|
|
|
|
510,164,598
|
|
|
|
4,730,796,549
|
|
|
|
451,015,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 13 – 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.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
You
should read the following discussion and analysis of our financial condition and results of operations together with and our financial
statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this
discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may
differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited
to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2020 as may be amended, supplemented or superseded from time to time by other reports we file
with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.
Overview
We are focused on the research and development of
(i) various species of hemp; (ii) beneficial uses of hemp and hemp derivatives; (iii) indoor and outdoor cultivation methods for hemp;
(iv) technology used for cultivation and harvesting of different species of hemp, including, but not limited to, lighting, venting, irrigation,
hydroponics, nutrients and soil; (v) different industrial hemp derived cannabinoids (“CBD”) and the possible health benefits
thereof; and (vi) new and improved methods of hemp cannabinoid extraction omitting or eliminating the delta-9 tetrahydrocannabinol “THC”
molecule.
Specifically, we develop and sell consumer products
that include industrial hemp derived, non-psychoactive CBD as an ingredient, under the brand name “hempSMART™” through
our wholly-owned subsidiary, H Smart, Inc. In addition, we provide consulting services to licensed cannabis and/or hemp operators with
respect to financial accounting and bookkeeping and real property management. Our business also includes making selected investments and
entering into joint ventures with start-up businesses in the legalized cannabis and hemp industries.
Our Products
hempSMART™
Our consumer products containing hemp and CBD are
sold through our wholly-owned subsidiary H Smart, Inc. under the brand name hempSMART™. Our current hempSMART™ 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 the brain.
-
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, are
intended to deliver an all-natural formulation for the temporary relief of minor discomfort associated with physical activity.
-
hempSMART Pain Cream™ each container is formulated with
300mg of full spectrum non-psychoactive CBD derived from industrial hemp. This product contains a synergistic combination of natural botanicals
and full spectrum hemp extract featuring CBD, cannabigerol, also known as CBG, and a broad range of terpenes. Our 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, is intended to provide an immediate cooling and soothing sensation. This topical product is formulated to help reduce minor
discomfort and promote muscle relaxation on the areas to which 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). These drops are 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 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. This facial moisturizer is designed to refresh, replenish
and restore skin, providing long lasting hydration and balance.
-
hempSMART Drink Mix, an industrial hemp based powderized
premium CBD drink made with organic CBD infused with honey to be mixed with any beverage of preference.
Our Consulting Services
In addition to selling our hempSMART™ products,
we also provide certain services to licensed cannabis and/or hemp operators. Our services include the following:
Financial Accounting and Bookkeeping
We 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.
Real 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 real property to
conduct operations.
We have not yet entered into any engagements for such
services and have not generated any revenue related to such services.
cDistro Acquisition
On June 29, 2021, we acquired cDistro, Inc. which is engaged in the hemp and
CBD product distribution business. Specifically, cDistro distributes high quality hemp-derived cannabinoid products on its website, www.cdistro.com.cDistro
(retail services/wholesale pricing) offers the CBD brands along with smoke and vape shop related products to wholesalers, c-stores, specialty
retailers, and consumers in North America. We work exclusively with select manufacturers to deliver retail service at wholesale.
Current Joint Ventures and Investments
Joint Ventures in Brazil and Uruguay
On September 30, 2020, we entered into two joint venture
agreements with Marco Guerrero, our director, to form joint venture operations in Brazil and Uruguay to produce, manufacture, market and
sell our hempSMART™ products in Latin America and to develop and sell hempSMART™ products globally.
Cannabis Global, Inc.
Joint Venture
On May 12, 2021, we entered into a joint venture agreement
with Cannabis Global, Inc. (“Cannabis Global”) pursuant to which we will invest up to $250,000 into a newly formed entity
(“MCOA Lynwood”) and Cannabis Global, through Natural Plant Extracts of California, Inc., an entity in which Cannabis Global
owns a majority interest, will operate a regulated and licensed laboratory to manufacture various cannabis products in the State of California.
As of June 30, 2021, we have invested $158,000.
Share Exchange
On September 30, 2020, we entered into a securities
exchange agreement with Cannabis Global pursuant to which we issued 650,000,000 shares of our common stock to Cannabis Global in exchange
for 7,222,222 shares of Cannabis Global common stock. In addition, we and Cannabis Global entered into a lock-up leak-out agreement which
contains certain restrictions with respect to the sales of such securities.
Joint Venture Subject to Ongoing Dispute
On March 16,
2017, we entered into a joint venture agreement with Bougainville Ventures, Inc. (“Bougainville”) to, among other things,
engage in the development and promotion of products in the legalized cannabis industry in Washington State. We believe that some of the
funds we paid to Bougainville were misappropriated and that there was self-dealing with respect to those funds and that Bougainville misrepresented
certain material facts in the joint venture agreement. As a result of the foregoing, on September 20, 2018, we filed suit against
Bougainville, Andy Jagpal, Richard Cindric, et al. in Okanogan County Washington Superior Court. See Part II, Item 1 - Legal Proceedings.
Results of Operations
Three Months
Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
Revenues
Total revenues
for the three months ended June 30, 2021 and 2020, were $16,880 and $82,958, respectively, a decrease of $66,078. This decrease is attributable
to our new eCommerce sales platform as well as the slowing of the general market demand for
our products and services due to the COVID-19 pandemic. Changes to our sales strategy include the rebranding of hempSMART’s products.
The following
table identifies a comparison of our sales of products during the three months ended June 30, 2021 and 2020, respectively:
|
|
|
|
|
Products
|
|
June 30, 2021
|
|
June 30, 2020
|
Body Lotion
|
|
$
|
403
|
|
|
$
|
1,297
|
|
Brain
|
|
|
270
|
|
|
|
9,558
|
|
Drink Mix
|
|
|
24
|
|
|
|
2,052
|
|
Drops
|
|
|
10,352
|
|
|
|
38,908
|
|
Face Moisturizer
|
|
|
89
|
|
|
|
6,436
|
|
Pain Capsules & cDistro products (2021 only)
|
|
|
342
|
|
|
|
2,548
|
|
Pain Cream
|
|
|
4,668
|
|
|
|
17,058
|
|
Pet Drops
|
|
|
732
|
|
|
|
5,101
|
|
Totals
|
|
$
|
16,880
|
|
|
$
|
82,958
|
|
Related Party Sales
Related party
sales contributed $0 and $5,131 to revenues for the three months ended June 30, 2021 and 2020, respectively. Related party sales are comprised
of sales of our hempSMART products to our directors, officers, employees, and sales team members. No related party sales were for
services. All sales were made at listed retail prices and were for cash consideration.
Costs of Sales
Costs of sales primarily consist of inventory cost
and overhead, manufacturing, packaging, warehousing, shipping, and direct labor costs directly attributable to our hempSMART products.
For the three months ended June 30, 2021 and 2020, our total costs of sales were $3,301 and $39,187, respectively, a decrease of $35,886.
The decrease in costs of sales is due to a decline in sales as a result of the COVID-19 pandemic.
Gross Profit
For the three months ended June 30, 2021 and 2020,
gross profit was $13,579 and $43,771, respectively, a decrease of $30,192. This decrease was primarily attributed to new pricing and promotions
associated with our sales restructuring and new sales strategies, along with the effects of the COVID-19 pandemic during the three months
ended June 30, 2021. As a result, the gross margins were 80.4% and 56.2% for the three months ended June 30, 2021 and 2020, respectively.
Selling and Marketing Expenses
For the three months ended June 30, 2021
and 2020, selling and marketing expenses were $155,212 and $74,212, respectively, an increase of $81,014. The increase is due primarily
to the effects of the restructuring of our sales team and new sales strategies deployed during the three months ended June 30, 2021, as
compared to June 30, 2020. These increases were mainly attributable to advertising/promotions of $33,769 and digital media of $47,245.
The changes to the sales strategy implemented during the quarter ended June 30, 2021 included rebranding of hempSMART’s products.
Payroll and Related Expenses
For the three months ended June 30, 2021
and 2020, payroll and related expenses were $132,257 and $95,644, respectively, an increase of $36,613. This increase is attributed to
an increase in headcount during the three months ended June 30, 2021, as compared to June 30, 2020.
Stock-based Compensation
For the three months ended June 30, 2021
and 2020, stock-based compensation was $139,000 and $536,452, respectively, a decrease of $397,452. This decrease was due to less shares
issued to our officers and vendors during the three months ended June 30, 2021, as our cash position was higher as compared to the three-month
period ended June 30, 2020.
General and Administrative Expenses
General and administrative expenses increased
to $611,970 for the three months ended June 30, 2021 as compared to $211,116 for the three months ended June 30, 2020. General and administrative
expenses include research and development, building rent, utilities, legal fees, office supplies, subscriptions, and office equipment.
The increase of $400,854 during the three months ended June 30, 2021 is primarily attributed to increased legal fees of $162,510 related
to acquisition costs and SEC filings, $87,901 for investor relations as we expanded our investor/stockholder communications, $24,750 in
additional audit fees related to potential acquisition projects, $18,843 in director and officer liability insurance as rates were increased
during the period due to cannabis industry risk assessments, $36,688 in travel attributed to investor and marketing events, as well as
our events, $16,818 in bank fees due to wire transfers relating to payments to an investor, marketing and operation vendors, $10,000 in
board fees as directors were paid in cash instead of stock, $9,527 in research and development expenses related to development of future
products and $19,729 in shipping costs related to implementation and transfer of inventory to our outsourced logistics warehouse in the
United States and Europe.
Gain on Change in Fair Value of Derivative
Liabilities
During the three months ended June 30,
2021 and 2020, we issued convertible promissory notes and warrants with an embedded derivative, all requiring us to adjust to reflect
the fair value of the derivatives each reporting period, and mark to market as a non-cash adjustment to our current period operations.
This resulted in gains of $696,729 and $1,572,964 change in fair value of derivative liabilities for the three months ended June 30, 2021
and 2020, respectively.
Loss on Equity Investment
During the three months ended June 31,
2021 and 2020, we adjusted the carrying value of our investment for our pro rata share of equity investment of $394,194 and $7,048, respectively.
Loss on Settlement of Debt
During the three months ended June 30,
2021 and 2020, we realized a loss on settlement of debt of $96,750 and $0, respectively.
Interest Expense
Interest expense during the three months
ended June 30, 2021 was $891,783 compared to $881,945 for the three months ended June 30, 2020. Interest expense primarily consists of
interest incurred on our convertible and non-convertible debt. The debt discounts amortization incurred during the three months ended
June 30, 2021 and 2020 was $433,073 and $592,338, respectively.
Net Loss
Our net loss for the three months ended
June 30, 2021 and 2020 was $1,828,117 and $186,819, respectively, an increase of $1,641,298. The net loss of $1,828,117 for the three
months ended June 30, 2021 represents 10,830% of total revenues for the period. The net loss of $186,819 for the three months ended June
30, 2020, represents 225.2% of total revenues for the period.
Six Months
Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Revenues
Total revenues for the six months ended June 30, 2021
and 2020 were $51,810 and $164,777, respectively, a decrease of $112,967. The decrease in total revenues of hempSMART™ products
was due to the decrease in volume of sales as a result of the COVID-19 pandemic and our new eCommerce sales platform.
The following table identifies our product offerings
and the revenues related to these products for the six months ended June 30, 2021 and 2020, respectively:
|
|
|
|
|
Products
|
|
June 30, 2021
|
|
June 30, 2020
|
Body Lotion
|
|
$
|
1,067
|
|
|
$
|
2,452
|
|
Brain
|
|
|
361
|
|
|
|
19,674
|
|
Drink Mix
|
|
|
167
|
|
|
|
2,052
|
|
Drops
|
|
|
29,716
|
|
|
|
86,132
|
|
Face Moisturizer
|
|
|
2,793
|
|
|
|
7,309
|
|
Pain Capsules & cDistro products (2021 only)
|
|
|
343
|
|
|
|
3,646
|
|
Pain Cream
|
|
|
16,423
|
|
|
|
31,906
|
|
Pet Drops
|
|
|
940
|
|
|
|
11,606
|
|
Totals
|
|
$
|
51,810
|
|
|
$
|
164,777
|
|
Related Party Sales
Related party
sales contributed $0 and $8,303 to revenues for the six months ended June 30, 2021 and 2020, respectively. Related party sales are comprised
of sales of our hempSMART products to our directors, officers, employees, and sales team members. No related party sales were for
services. All sales were made at listed retail prices and were for cash consideration.
Costs of Sales
Costs of sales,
include the costs of product development, manufacturing, testing, packaging, storage and sale. For the six months ended June 30, 2021
and 2020, costs of sales were $28,481 and $73,392, respectively, a decrease of $44,911. The decrease was a result of decreased growth
in the marketing and selling of our hempSMART™ products.
Gross Profit
For the six months ended June 30, 2021 and 2020, gross
profit was $23,329 and $91,385, respectively, a decrease of $68,056. This decrease was primarily attributed to our new sales platform
and new sales pricing and promotions, along with the effects of the COVID-19 pandemic during the six months ended June 30,
2021. As a result, our gross margins were 45.0% and 58.4% for the six months ended June 30, 2021 and 2020, respectively.
Selling and Marketing Expenses
For the six months ended June 30, 2021
and 2020, selling and marketing expenses were $262,761 and $200,667, respectively, an increase of $62,094. This increase was attributed
to our investment in social media advertising in support of our new eCommerce program promoting our rebranded hempSMART products.
Payroll and Related Expenses
For the six months ended June 30, 2021
and 2020, payroll and related expenses was $270,402 and $196,843, respectively, an increase of $73,559. This increase is attributed to
additional head counts created during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.
Stock-based Compensation
For the six months ended June 30, 2021
and 2020, stock-based compensation was $158,900 and $542,767, respectively, a decrease of $383,867. This decrease is attributed to our
improved cash position during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.
General and Administrative Expenses
General and administrative expenses increased
to $1,137,652 for the six months ended June 30, 2021 compared to $415,172 for the six months ended June 30, 2020. General and administrative
expenses include research and development, building rent, utilities, legal fees, office supplies, subscriptions, and office equipment.
The increase of $722,480 during six months ended June 30, 2021 were primarily attributed to $23,016 in bank fees related to wire transfer
fees, $46,000 in board of director fees due to renegotiated rates during the six months ended June 30, 2021, $114,132 in consulting fees
related to services for medical advisory and strategic planning, $41,550 of additional fees paid for director and officer liability insurance
as rates were increased dramatically by insurance carriers due to cannabis industry risk assessments, $149,720 more in investor relations
during the six months ended June 30, 2021 as we expanded our investor/stockholder communications, $297,469 of additional legal consulting
fees which were related to various lawsuits, SEC filings and international work related to the formation of our new subsidiaries in Brazil
and Uruguay.
Loss/Gain on Change in Fair Value
of Derivative Liabilities
During the six months ended June 30, 2021
and 2020, we issued convertible promissory notes and warrants with an embedded derivative, all requiring us to adjust to the fair value
of the derivatives each reporting period, and mark to market as a non-cash adjustment to our current period operations. This resulted
in a loss of $1,629,289 and a gain of $1,142,272 change in fair value of derivative liabilities for the six months ended June 30, 2021
and 2020, respectively.
Loss on Equity Investment
During the six months ended June 30, 2021
and 2020, we adjusted the carrying value of our investment for our pro rata share of equity investment of $394,194 and $133,893, respectively.
Loss/Gain on Settlement of Debt
During the six months ended June 30, 2021
and 2020, we realized a loss on settlement of debt of $164,977 and a gain of $3,409, respectively. These were related to the payoffs of
settlement agreements made in the ordinary course of our business during the six months ended June 30, 2021 and 2020, respectively.
Interest Expense
Interest expense during the six months
ended June 30, 2021 and 2020 was $1,992,745 and $1,772,096, respectively. Interest expense primarily consists of interest incurred on
our convertible and non-convertible debt. The debt discounts amortization during the six months ended June 30, 2021 and 2020 was $744,783
and $1,028,931, respectively.
Net Loss
Our net loss for the six months ended June
30, 2021 and 2020 was $5,486,107 and $2,305,121, respectively, an increase of $3,180,986. The net loss of $5,486,107 for the six months
ended June 30, 2021 represents 10,589% of total revenues for the period. The net loss of $2,305,121 for the six months ended June 30,
2020, represents 1,390% of total revenues for the period.
Liquidity and Capital Resources
We have generated a net loss from continuing
operations for the six months ended June 30, 2021 of $5,486,107 and used $1,841,640 cash for operations. As of June 30, 2021, we had total
assets of $6,605,409, which short-term investments of $743,200, inventory of $203,898, and other current assets of $93,830. The other
current assets consisted of $93,830 in advances to our new Brazilian operations, a $12,500 non-trade receivable due from a brokerage firm
and advance payments to vendors.
During the six months ended June 30, 2021
and 2020, we met our capital requirements through a combination of loans, sales of equity and convertible debt instruments; however, we
will need to secure additional external funding in order to continue our operations. Our primary internal sources of liquidity were provided
by an increase in proceeds from the issuance of notes payable of $1,508,250 and sale of our common stock for gross proceeds of $1,358,767
for the six months ended June 30, 2021 as compared to an increase in proceeds from the issuance of note payables of $442,000 and a government
loan due to COVID-19 of $35,500 for the six months ended June 30, 2020. Our ability to rely upon external financing arrangements to fund
operations is not certain, and this may limit our ability to secure future funding from external sources without changes in terms requested
by counterparties, changes in the valuation of collateral, and associated risk, each of which is reasonably likely to result in our liquidity
decreasing in a material way. We intend to utilize cash on hand, loans and other forms of financing such as the sale of additional equity
and debt securities and other credit facilities to conduct our ongoing business, and to also conduct strategic business development and
implementation of our business plans generally. However, we may be unable to raise additional funds
when needed on favorable terms, or at all, which may have a negative impact on our financial condition and could force us to curtail or
cease our operations.
Cash Flows from Operating Activities
For the six months ended June 30, 2021,
we used cash in operating activities of $1,841,640. For the six months ended June 30, 2020, we used cash in operating activities of $669,005.
This decrease of $1,172,635 is due primarily to loss for the period which was offset by stock-based compensation and continued implementation
of our business plans, operations, management, personnel and professional services.
Cash Flows from Investing Activities
During the six months ended June 30, 2021,
we used $289,439 in investing activities related to purchase of equipment and property of $107,934, $30,898 to establish a joint venture
and $150,607 in the acquisition of a new business. During the six months ended June 30, 2020, we used $1,271 related to our purchase of
property and equipment.
Cash Flows from Financing Activities
During the six months ended June 30, 2021,
cash provided by financing activities was $2,236,387 as a result of our receipts of funds from the issuance of notes payable of $1,508,250
and sale of our common stock of $1,358,767, along with repayments of notes payable of $610,630 and repayments of related party notes of
$20,000. During the six months ended June 30, 2020, cash provided by financing activities was $477,500 as a result of our receipt of funds
from the issuance of notes payable of $442,000 and a government loan due to COVID-19 of $35,500.
Our business plans have not generated significant revenues and as of the date of this filing are not
sufficient to generate adequate amounts of cash to meet our needs for cash. Our primary source of operating funds in 2021 and 2020 has
been proceeds from the sale of our common stock and the issuance of convertible debt and non-convertible debt. We have experienced net
losses from operations since inception, but expect these conditions to improve in 2021 and beyond as we develop direct sales and marketing
programs. We had stockholders' deficiencies at June 30, 2021 and require additional financing to fund future operations. As of the date
of this filing, and due to the early stages of operations, we have insufficient sales data to evaluate the amounts and certainties of
cash flows, as well as whether there has been material variability in historical cash flows.
We
currently do not have sufficient cash and liquidity to meet our anticipated working capital for the next twelve months. Historically,
we have financed our operations primarily through private sales of our common stock and debt. If our sales goals for our hempSMART™ products
do not materialize as planned, and we are not able to achieve profitable operations at some point in the future, we may have
insufficient working capital to maintain our operations as we presently intend to conduct them or to fund our expansion, marketing, and
product development plans. There can be no assurance that we will be able to obtain such financing on acceptable terms, or at all.
Off Balance Sheet Arrangements; Commitments
and Contractual Obligations
As of June 30, 2021, we did
not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
revenues, expenses, results of operations, liquidity, capital expenditures or capital resources
nor did we have any commitments or contractual obligations.
Critical Accounting Policies
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the condensed
consolidated financial statements describes the significant accounting policies and methods used in the preparation of the condensed consolidated
financial statements. Estimates are used for, among other things, contingencies and taxes. Actual results could differ materially from
those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in
the preparation of the condensed consolidated financial statements.
Stock-Based Compensation
We account for employee and non-employee compensation
in accordance with Accounting Standards Codification 718-10-30 of the Financial Accounting Standards Board. See Note 3 - “Summary
of Significant Accounting Policies” set forth in our condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q.
Recent Accounting Pronouncements
A
description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations
is set forth in Note 3 to the condensed consolidated financial statements included elsewhere
in this Quarterly Report.
JOBS Act
On April 5, 2012, the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”) was enacted. Section 107 of the JOBS Act provides that an “emerging growth
company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying
with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting
standards until those standards would otherwise apply to private companies. We have chosen to opt out of the extended transition periods
available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards. Section
107 of the JOBS Act provides that our decision to opt out of the extended transition periods for complying with new or revised accounting
standards is irrevocable.
Subject to certain conditions set forth in the JOBS
Act, as an “emerging growth company,” we intend to rely on certain exemptions, including, without limitation, (i) providing
an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b)
of the Sarbanes-Oxley Act of 2002, as amended, and (ii) complying with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional
information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging
growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion
or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the
date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on
which we are deemed to be a large accelerated filer under the rules of the SEC.
COVID-19:
The COVID-19 global pandemic has been unprecedented and unpredictable and is likely to continue to result in significant national and
global economic disruption, which may adversely affect our business. Based on the Company’s current assessment, however, the Company
does not expect any material impact on its long-term strategic plans, its operations, or its liquidity due to the worldwide spread of
COVID-19. However, the Company is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations,
suppliers, and industry.